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Updated 10 April 2019

Huawei v ZTE

CJEU decisions
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) [1] . 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 [2] .

The Defendants, ZTE Corp. and ZTE Deutschland GmbH, hold themselves several SEPs relating to the LTE standard [3] and also market, inter alia in Germany, LTE-compliant products [4] .

Between November 2010 and March 2011, the parties engaged into discussions concerning the licensing of the Claimant’s portfolio of SEPs [4] . The Claimant indicated the amount it considered as a reasonable royalty; the Defendants, on the other hand, sought to conclude a cross-licence [5] . An offer for a licensing agreement was, however, not finalized [5] .

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 [6] .

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 [7] : 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 [8] . 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 [9] .

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[10] .

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 [11] . 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 [12] 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[13] .

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 [14] .

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 [15] .

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 [16] . 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 [17] . Moreover, an action for the enforcement of an IPR can constitute an abuse of dominant position only in “exceptional circumstances[18] .

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[19] . 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 [19] . 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 [20] .

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 [21] . 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[22] , 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 [23] . 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 [24] .

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’ [11] . Whether this is the case must be established on the basis of ‘objective factors’, which implies, in particular, that there are no ‘delaying tactics[11] .

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 [12] . 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[13] . 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 [13] .

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[25] .

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 [26] .


  • [1] Huawei v ZTE, Court of Justice of the European Union, judgment dated 6 July 2015, para. 22.
  • [2] Ibid, para. 22.
  • [3] Ibid, para. 40.
  • [4] Ibid, para. 24.
  • [5] Ibid, para. 25.
  • [6] Ibid, para. 27.
  • [7] Ibid, paras. 29 et seqq.
  • [8] Ibid, paras. 30 et seqq
  • [9] Ibid, paras. 34 et seqq
  • [10] Ibid, para. 77.
  • [11] Ibid, para. 65.
  • [12] Ibid, para. 66.
  • [13] Ibid, para. 67.
  • [14] Ibid, paras. 72 et seqq
  • [15] Ibid, para. 42.
  • [16] Ibid, para. 43.
  • [17] Ibid, para. 46.
  • [18] Ibid, para. 47.
  • [19] Ibid, para. 53.
  • [20] Ibid, paras. 53 et seqq
  • [21] Ibid, paras. 58 et seqq
  • [22] Ibid, para. 61.
  • [23] Ibid, para. 63.
  • [24] Ibid, para. 64.
  • [25] Ibid, para. 68.
  • [26] Ibid, para. 69.

Updated 17 August 2018

Apple v Qualcomm, [2018] EWHC 1188 (Pat)

English court decisions
22 May 2018 - Case No. HP-2017-000015

A. Facts

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 [27] .

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) [28] . Qualcomm USA supplies manufacturers of Claimants’ devices with chipsets for mobile phones [29] . 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) [28] . 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 [30] . 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 [31] , a claim for declaration that rights derived from SEPs held by Qualcomm USA are exhausted [32] , a claim for damages allegedly suffered by an abuse of dominant position by Qualcomm USA in the relevant markets [33] , as well as claims arising from an alleged breach of the ETSI IPR Policy and the FRAND undertakings [34] .

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 [35] .

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 [36] .

Regarding to the claim asserted against Qualcomm UK, the Court found that no real prospect of success on the merits exist [37] . Accordingly, the Court signaled that it will grant Qualcomm UK a summary judg-ment against that claim, as the latter requested [38] .


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 [35] . 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 [39] . 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 [40] .

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 [41] . Moreover, in the eyes of the Court, the ETSI IPR Policy does not establish such an obligation even for entities which hold SEPs [41] . 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) [41] .

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 [39] . 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 [39] . The Court did not see any need to impose an unexpressed obligation of that kind on ETSI members, either [39] .

