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CJEU Huawei v ZTE
Updated 17 January 2018
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CJEU Huawei v ZTE
16 July 2015 - Case No. C-170/13
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)  . 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  .
Between November 2010 and March 2011, the parties engaged into discussions concerning the licensing of the Claimant’s portfolio of SEPs  . The Claimant indicated the amount it considered as a reasonable royalty; the Defendants, on the other hand, sought to conclude a cross-licence  . An offer for a licensing agreement was, however, not finalized  .
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  .
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  : 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  . 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  .
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’  .
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  . 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  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’  .
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  .
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  .
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  . 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  . Moreover, an action for the enforcement of an IPR can constitute an abuse of dominant position only in “exceptional circumstances”  .
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’  . 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  . 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  .
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  . 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’  , 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  . 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  .
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’  . Whether this is the case must be established on the basis of ‘objective factors’, which implies, in particular, that there are no ‘delaying tactics’  .
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  . 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’  . 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  .
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’  .
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  .
-  Huawei v ZTE, Court of Justice of the European Union, judgment dated 6 July 2015, para. 22.
-  Ibid, para. 22.
-  Ibid, para. 40.
-  Ibid, para. 24.
-  Ibid, para. 25.
-  Ibid, para. 27.
-  Ibid, paras. 29 et seqq.
-  Ibid, paras. 30 et seqq
-  Ibid, paras. 34 et seqq
-  Ibid, para. 77.
-  Ibid, para. 65.
-  Ibid, para. 66.
-  Ibid, para. 67.
-  Ibid, paras. 72 et seqq
-  Ibid, para. 42.
-  Ibid, para. 43.
-  Ibid, para. 46.
-  Ibid, para. 47.
-  Ibid, para. 53.
-  Ibid, paras. 53 et seqq
-  Ibid, paras. 58 et seqq
-  Ibid, para. 61.
-  Ibid, para. 63.
-  Ibid, para. 64.
-  Ibid, para. 68.
-  Ibid, para. 69.
Updated 17 January 2018
30 March 2017 - Case No. I-15 U 66/15
The claimant is the owner of European patent EP B1, allegedly covering data transmission technology under the GPRS standard. The defendants produce and market devices using the GPRS standard. On 10 April 2013, the claimant made a commitment towards ETSI by declaring to grant a license on FRAND terms regarding, inter alia, patent EP B1. In various letters and meetings between 2012 and 2015, the claimant informed the parent companies of the defendants about its patent portfolio and made an offer, but no licensing agreement was entered into. These interactions took place before the CJEU handed down its Huawei v. ZTE ruling in July 2015. On 3 November 2015, the District Court granted an injunction order.  The District Court also held that the defendants were liable for compensation in principle and ordered them to render full and detailed account of its sales. Further, the District Court ordered a recall and removal of all infringing products from the relevant distribution channels.
The defendants lodged an appeal with the Higher Regional Court of Düsseldorf. They argued, inter alia, that the District Court had not taken into account the procedural requirements set out by the CJEU in the decision Huawei v. ZTE  and that the claimant had not made a license offer on FRAND conditions.  The Higher Regional Court of Düsseldorf partially granted the appeal. It held that the defendants were under an obligation to render accounts and that they owed compensation in principle.  However, it held that the defendants were under no obligation to recall and remove the products from the relevant distribution channels because the claimant was in breach of its obligations under EU competition law (‘kartellrechtlicher Zwangslizenzeinwand’).  The Higher Regional Court did not have to decide about the injunction order because the parties had agreed to settle the matter in this regard (the patent had expired in September 2016). 
B. Court’s reasoning
1. Market Power
The Higher Regional Court held that the claimant was a dominant undertaking within the meaning of Art 102 TFEU.  In the eyes of the court, proprietorship of an SEP does not automatically constitute a dominant market position because not all SEPs necessarily influence competition in the downstream product market.  Rather, it needs to be ascertained whether or not market dominance exists in respect of each SEP individually. A dominant market position exists, for example, if it would not be possible to successfully market a competitive product without using the respective SEP, or if compatibility and interoperability under the standard could not be guaranteed. In contrast, a dominant position does not exist if the technology covered by the SEP is only of little importance for consumers in the relevant market.  On this basis, the Higher Regional Court had no doubts that the claimant was in a dominant market position  because the patent in question was related to data transfer, an essential function of the GPRS standard. 
2. Notice of Infringement
The Higher Regional Court held that the claimant had given proper notice of infringement under the CJEU requirements. According to the court, the procedure set out by the CJEU in the Huawei v. ZTE ruling applied to transitional cases (i.e. proceedings that had commenced before the CJEU decision, but where the decisions were handed down after).  The District Court had wrongfully assumed that the Huawei v. ZTE principles did not apply to the case at hand. CJEU decisions pursuant to Art 267 TFEU apply ab initio (‘ex tunc’) and thus to transitional cases.  The Higher Regional Court argued that the Huawei v. ZTE case itself had been of a transitional nature and that the CJEU had been aware of the diverging principles created by the German Federal Court of Justice in the Orange Book Standard decision in 2009.  Nevertheless, the CJEU had not distinguished between transitional and ‘new’ cases. As a consequence, the claimant was under an obligation to notify the defendants of the infringement. The written correspondence between the parties from 2012 and 2013 met this requirement 
The Higher Regional Court also held that it was sufficient to notify the defendants’ parent companies.  The claimant can reasonably expect that the parent company will pass on the respective information to all subsidiaries that are active on the relevant product markets. Requiring the claimant to give additional notices to the subsidiaries would be an unjustified formality (‘bloße Förmelei’). 
3. The Defendant’s Willingness to Enter into a License Agreement
As a consequence, the defendants were under an obligation to declare their willingness to enter into a license agreement on FRAND terms.  Several months had passed between the notice of infringement and the defendants’ declaration of willingness. However, the defendants had made it clear in an email from December 2013 that they were willing to enter into a license agreement. In the eyes of the Higher Regional Court, this was sufficient because there was ample time between this declaration and the commencement of proceedings in 2014.