Finally, the Court ruled that the FRAND undertakings of Qualcomm USA did not affect Qualcomm UK [42] . 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 [43] . Again, a company which does not own SEPs cannot be required to grant licences for patents that it does not hold [44] .

  • [27] Applev Qualcomm, UK High Court of Justice, judgement dated 22ndMay 2018, Case-No. HP-2017-000015, [2018] EWHC 1188 (Pat), para. 1 et seq.
  • [28] Ibid, para. 3.
  • [29] Ibid, para. 63.
  • [30] Ibid, para. 35 et seq.
  • [31] Ibid, para. 13 et seq.
  • [32] Ibid, para. 15.
  • [33] Ibid, para. 16.
  • [34] Ibid, paras. 13 et seq.
  • [35] Ibid, paras. 11 and 38.
  • [36] Ibid, paras. 92 and 115 et. seq.
  • [37] Ibid, para. 57.
  • [38] Ibid, paras. 8 and 57.
  • [39] Ibid, para. 53.
  • [40] Ibid, para. 38.
  • [41] Ibid, para. 47.
  • [42] Ibid, para. 49 et seq.
  • [43] Ibid, para. 50 et seq.
  • [44] Ibid, para. 50.

Updated 17 January 2018

Sisvel v Haier

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

A. Facts

The claimant is the owner of European patent EP B1, allegedly covering data transmission technology under the GPRS standard. The defendants produce and market devices using the GPRS standard. On 10 April 2013, the claimant made a commitment towards ETSI by declaring to grant a license on FRAND terms regarding, inter alia, patent EP B1. In various letters and meetings between 2012 and 2015, the claimant informed the parent companies of the defendants about its patent portfolio and made an offer, but no licensing agreement was entered into. These interactions took place before the CJEU handed down its Huawei v. ZTE ruling in July 2015. On 3 November 2015, the District Court granted an injunction order. [45] 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 [46] and that the claimant had not made a license offer on FRAND conditions. [47] 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. [48] 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’). [49] 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). [50]

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. [51] 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. [52] 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. [52] On this basis, the Higher Regional Court had no doubts that the claimant was in a dominant market position [53] because the patent in question was related to data transfer, an essential function of the GPRS standard. [54]

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

The Higher Regional Court also held that it was sufficient to notify the defendants’ parent companies. [58] 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’). [58]

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. [59] 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. [60] 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’). [60] The Higher Regional Court held that the statements made by the defendants in the course of the negotiations did not justify such a conclusion. [60]

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. [61] 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. [62] 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’). [62] 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. [62] 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 [63] because it discriminated against the defendants. [64] 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. [65]

The court held that dominant undertakings are under no obligation to treat all business partners in exactly the same way. [66] SEP owners have discretion regarding the license fees that they charge. [67] Different treatment of licensees is accepted if it can be justified as a result of normal market behavior. [68] Further, license conditions can be abusive only if they are significantly different between licensees. [68] These principles also apply to SEP owners who have given a FRAND declaration because this commitment refers to Art 102 lit. c) TFEU. [69] The burden of proof for such substantially unequal treatment lies with the defendant, [70] whilst the onus is on the claimant to prove that this unequal treatment is justified. [70] 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. [70] On this basis the Higher Regional Court concluded that the claimant had treated the defendants significantly differently from their competitors [71] without having a proper justification. [72] In particular, the claimant could not prove that discounts given to a competitor were common in the industry, [73] or that these discounts were a result of the particularities of the case. [74]

  • [45] LG Düsseldorf, 3 November 2015, File No. 4a O 93/14
  • [46] 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.
  • [47] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 34.
  • [48] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 75.
  • [49] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 74 and 175.
  • [50] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 47.
  • [51] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 177 et seqq.
  • [52] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 182.
  • [53] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 185.
  • [54] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 186.
  • [55] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 202.
  • [56] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 203.
  • [57] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 215.
  • [58] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 213.
  • [59] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 220.
  • [60] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 240.
  • [61] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 244.
  • [62] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 245.
  • [63] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 242.
  • [64] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 251.
  • [65] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 249.
  • [66] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 254.
  • [67] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 255 and 257.
  • [68] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 256.
  • [69] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 257.
  • [70] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 258.
  • [71] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 263.
  • [72] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 268.
  • [73] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 270 et seqq.
  • [74] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 275 et seqq. and paras 290 et seqq.