In the further course of the negotiations, the rejection of certain license terms by the defendant was not necessarily an indicator for general unwillingness.  The defendant’s willingness needs to be seen in the overall context of the case. Unwillingness would be demonstrated only if the defendant definitively and finally rejects the claimant’s offers (the ‘last word’).  The Higher Regional Court held that the statements made by the defendants in the course of the negotiations did not justify such a conclusion. 
4. The SEP Owner’s Licensing Offer and the Standard Implementer’s Reaction
The Higher Regional Court held that the District Court had been incorrect to leave open the question as to whether the claimant’s offer had been FRAND.  The Higher Regional Court took the view that the CJEU had established an intricate system of consecutive actions that the parties must take. A claimant needs to make an offer on FRAND terms only if the defendant declared its willingness to enter into a license agreement on FRAND terms. Similarly, a defendant is under an obligation to make a counter-offer on FRAND terms only if the claimant made an offer on FRAND terms.  According to the Higher Regional Court, this view flows from the wording of the Huawei v. ZTE ruling that relates the content of offer and counter-offer (‘such an offer’; ‘responded to that offer’).  An SEP owner who has given a commitment to an SSO to offer FRAND licenses can be expected to make a FRAND offer that can reasonably be accepted by the defendant. In addition, a defendant needs to be able to assess whether the conditions of the claimant’s offer are FRAND. Requiring a defendant to make a FRAND counter-offer no matter what the claimant had offered earlier would be a contradiction of this basic proposition of the Huawei v. ZTE ruling.  Thus, it was necessary to have a decision in respect of the conditions of the claimant’s licensing offer.
The Higher Regional Court held that the claimant’s licensing offer did not meet FRAND requirements  because it discriminated against the defendants.  The court reiterated that infringement courts cannot limit their assessment to a summary review of whether the conditions were not evidently non-FRAND. Rather, infringement courts need to make a full assessment of the license conditions. 
The court held that dominant undertakings are under no obligation to treat all business partners in exactly the same way.  SEP owners have discretion regarding the license fees that they charge.  Different treatment of licensees is accepted if it can be justified as a result of normal market behavior.  Further, license conditions can be abusive only if they are significantly different between licensees.  These principles also apply to SEP owners who have given a FRAND declaration because this commitment refers to Art 102 lit. c) TFEU.  The burden of proof for such substantially unequal treatment lies with the defendant,  whilst the onus is on the claimant to prove that this unequal treatment is justified.  However, as the defendant will typically not have the necessary information, the claimant is under an obligation to provide information as to which competitors have been granted licenses and on what terms.  On this basis the Higher Regional Court concluded that the claimant had treated the defendants significantly differently from their competitors  without having a proper justification.  In particular, the claimant could not prove that discounts given to a competitor were common in the industry,  or that these discounts were a result of the particularities of the case. 
-  LG Düsseldorf, 3 November 2015, File No. 4a O 93/14
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 32.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 34.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 75.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 74 and 175.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 47.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 177 et seqq.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 182.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 185.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 186.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 202.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 203.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 215.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 213.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 220.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 240.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 244.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 245.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 242.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 251.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 249.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 254.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 255 and 257.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 256.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 257.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 258.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 263.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 268.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 270 et seqq.
-  OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 275 et seqq. and paras 290 et seqq.
Updated 17 August 2018
English court decisions
22 May 2018 - Case No. HP-2017-000015
The Claimants are the US-based parent company of the Apple group, Apple Inc., and five European subsidiaries. The Apple group manufactures and sells, among other products, mobile telecommunication and media devices  .
The two Defendants are the US-based parent company of the Qualcomm group, Qualcomm Incorporated (Qualcomm USA), and its subsidiary, Qualcomm (UK) Limited (Qualcomm UK)  . Qualcomm USA supplies manufacturers of Claimants’ devices with chipsets for mobile phones  . The company holds a great number of patents declared essential (Standard Essential Patents, or SEPs) to mobile telecommuni¬cation standards developed by the European Telecommunications Standards Institute (ETSI)  . Qualcomm USA made undertakings towards ETSI pursuant to Article 6.1 of the ETSI Intellectual Property Rights Policy (IPR Policy) that it “and its Affiliates” would make its SEPs accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions (FRAND undertakings). Qualcomm UK, on the other hand, neither holds SEPs relating to ETSI standards, nor made a FRAND undertaking vis-à-vis ETSI pursuant to Article 6.1. ETSI  . The company is, nevertheless, a member of ETSI.
The Claimants brought an action against both Defendants before the High Court of Justice (Court). Against Qualcomm USA the Claimants asserted claims for declaration of invalidity, for revocation and for declaration of non-essentiality with respect to certain SEPs  , a claim for declaration that rights derived from SEPs held by Qualcomm USA are exhausted  , a claim for damages allegedly suffered by an abuse of dominant position by Qualcomm USA in the relevant markets  , as well as claims arising from an alleged breach of the ETSI IPR Policy and the FRAND undertakings  .
Against Qualcomm UK the Claimants raised one single claim: They argued that Qualcomm UK as a member of ETSI was in breach of an obligation to license or procure licences on FRAND terms for SEPs held by the Qualcomm group  .
In its present decision, the Court did not rule on the merits of the claims asserted against Qualcomm USA. The Court focused on procedural questions regarding to the service of these claims, expressing doubts that some of the claims raised (particularly the claim for damages resulting from an alleged abuse of market power) could be validly served on Qualcomm USA outside the UK jurisdiction  .
Regarding to the claim asserted against Qualcomm UK, the Court found that no real prospect of success on the merits exist  . Accordingly, the Court signaled that it will grant Qualcomm UK a summary judg-ment against that claim, as the latter requested  .
B. Court’s reasoning
The Claimants based the claim against Qualcomm UK on the notion that the ETSI IPR policy obliges all ETSI members to license or procure a licence for SEPs on FRAND terms  . In addition, the Claimants argued that the ETSI IPR Policy imposes on Qualcomm UK as a member of ETSI an obligation to see to it that Qualcomm USA, or other companies belonging to the Qualcomm group, performed their FRAND undertakings  . Further, the Claimants pleaded that the FRAND undertakings made by Qualcomm USA towards ETSI on behalf of itself and its “Affiliates” also covered Qualcomm UK; thus, a breach of these undertakings was enforceable and actionable against the latter as well  .
Ruling on the obligations of ETSI members, the Court made clear that the ETSI IPR Policy does not require ETSI members which do not own SEPs to make a FRAND undertaking, not least because such an undertaking could not be fulfilled  . Moreover, in the eyes of the Court, the ETSI IPR Policy does not establish such an obligation even for entities which hold SEPs  . This can be derived from the provisions contained in the ETSI IPR Policy regulating the steps to be taken, in case that the patent holder chooses to refrain from making a FRAND undertaking (Article 8 ETSI IPR Policy)  .
Furthermore, the Court rejected the notion that the ETSI IPR Policy imposes on Qualcomm UK as a member of ETSI an obligation to make sure that Qualcomm USA performed its FRAND undertakings  . According to the Court, there is nothing in the wording of the ETSI IPR Policy or in the nature of the ETSI scheme which could establish such an obligation of ETSI members  . The Court did not see any need to impose an unexpressed obligation of that kind on ETSI members, either  .
Finally, the Court ruled that the FRAND undertakings of Qualcomm USA did not affect Qualcomm UK  . In the Court’s view, the reference to “Affiliates” in connection with undertakings pursuant to Article 6.1 ETSI IPR Policy covers only subsidiaries which themselves own SEPs subject to the respective undertaking  . Again, a company which does not own SEPs cannot be required to grant licences for patents that it does not hold  .
-  Applev Qualcomm, UK High Court of Justice, judgement dated 22ndMay 2018, Case-No. HP-2017-000015,  EWHC 1188 (Pat), para. 1 et seq.
-  Ibid, para. 3.
-  Ibid, para. 63.
-  Ibid, para. 35 et seq.
-  Ibid, para. 13 et seq.
-  Ibid, para. 15.
-  Ibid, para. 16.
-  Ibid, paras. 13 et seq.
-  Ibid, paras. 11 and 38.
-  Ibid, paras. 92 and 115 et. seq.
-  Ibid, para. 57.
-  Ibid, paras. 8 and 57.
-  Ibid, para. 53.
-  Ibid, para. 38.
-  Ibid, para. 47.
-  Ibid, para. 49 et seq.
-  Ibid, para. 50 et seq.
-  Ibid, para. 50.
Updated 17 January 2018
English court decisions
7 June 2017 - Case No. HP-2014-000005
A. Facts and Main Judgment
The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue relate to telecommunication network coding and procedures. In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents and one non-technical trial relating to competition law issues, FRAND issues, injunctive relief and damages for past infringements.Unwired Planet v. Huawei  EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html In its decision on 5 April 2017 (the ‘main judgment’), the Patents Court (Birrs J) held that two patents were valid and that they had been infringed, and that the claimant was in a dominant position, but had not abused this position. The court stated that a final decision about an injunction to restrain patent infringements should be made separately. A few weeks after the main judgment, a license representing the FRAND terms between the two parties was prepared (the ‘settled license’), but had not yet been entered into.  Further, the defendant offered to give an undertaking to the court to enter into the license settled by the Patents Court or any other court. 
In its subsequent decision on 7 June 2017 (the case at hand), the parties argued whether the court should grant an injunction order given the existence of the settled license. Other minor issues of the case related to damages, declaratory relief, costs and permission to appeal.  The court granted an injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 (the ‘final order’).  The injunction order would be discharged if the defendant entered into a FRAND license and it would be stayed pending appeal. The court also declared that the settled license represented the FRAND terms in the given circumstances between the parties and that the defendant had to pay GBP 2.9 million of the claimant’s costs. Permission to appeal was granted to the defendant in respect of three issues and to the claimant in respect of one issue. 
B. Court’s Reasoning
The main issue considered by the court was the interplay between the injunction, the settled license and the undertaking offered by the defendant. Patent EP (UK) 2 229 744 will expire in 2028. The settled license’s expiry date is 31 December 2020,  which would put the defendant in a difficult position if it attempts to renegotiate the license while the injunction is still in place. The defendant would even risk being in contempt of court if it continued to sell equipment if there was an argument that the license had come to an end for other reasons (e.g. repudiatory breach of contract).  However, the court took the view that it cannot be said that the defendant must be free to sell products if the license has ceased to exist.  Similarly, it cannot be said with certainty that the claimant must have an injunction at that date.
Thus, the court considered what the correct form of injunction in respect of a FRAND undertaking should be when a court has settled a license but the defendant has not entered into it (‘FRAND injunction’).  The court held that the FRAND injunction should contain a proviso that it will cease to have effect as soon as the defendant enters into the FRAND license. The injunction should also be subject to an express liberty to either party to return to court in the future if the FRAND license ceases to exist or expires while the patent is still valid. 
The court also held that despite the court’s discretion as to whether an injunction is granted, an injunction is normally effective, proportionate and dissuasive in IP cases.  Although the practical effect of a defendant’s undertaking and an injunction are similar, rights holders usually insist on an injunction.  One reason is that it involves a public vindication of the claimant’s rights.  As the claimant has been forced to come to court, an offer of undertaking after judgment is usually considered too late.  In this case, the defendant had maintained throughout the negotiations and the trial that it was under no obligation to accept a worldwide license.  Thus, according to the court, the right thing to do was to grant a FRAND injunction which will be stayed on terms pending appeal.
2. Other Issues
The court held that the issue of damages is closely related to the main issue.  If the defendant entered into the settled license, all payments would be covered by the license. If the defendant did not enter into the settled license, an order for damages is required. As a consequence, the court order should be in the same form as the FRAND injunction (stayed pending appeal and ceasing to have effect if the parties enter into the settled license). 
The parties also disagreed about the wording of the court declaration regarding the FRAND terms of the settled license.  The court dismissed the defendant’s suggestion as too complicated and the claimant’s suggestion as incomprehensive. Instead, the court declaration would be ‘the license annexed to the judgment represents the FRAND terms applicable between the parties in the relevant circumstances’.  Further, the court rejected the defendant’s petition to make a declaration that the claimant had not abused its dominant market position.  It took the view that the main judgment made a clear finding on this issue in summary paragraph 807(17).