Updated 9 November 2020

Sharp v Daimler

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

A. Facts

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

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

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

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

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

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

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

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

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

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

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

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

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

With the present judgment [75] (cited by https://www.gesetze-bayern.de/Content/Document/Y-300-Z-BECKRS-B-2020-N-22577?hl=true), the Court granted an injunction against Daimler and also recognised Daimler's liability to pay damages on the merits. The Court further ordered Daimler to recall and destroy infringing products, render accounts and provide information necessary for the calculation of damages to Sharp.


B. Court's reasoning

The Court found that the patent-in-suit is essential to the practice of the 4G/LTE standard [76] and infringed [77] . For this reason, Sharp was entitled -among other claims- to injunctive relief [78] .

Daimler asserted a so-called 'FRAND-defence', basically, arguing that by filing an infringement action, Sharp abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) and should, therefore, be denied an injunction. Among other points, it was argued that Sharp had failed to comply with the conduct requirements established by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [79] (Huawei decision, or framework).

The Court dismissed the FRAND-defence raised by Daimler and also found that Daimler could not rely on a FRAND-defence derived from its suppliers [80] .

Abuse of market dominance

According to the Court, an abuse of market dominance by the enforcement of SEPs can occur, if the patent holder did not make 'sufficient efforts' to satisfy the 'particular responsibility' attached to its dominant position and facilitate the signing of an agreement with a licensee, which is 'in principle willing to take a licence' [81] . This requires, however, that the implementer, who already uses the protected technology without authorization by the right holder, is willing to take a licence on FRAND terms [82] . The Court explained that it cannot be requested by the SEP holder to 'impose' a licence to any standards user [82] .

Based on the above, the Court found that the initiation of the present proceedings by Sharp was not abusive in terms of Article 102 TFEU [83] . The Court did not establish whether Sharp had a dominant market position, but just assumed that this was the case [83] Nevertheless, an abuse of (assumed) dominance was not given, since Daimler had failed to adequately express willingness to obtain a licence for Sharp's SEP portfolio [84] .

Willingness

The Court explained that the implementer has to 'clearly' and 'unambiguously' declare that it is willing to sign a licence with the SEP holder 'on whatever terms are in fact FRAND' and, subsequently, engage in licensing negotiations in a 'target-oriented' manner (citing Federal Court of Justice, judgment dated 5 May 2020 – Sisvel v Haier, Case No. KZR 36/17 and High Court of Justice of England and Wales, judgment dated 5 April 2017, Case No. [2017] EWHC 711(Pat) – Unwired Planet v Huawei) [82] .

This means that the implementer should not delay licensing negotiations [85] . In the eyes of the Court, this is particularly important since implementers, which already use the patented standardized technology prior to negotiations, could have the -sole or predominant- interest to delay the signing of a licence until the expiration of the patent [85] .

Having said that, the Court found that Daimler did not behave as a 'willing' licensee [84] .

Looking at Daimler's behaviour before the counteroffer to Sharp was made, the Court held that a 'clear' declaration of willingness is missing [86] . In its first response to Sharp dated 7 June 2019, Daimler did not express a commitment of any kind going beyond the general willingness to discuss a licence, if Sharp's patents were used [87] . Furthermore, Daimler's letter dated 23 July 2019 did neither contain an adequate declaration of willingness, particularly since Daimler referred Sharp -without specification- to its suppliers and insisted that Sharp is obliged to license the latter [88] . The same is true with respect to the statement dated 18 September 2019, in which Daimler again referred to its suppliers and refused to provide Sharp with information necessary for drawing up a licensing offer [89] . The Court noted that although no legal obligation to share the information requested by Sharp existed, Daimler's respective refusal made clear that it did not engage in the discussions in a 'target-oriented manner', but rather aimed at delaying the negotiations [90] . This is also confirmed by the fact that Daimler's response came almost six weeks after Sharp's respective request; the Court did not see any reason why Daimler's reaction took so long [90] .