Further, the parties disagreed about the extent of the defendant’s obligation to bear the claimant’s costs. The claimant argued that it should be regarded as the successful party so that the defendant had to pay its costs (GBP 6.4million).  The defendant argued the claimant had been clearly wrong regarding the applicable FRAND rate  and the appropriate thing would be to make no cost order. The court rejected the idea that there was no overall winner (as argued by the defendant) because the claimant was successful on the issues of the nature of the license and the existence and abuse of market dominance.  The ensuing question was whether any deductions were appropriate.  The court held that neither party had offered terms that were essentially FRAND.  However, the rates offered by the claimant were significantly further away from the end result than the rates offered by the defendant.  Thus, the defendant’s costs in relation to the FRAND rate issue were not recoverable by the claimant.
The fifth and final issue was in respect of permission to appeal. The court granted the defendant permission on three grounds: first, the necessity of granting a global license (including the court’s view that there is only one applicable license fee);  second, the hard-edged non-discrimination point;  and third, the issue of injunctive relief and abuse of market dominance under the CJEU ruling Huawei v. ZTE.  Conversely, the claimant was granted permission to appeal on the blended global benchmark issue (using a blended global rate as a benchmark, leading to the question whether another discount for the Chinese market should given). 
-  Unwired Planet v. Huawei  EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), para 2.
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), para 8.
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), para 1.
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), para 70.
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), para 22.
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), para 19.
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), para 20.
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), para 25.
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), para 26.
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), para 29.
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), para 33.
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), para 34.
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), para 36.
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), para 38.
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), paras 39-40.
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), para 41.
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), para 44.
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), para 45.
-  Unwired Planet v Huawei,  EWHC 1304 (Pat), para 56.
-  See Unwired Planet v. Huawei  EWHC 711(Pat), paras 170 et seqq.
-  See Unwired Planet v. Huawei  EWHC 711(Pat), paras 177 and 481 et seqq.
-  See Unwired Planet v. Huawei  EWHC 711(Pat), paras 627 et seqq.
-  See Unwired Planet v. Huawei  EWHC 711(Pat), paras 537 et seqq.
Updated 3 December 2018
28 September 2018 - Case No. 7 O 165/16
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)  . 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  .
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  . The Defendant filed an action for invalidity against the Claimant’s SEP in Germany  .
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  . Subsequently, several licensing offers and counter-offers were made by the Claimant and the parent company respectively  . 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  . In response, the parent company confirmed that it is willing to obtain a licence, among others, by letter dated 7 September 2016  . 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  .
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  . 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)  . This deadline was extended for almost three weeks until 7 May 2018  .
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)  .
With the present judgment the Court ruled that the Defendant is liable for damages arising from the infringement of the SEP in suit  . The Court also ordered the Defendant to render accounts and to provide relevant information to the Claimant  . 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  .
B. Court’s reasoning
The Court held that the products sold by the Defendant in Germany infringe Claimant’s SEP  . Thus, the Defendant is obliged to compensate the damages suffered by the Claimant and the previous holder of the patent in suit  . 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)  .
In the Court’s view, the Defendant cannot raise a defence based on a so-called “patent ambush” against these claims  . 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  . 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”  . The Court held that the Defendant failed to establish such fact  . 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?)  .
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  .
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  . The wording of Article 6.1. ETSI IPR Policy establishes a respective assumption  . 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  . 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  . 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  .
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  . 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  .
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  . 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  .
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  .
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)  .
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  . 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)  .
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)  .
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)  .
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  .
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)  . 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  .
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  . Only then, the SEP user’s consequent obligation under the Huawei framework to make a FRAND counter-offer to the SEP holder is triggered  . 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  . For the assessment of the non-discriminatory character of the offer, information on comparable agreements is needed  .
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  . 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  . 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”)  . 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  . Otherwise, the initiation of the infringement proceedings shall be considered as abusive in terms of antitrust law  . In the present case, the Claimant chose to not ask for a stay in the proceedings, ignoring the Court’s respective indication  .
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  . On the other hand, it does not define the ownership of the patent in material legal terms  . Nevertheless, the patent registration establishes an assumption of ownership which must be rebutted by the defendant in infringement proceedings based on concrete indications  .
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  . As a rule, it must be expected with a sufficient degree of probability that the patent(s) in suit will be invalidated  . The Defendant failed convince the Court that this was the case with the SEP in suit  .
-  District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, page 2 and 23.
-  Ibid, page 23 et seq.
-  Ibid, page 5.
-  Ibid, page 25.
-  Ibid, page 26.
-  Ibid, pages 5 et seq.
-  Ibid, page 6.
-  Ibid, page 19.
-  Ibid,page 23.
-  Ibid, pages 16 et seqq.
-  Ibid, page 20.
-  Ibid, page 21.
-  Ibid, page 22.
-  Ibid, page 24.
-  Ibid, pages 24 et seq.
-  Huawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-130/13.
-  District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, pages 22.
-  Ibid,pages 23 and 25.
-  Ibid, page 23.
-  Ibid, pages 23 and 25 et seq.
-  Ibid, pages 26 et seqq.
-  Ibid, page 27.
-  Ibid, page 28.
-  Ibid, page 29.
-  Ibid, page 10.
-  Ibid, pages 10 et seq.
-  Ibid, page 11.
-  Ibid, page 30.
Updated 1 November 2017
English court decisions
4 May 2017 - Case No. HP-2014-000005
The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue (EP (UK) 2 229 744, EP (UK) 2 119 287, EP (UK) 2 485 514, EP (UK) 1 230 818, EP (UK) 1 105 991, EP (UK) 0 989 712) relate to telecommunication network coding and procedures  . Most were part of a large patent portfolio that the claimant had acquired from a major telecommunications company in 2013.  In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents. This summary focuses on the non-technical trial addressed competition law issues, FRAND issues, injunctive relief and damages for past infringements. 
In April 2014 the claimant made an open offer to the defendant, a major international smartphone manufacturer, to grant a license in respect of the claimant’s entire global patent portfolio (containing SEPs and non-SEPs). The defendant refused the offer, contending that there was no patent infringement, that the patents were not essential, and that they were invalid. The defendant also argued that the offer was not FRAND and thus did not constitute an abuse of a dominant market position under Art. 102 TFEU. In July 2014 the claimant made a further offer, limited to the claimant’s SEPs. Again, the defendant refused, arguing that the license conditions were not FRAND.  In June 2015 both parties made further offers. These offers were the result of directions from the court. The claimant offered a worldwide portfolio license while the defendant wanted to limit the territorial scope to the United Kingdom.  Between August and October 2016 the parties exchanged further offers without reaching an agreement. 
The Patents Court (Birrs J) held that the claimant was in a dominant position, but did not abuse this position.  The defendant was not prepared to take a license on FRAND conditions and the claimant was not in breach of competition law. Thus, the court held that a final injunction to restrain patent infringements should be granted. An injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 was granted on 7 June 2017. 
- Court’s reasoning
- Market power
The court defined the relevant market for assessing dominance as a distinct market for licensing each SEP individually.  European case law indicated that owning an SEP could be a rebuttable presumption for the existence of a dominant position.  The claimant’s pleaded position was a non-admission of dominance rather than a denial coupled with a positive case to the contrary. It was the view of the court that this was insufficient to rebut the presumption. In particular, the claimant’s argument of countervailing buyer power was unconvincing because it had not been supported by a proper economic analysis. 
- SEP Proprietor’s Licensing Offer
- FRAND Declaration as Conceptual Basis
The court pointed out that that the FRAND undertaking also applied in the case that the SEP proprietor was not in a dominant position. It held that the FRAND undertaking operated as a practical constraint on a SEP owner’s market power.  The ETSI declaration made by the SEP proprietor is also the starting point for determining the FRAND rate. The underlying issue, which is discussed at length by the court,  is if such a declaration forms a contract and whether that contract can benefit third parties. The court acknowledged that the legal effect of this declaration, in particular its enforceability, is a controversial issue under French law.  However, the court reasoned that the FRAND declaration is an important aspect of technology standardisation. Holders of SEPs are not compelled to give a FRAND declaration. If they do, the undertaking would be enforceable and irrevocable due to public interest. 
The court applied a procedural approach to FRAND. It emphasised that FRAND describes not only a set of license terms, but also the process by which a set of terms are agreed.  It applies to both the SEP-holder and the implementer/defendant. In particular, this approach allows for starting offers that leave room for negotiation. On the other hand, making extreme offers and taking an uncompromising approach which prejudices fair, reasonable, and non-discriminatory negotiation is not a FRAND approach.  This approach also means that the SEP proprietor is under an obligation to make a FRAND offer and to enter into FRAND license agreements. 
- ‘True FRAND Rate’
The court considered that there is only a single set of terms for a given set of circumstances that would meet FRAND conditions (‘true FRAND rate’).  This eliminates the so-called Vringo-problem,  i.e. if FRAND were a range there would be two different but equally FRAND offers. Thus, if the court would grant or not an injunction, it would be unfair for the alleged infringer or SEP holder respectively. 
The court was of the opinion that the true FRAND rate approach does not cause problems under competition law. Theoretically, if only one set of terms is truly FRAND, and if FRAND also represents the line between abusive and non-abusive conduct under Art. 102 TFEU, then every agreed SEP-licence could be at serious risk of being abusive.  However, the court took the view that FRAND-compliance and compliance with Art. 102 TFEU are not the same thing (the court pointed out that the CJEU in the Huawei ruling appears to equate an obligation to make a FRAND offer with compliance with Art 102 TFEU).  Since Art. 102 TFEU condemns excessive pricing,  a royalty rate can be somewhat higher than the true FRAND rate and still not be contrary to competition law. Conversely, for a breach of competition law, it will be necessary but not sufficient that the rate is not the true FRAND rate. 
The court held that the correct approach is to start from a global rate as a benchmark and to then adjust this rate as appropriate.  It distinguished between two concepts of discrimination. First, the ‘general’ concept of non-discrimination describes an overall assessment of FRAND which can be used to derive the benchmark mentioned above.  It is based on the intrinsic value of the patent portfolio, but it does not depend on the licensee. The court held that this benchmark should be applied to all licensees seeking the same kind of license. 
Second, the ‘hard-edged’ non-discrimination obligation, which takes into account the nature of the potential licensee,  is a distinct concept that could be used to adjust license terms. However, the court held that the FRAND declaration does not introduce such a hard-edged non-discrimination concept.  If, contrary to the view taken by the court, the FRAND undertaking did include hard-edged non-discrimination, a licensee could only have the right to a lower rate granted to another licensee (i.e. a specific non-discrimination obligation resulting from the FRAND declaration) if the difference would otherwise distort competition between the two licensees. 
- Territorial Scope of License
The court held that the defendant’s offer that was limited to UK licenses was not FRAND. In the court’s opinion country by country licensing is inefficient for goods such as mobile telecommunications devices that are distributed across borders.  It would also be inefficient to negotiate many different licenses and then to keep track of so many different royalty calculations and payments. No rational business would do this, if it could be avoided.  This was illustrated by the fact that the vast majority of licenses introduced in the trial were worldwide licenses.  Further, it is common ground that the industry assesses patent families rather than individual patents within the family. Assessing portfolios on a family basis inevitably involved tying a patent in one jurisdiction with a patent in another.  Thus, according to the court, a worldwide license would not be contrary to competition law. As willing and reasonable parties would agree on a worldwide licence, the insistence by the defendant on a license which was limited to the UK was not FRAND. 
- FRAND Declaration as Conceptual Basis
- Market power
- Court’s reasoning
- Comparable agreements and reasonable aggregate royalty rate
The court held that for determining the royalty rate, the evidence of the parties would be relevant, including evidence of how negotiations actually work in the industry.  Other freely-negotiated license agreements might be used as comparables.  This may be compared with a top down approach  can also be used in which the rate is set by determining the patentee’s share of relevant SEPs and applying that to the total aggregate royalty for a standard, but this may be more useful as a cross-check.  Royalty rates determined by other courts might be useful as persuasive precedents. However, in the eyes of the court, a license rate determined at a binding arbitration does not carry much weight as to what parties are usually paying.  License agreements must meet certain criteria to be comparable.  First, the licensor is the claimant. Second, the license agreement is recent. However, it is not necessary that the licensee is the defendant or a comparable company because different market participants have different bargaining powers, which is reflected in the negotiations and the resulting royalty rates.  Finally the court confirmed that a royalty based on the handset price was appropriate and implied a reasonable aggregate royalty rate of 8.8%of the handset price. The court found that the 8.8% was reasonable, in part, because the aggregate implied by either party’s case was higher (10.4% and 13.3%). 