In addition, the Court noted that the finding that Daimler acted as an 'unwilling' licensee was reinforced by Daimler's overall behaviour in the discussions with the Avanci platform [91] . The Court held that for the assessment of the 'willingness' of an implementer who raises a FRAND defence the entire conduct must be taken into account, not only facts occurring, in terms of time, directly after receipt of an infringement notification [92] . The standard for the assessment of willingness should not depend on the -rather random- fact of whether the implementer was first approached by the patent holder or took the initiative to seek a licence itself, instead [93] . Although the duties established in the Huawei judgment (one of which is to react to an infringement notification by expressing 'willingness' to obtain a licence) shall, as a rule, be followed as 'steps' in the order described by the CJEU, exceptions must be allowed on a case-by-case basis, if the parties' behaviour allows for that and a purely 'formalistic' view of the Huawei framework does not appear appropriate [94] . According to the Court this was the case here, since Daimler that had been in contact with Avanci since September 2016 and had not expressed the willingness to take a licence at any point in time [95] .

The Court further found that Daimler's counteroffer dated 17 December 2019, which was made only after the infringement action was filed, could not remedy the missing willingness [96] . In the view of the Court, the fact that the counteroffer was followed by a request towards Sharp to consent to a stay of the ongoing proceedings showed, in the present case, that Daimler only aimed at causing delay; the counteroffer could, therefore, not compensate the 'massive unwillingness' which Daimler had demonstrated up to that point in time [97] . In this respect, the Court noted that the possibility to remedy flaws during pending court proceedings (e.g. by making a counteroffer), is, in principle, given, however, under increasingly stricter conditions as the trial progresses [98] .

The Court also highlighted that, in terms of content, Daimler's counteroffer did not express a willingness to obtain a licence on 'whatever terms are in fact FRAND' [99] . By using a different 'reference point' for the royalty calculation, Daimler had counteroffered only a fraction of the fees offered by Sharp or collected by Avanci from its competitors, so that the rejection of the counteroffer was 'logically necessary' [100] .

In this context, the Court made clear that for the assessment of willingness only the behaviour of Daimler was relevant [101] . What is more, Daimler could not rely on the -alleged- willingness of the suppliers that joined the proceedings to obtain a licence from Sharp, in order to avoid an injunction [102] . Accordingly, the Court did not examine whether Daimler's suppliers had indeed acted as 'willing licensees' [102] .

Non-discrimination / licensing level

Apart from the above, the Court explained that Sharp did not act in an abusive or discriminatory manner by seeking to license only Daimler as the end device manufacturer [103] .

The Court took the view that Sharp was not obliged to license Daimler's suppliers [104] . The fact that in the (German) automotive sector it is common that suppliers take licences concerning components sold to car manufacturers, does not oblige Sharp to respect and accept this practice [105] . On the contrary, as far as its products increasingly use wireless telecommunications technologies, Daimler must accept the practices prevailing in this field which include licensing also to end device manufacturers [105] .

Irrespective of this, Sharp is under no legal duty to grant licences to component manufacturers; it is only obliged to grant 'access' to the standard, on which its SEPs read [106] . The patent holders' commitment towards ETSI creates an obligation to license SEPs to third parties [107] . The Court highlighted that this does not entail, however, an obligation to grant licences at all levels of the value chain [108] . Such an obligation does not arise either from competition nor from patent or contract law in conjunction with the FRAND undertaking towards ETSI [108] .