- Principles derived from Huawei v. ZTE
The court also provided a compiled overview of its interpretation of the Huawei v. ZTE ruling.  In the eyes of the court, the ‘willingness to conclude a licence on FRAND terms’ refers to a willingness in general. The fact that concrete proposals are also required does not mean it is relevant to ask whether the proposals are actually FRAND or not. If the patentee complies with the procedure as set out by the CJEU, then bringing a claim for injunction is not abusive under Art 102. But even if sufficient notice is given, bringing a claim can constitute an abuse because complying with the procedure does not mean that a patentee can behave with impunity. In other words, there might be other aspects that make the claim abusive. Conversely, bringing such a claim without prior notice will necessarily be abusive. Significantly, the court held, the legal circumstances of this case differ from the circumstances assumed by the CJEU in a crucial respect. A FRAND undertaking can be effectively enforced irrespective of Art 102. The defendant does not need Art 102 TFEU to have a defence to the injunction claim.
- Comparable agreements and reasonable aggregate royalty rate
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 2
-  Unwired Planet v. Huawei  EWHC 711(Pat), paras 54 et seqq.
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 3
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 5
-  Unwired Planet v. Huawei  EWHC 711(Pat), paras 7-8
-  Unwired Planet v. Huawei  EWHC 711(Pat), paras 11-14
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 807
-  Unwired Planet v Huawei, EWHC 1304 (Pat)
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 631
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 634
-  Unwired Planet v. Huawei  EWHC 711(Pat), paras 636-646
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 656
-  Unwired Planet v. Huawei  EWHC 711(Pat), paras 108-145
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 146
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 162
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 163
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 159
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 164
-  See Vringo v ZTE  EWHC 1591 (Pat) and  EWHC 214 (Pat)
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 158
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 152
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 154
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 153
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 176
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 177
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 503
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 501
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 544
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 534
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 546
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 572
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 171
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 170
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 178
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 806 (10)
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 175
-  Unwired Planet v. Huawei  EWHC 711(Pat), para 476
-  Unwired Planet v. Huawei  EWHC 711(Pat), 744
Updated 30 October 2018
English court decisions
23 October 2018 - Case No. A3/2017/1784,  EWCA Civ 2344
The Claimant, Unwired Planet International Limited, holds a significant portfolio of patents which are essential for the implementation of the 2G/GSM, 3G/UMTS and 4G/LTE wireless telecommunications standards (Standard Essential Patents, or SEPs). The Defendants, Huawei Technologies Co. Ltd. and Huawei Technologies (UK) Co. Ltd., manufacture and sell mobile devices complying with the above standards worldwide.
Starting in September 2013, the Claimant contacted the Defendants several times, requesting the latter to engage in discussions for a licence regarding its SEP portfolio.  In March 2014, the Claimant sued the Defendants as well as Samsung and Google for infringement of five of its UK SEPs before the UK High Court of Justice (High Court).  The Claimant also initiated parallel infringement proceedings against the Defendants in Germany. 
The High Court conducted three technical trials first, focusing on the validity and essentiality of four of the SEPs in suit.  By April 2016, these trials were completed; the High Court held that two of the SEPs in suit were both valid and essential, whereas two other patents were found to be invalid.  The parties agreed to postpone further technical trials indefinitely. 
In late 2016, the trial concerned with questions regarding to the licensing of the SEPs in suit commenced between the Claimant and the Defendants. Over the course of these proceedings the parties made licensing offers to the each other. However, they failed to reach an agreement. The Defendants indicated they were willing to take a licence under Claimant’s UK patent portfolio, whereas the Claimant contended that it was entitled to insist upon a worldwide licence. 
In April 2017, the High Court granted an UK injunction against the Defendant, until such time as it entered into a worldwide licensing agreement with the Claimant on the specific rates, which the court determined to be Fair, Reasonable and Non-Discriminatory (FRAND)  in accordance with the undertaking given by the Claimant towards the European Telecommunications Standards Institute (ETSI).  Pending appeal, the High Court stayed the injunction. 
Shortly after the High Court delivered its decision, the Defendants began proceedings against the Claimant in China, which are still pending. 
With the present judgment, the UK Court of Appeal dismissed the Defendants’ appeal against the decision of the High Court. 
B. Court’s reasoning
The Defendants appealed the decision of the High Court on the following three grounds:
1. The High Court’s finding that only a worldwide licence was FRAND is erroneous; the imposition of such a licence on terms set by this court based on a national finding of infringement of UK patents is wrong in principle. 
2. The offer imposed to the Defendants by the High Court is discriminatory in violation of Claimant’s FRAND undertaking, since the rates offered are higher than the rates reflected in the licence granted by the Claimant to Samsung. 
3. The Claimant is not entitled to injunctive relief; by bringing the infringement proceedings against the Defendants, without meeting the requirements established by the Court of Justice of the European Union (“CJEU”) in the matter Huawei v ZTE  (Huawei judgment) before, the Claimant abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the European Union (“TFEU”). 
Notably, the High Court’s determination of the rates which apply to the worldwide licence that the court requested the Defendants to take was not challenged by any of the parties to the proceedings. 
1. Worldwide licences
The Court of Appeal disagreed with the Defendants’ notion that imposing a worldwide licence on an implementer is wrong, because it amounts to an (indirect) interference with foreign court proceedings relating to patents subsisting in foreign territories, which would have been subject to materially different approaches to the assessment of FRAND royalty rates and could, therefore, lead to different results (particularly the ongoing litigation between the parties in China and Germany). 
The Court of Appeal explained that in imposing a worldwide licence the High Court did neither adjudicate on issues of infringement or validity concerning any foreign SEPs, nor was it deciding what the appropriate relief for infringement of any foreign SEPs might be (particularly since it made clear that a FRAND licence should not prevent a licensee from challenging the validity or essentiality of any foreign SEPs and should make provision for sales in non-patent countries which do not require a licence)  . 
Moreover, the High Court simply determined the terms of the licence that the Claimant was required to offer to the Defendants pursuant to its FRAND undertaking towards ETSI.  Such an undertaking has international effect.  It applies to all SEPs of the patent holder irrespective of the territory in which they subsist.  This is necessary for two reasons: first, to protect implementers whose equipment may be sold and used in a number of different jurisdictions.  Second, to enable SEP holders to prevent implementers from “free-riding” on their innovations and secure an appropriate reward for carrying out their research and development activities and for engaging with the standardisation process. 
Accordingly, the High Court had not erred in finding that a worldwide licence was FRAND. On the contrary, there may be circumstances in which only a worldwide licence or at least a multi-territorial licence would be FRAND.  German Courts (in Pioneer Acer  and St. Lawrence v Vodafone  ) as well as the European Commission in its Communication dated 29 November 2017  had also adopted a similar approach. 
Having said that, the Court of Appeal recognized that it may be “wholly impractical” for a SEP holder to seek to negotiate a licence for its patents on a country-by-country basis, just as it may be “prohibitively expensive” to seek to enforce its SEPs by litigating in each country in which they subsist.  In addition, if in the FRAND context the implementer could only be required to take country-by-country licences, there would be no prospect of any effective injunctive relief being granted to the SEP holder against it: the implementer could avoid an injunction, if it agreed to pay the royalties in respect of its activities in any particular country, once those activities had been found to infringe.  In this way, the implementer would have an incentive to hold out country-by-country, until it was compelled to pay. 
In its discussion of this topic, the Court of Appeal disagreed with the view taken by the High Court that in every given set of circumstances only one true set of FRAND terms exists. Nevertheless, the court did not consider that the opposite assumption of the High Court had a material effect to the its decision. 
In the eyes of the Court of Appeal, it is “unreal” to suggest that two parties, acting fairly and reasonably, will necessarily arrive at precisely the same set of licence terms as two other parties, also acting fairly and reasonably and faced with the same set of circumstances.  The reality is that a number of sets of terms may all be fair and reasonable in a given set of circumstances.  Whether there is only one true set of FRAND terms or not, is, therefore, more of a “theoretical problem” than a real one.  If the parties cannot reach an agreement, then the court (or arbitral tribunal) which will have to determine the licensing terms will normally declare one set of terms as FRAND. The SEP holder would then have to offer that specific set of terms to the implementer. On the other hand, in case that the court finds that two different sets of terms are FRAND, then the SEP holder will satisfy its FRAND undertaking towards ETSI, if it offers either one of them to the implementer. 
Furthermore, the Court of Appeal dismissed Defendants’ claim that imposing a worldwide licence is contrary to public policy and disproportionate.  In particular, the Defendants argued that this approach encourages over-declaration of patents  and is not compatible with the spirit of the Directive 2004/48/EC on the enforcement of intellectual property rights,  which requires relief for patent infringement to be proportionate. 
Although the Court of Appeal recognised the existence of the practice of over-declaration and acknowledged that it is a problem, it held that this phenomenon cannot justify “condemning” SEP holders with large portfolios to “impossibly expensive” litigation in every territory in respect of which they seek to recover royalties.  The court also found that there was nothing disproportionate about the approach taken by the High Court, since the Defendants had the option to avoid an injunction by taking a licence on the terms which the court had determined. 
The Court of Appeal rejected the Defendants’ argument  that the non-discrimination component of Claimant’s FRAND undertaking towards ETSI obliges the Claimant to offer to the Defendants the same rates as those contained in the licence granted to Samsung. 
The Court of Appeal made clear that the obligation of the SEP holder not to discriminate is, in principle, engaged in the present case, since the Claimant’s transaction with the Defendants is equivalent to the licence it granted to Samsung.  In the court’s eyes, when deciding whether two transactions are equivalent one needs to focus first on the transactions themselves. Insofar, differences in the circumstances in which the transactions were entered into, particularly economic circumstances, such as the parties’ financial position  or market conditions (e.g. cost of raw materials), cannot make two otherwise identical transactions non-equivalent (releasing, therefore, the patent holder from the obligation not to discriminate). Changes in such circumstances could only amount to an objective justification for a difference in treatment. 
Considering the specific content of the SEP holder’s respective obligation, the Court of Appeal agreed with the High Court’s finding that the non-discrimination element of a SEP holder’s FRAND undertaking does not imply a so-called “hard-edged” component (imposing on the patent holder an obligation to offer the same rate to similarly situated implementers).  It argued that the “hard-edged” approach is “excessively strict” and fails to achieve a balance between a fair return to the SEP owner and universal access to the technology.  It could have the effect of compelling the SEP holder to accept a level of compensation for the use of its invention which does not reflect the value of the licensed technology and, therefore, harm the technological development of standards. 
Furthermore, the “hard-edged” discrimination approach should be rejected also because its effects would result in the insertion of the “most favoured licensee” clause in the FRAND undertaking. In the view of the Court of Appeal, the industry would most likely have regarded such a clause as inconsistent with the overall objective of the FRAND undertaking. 
Conversely, the Court of Appeal followed the notion described by the High Court as the “general” non-discrimination approach:  the FRAND undertaking prevents the SEP holder from securing rates higher than a “benchmark” rate which mirrors a fair valuation of its patent(s), but it does not prevent the patent holder from granting licences at lower rates.  For determining the benchmark rate, prior licences granted by the SEP holder to third parties will likely form the “best comparables”. 
The Court of Appeal argued that the “general” approach is in line with the objectives of the FRAND undertaking, since it ensures that the SEP holder is not able to “hold-up” implementation of the standard by demanding more than its patent(s) is worth.  However, the FRAND undertaking does not aim at leveling down the royalty owed to the SEP holder to a point where it no longer represents a fair return for its patent(s), or to removing its discretion to agree royalty rates lower than the benchmark rate, if it chooses to do so. 
In this context, the Court of Appeal made clear that it does not consider differential pricing as per se objectionable, since it can in some circumstances be beneficial to consumer welfare.  The court sees no value in mandating equal pricing for its own sake. On the contrary, once the hold-up effect is dealt with by ensuring that licences are available at the benchmark rate, there is no reason for preventing the SEP holder from charging less than the licence is worth.  Should discrimination appear below the benchmark rate, it should be addressed through the application of competition law; as long as granting licences at rates lower than the benchmark rate causes no competitive harm, there is no reason to assume that the FRAND undertaking constrains the ability of the SEP holder to do so. 
3. Abuse of dominant Position / Huawei v ZTE
The Court of Appeal further rejected Defendants’ argument that, by bringing the infringement proceedings prior to fulfilling the obligations arising from the Huawei judgment, the Claimant abused its dominant market position in violation of Article 102 TFEU. 
To begin with, the Court of Appeal confirmed the finding of the High Court that the Claimant held a dominant market position and dismissed the respective challenge by the latter.  It did not find any flaw in the High Court’s view that the SEP holder has a 100% market share with respect to each SEP (since it is “common ground” that the relevant market for the purpose of assessing dominance in the case of each SEP is the market for the licensing of that SEP  ) and that the constrains imposed upon the SEP holder’s market power by the limitations attached to the FRAND undertaking  and the risk of hold-out that is immanent to the structure of the respective market,  can either alone or together rebut the assumption that it most likely holds market power. 
Notwithstanding the above, the Court of Appeal held that the Claimant had not abused its market power in the present case. 
The court agreed with the finding of the High Court that the Huawei judgment did not lay down “mandatory conditions”, in a sense that that non-compliance will per se render the initiation of infringement proceedings a breach of Article 102 TFEU.  The language used in the Huawei judgment implies that the CJEU intended to create a “safe harbor”: if the SEP holder complies with the respective framework, the commencement of an action will not, in and of itself, amount to an abuse.  If the SEP holder steps outside this framework, the question whether its behaviour has been abusive must be assessed in light of all of the circumstances. 
In the court’s eyes, the only mandatory condition that must be satisfied by the SEP holder before proceedings are commenced, is giving notice to the implementer about the infringing use of its patents.  This follows from the clear language used by the CJEU with respect to this obligation.  The precise content of such notice will depend upon all the circumstances of the particular case.  In general, if an alleged infringer is familiar with the technical details of the products it is dealing and the SEP it may be infringing, but has no intention of taking a licence on FRAND terms, it will not be justified to deny the SEP holder an injunction, simply because it had not made a formal notification prior to the commencement of proceedings. 
On the merits, the court accepted the High Court’s assessment that the Claimant had not behaved abusively and particularly the finding, that the Defendants, who were in contact with the Claimant prior to the proceedings, had sufficient notice that the Claimant held SEPs which ought to be licensed, if found infringed and essential. 
Considering further that the respective conduct requirements were not established at the point in time, in which the infringement action was filed (since the present proceedings were initiated before the CJEU delivered the Huawei judgment), the Court of Appeal noted that it would very likely not be fair to accuse the Claimant of abusive behavior.  Insofar the court agreed with the respective approach developed by German courts in co-called “transitional” cases (Pioneer v Acer,  St. Lawrence v Vodafone  and Sisvel v Haier  )  .
-  Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, Case-No. A3/2017/1784,  EWCA Civ 2344, para. 233.
-  Ibid, para. 6 et seqq.
-  Ibid, para. 233.
-  Ibid, para. 7.
-  Ibid, paras. 8 and 137 et seqq.
-  Ibid, para. 8.
-  Ibid, para. 9 et seqq.; para. 31 et seqq.
-  Ibid, para 17.
-  Ibid, para 130.
-  Ibid, para 18.
-  Ibid, para 112.
-  Ibid, para 291.
-  Ibid, paras. 19 and 45 et seqq.
-  Ibid, paras. 20 and 132 et seqq.
-  Huawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-170/13.
-  Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 21, paras. 211 et seqq and para. 251.
-  Ibid, para. 17.
-  Ibid, paras. 74 and 77 et seq.
-  Ibid, para. 82.
-  Ibid, para. 80.
-  Ibid, para. 79 et seq.
-  Ibid, para. 26.
-  Ibid, para. 53.
-  Ibid, para. 54 et seq., para. 59.
-  Ibid, para. 56.
-  Pioneer v Acer, District Court of Mannheim, judgement dated 8 January 2016, Case No. 7 O 96/14.
-  St. Lawrence v Vodafone, District Court of Düsseldorf, judgement dated 31 March 2016, Case No. 4a O 73/14.
-  Communication From the Commission to the European Parliament, the Council and the European Economic and Social Committee, “Setting out the EU Approach to Standard Essential Patents”, 29 November 2017, COM(2017) 712 final.
-  Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 74.
-  Ibid, para. 111.
-  Ibid, para. 128.
-  Ibid, para. 121.
-  Ibid, para. 125.
-  Ibid, para. 75.
-  Ibid, para. 92
-  Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights (Official Journal of the EU L 195, 02/06/2004, p. 16)
-  Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 94.
-  Ibid, para. 96.
-  Ibid, para. 98.
-  Ibid, para. 20 and 132 et seqq.
-  Ibid, paras. 207 and 210.
-  Ibid, para. 176.
-  Ibid, para. 173.
-  Ibid, para. 169 et seq.
-  Ibid, paras. 194 et seqq.
-  Ibid, para. 198.
-  Ibid, para. 198.
-  Ibid, para. 199.
-  Ibid, para. 195.
-  Ibid, para. 202.
-  Ibid, para. 196.
-  Ibid, para. 197.
-  Ibid, para. 200.
-  Ibid, para. 21, paras. 211 et seqq and para. 251.
-  Ibid, para. 212.
-  Ibid, para. 216.
-  Ibid, para. 219.
-  Ibid, para. 220.
-  Ibid, para. 229.
-  Ibid, para. 284.
-  Ibid, para. 269.
-  Ibid, para. 270.
-  Ibid, para. 269 and 282.
-  Ibid, para. 253 and 281.
-  Ibid, para. 271.
-  Ibid, para. 273.
-  Ibid, para. 284
-  Ibid, para. 275
-  See above
-  Sisvel v Haier, Higher District Court of Düsseldorf, judgement dated 30 March 2017, Case No. 15 U 66-15.
-  Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 279.