In particular, EU competition law does not establish an obligation to license SEPs at all levels of the value chain [109] . According to the Court, patent holders are, in principle, free to choose the level of the value chain for licensing [110] . In the Huawei judgment, the CJEU pointed out that the FRAND undertaking creates 'legitimate expectations' on the part of third parties to be licensed by the patent holder. The Court held, however, that by that no obligation to license all suppliers of an end-device manufacturer is created; access to the market does not necessarily require a licence, but just a 'possibility of legal use', which can be, for instance, given through a licence granted at the last level of the value chain, from which suppliers can draw 'have-made-rights' [110] .

The Court also explained that neither patent law dictates the level of the value chain, at which SEP licences must be granted [111] . Especially the fact that not all patents contained in a SEP portfolio are necessarily exhausted at all times at the level of component manufacturers speaks for licensing at the end-device level (in addition to the more efficient 'management' of the licensing fees which is possible in this scenario) [112] .

Finally, the Court pointed out that contract law in conjunction with the FRAND undertaking towards ETSI do not impose an obligation on the patent holder to license every interested third party [113] . Under the applicable French law, Section 6.1. ETSI IPR Policy is to be understood as establishing only an obligation to negotiate a FRAND agreement in good faith with a party seeking a licence [114] . However, by referring to 'equipment', this provision addresses only end-device manufacturers, since not all components necessarily implement the standard as a whole [115] . In the eyes of the Court, the views expressed by the European Commission in different occasions in the past do not lead to a different conclusion [116]

FRAND defence raised by suppliers

The Court further found that Daimler cannot profit from a FRAND defence raised by suppliers [117] . The defendant can rely on such defence only if the patent holder is under an obligation to license the suppliers; this does not apply, however, when the defendant is in a position to sign a licence with the SEP holder itself which sufficiently considers patent exhaustion within the relevant value chain [117] .

The Court considered that this was the case here. Daimler's suppliers did not have an own claim to be granted a licence against Sharp, but a claim for a 'legally secured access' to standardised technology which cannot be considered in favour of Daimler [118] .


C. Other issues

Furthermore, the Court ruled that there are no grounds for a limitation of Sharp's claim for injunctive relief based on proportionality considerations [119] . Daimler had argued that no injunction should be granted based on the patent in suit, since the vehicles it manufactures are 'complex' products integrating a large number of components and the telematic control unit, on which Sharp's SEPs read, is of minor importance for the car.

The Court made clear that, under German law, proportionality is a general principle of constitutional rank that is to be considered also with respect to injunctive relief, if a respective objection is raised by the defendant [120] . According to the jurisprudence of the Federal Court of Justice, an injunction might not be immediately enforceable in exceptional cases, in which the implementer would suffer hardships not justified by the patent holder's exclusionary right in violation of the principle of good faith [121] .

In the eyes of the Court, any limitation of the right to injunctive relief shall come into question 'in very few exceptional cases' and must, thus, be subject to strict conditions, not least for preserving the 'legal order' as well as 'legal certainty and predictability' [122] . A case-by-case assessment of all relevant facts must take place, whereas the overall substantive and procedural framework (including e.g. the need to provide security for the enforcement of first-instance injunctions) should be considered [122] . The Court explained that only hardships going beyond the usual consequences of an injunction can be taken into account [122] . It should be expected from the infringer to make efforts towards the signing of a licence as soon as possible and take precautions against a potential injunction after receipt of an infringement notification, at the latest [122] .

Against this background, the Court noted that even if only a single component of Daimler's vehicles might be affected in the present case, the dispute revolves around the licensing of a complex patent portfolio (either Sharp's or Avanci's portfolio) [123] . The Court was further not convinced that the features enabled by Sharp's patents were of minor importance to Daimler's vehicles, since a significant part of innovation referring to 'connected cars' relates from both technical and economic angle closely to mobile telecommunications technologies [124] . Finally, the Court also criticized the fact that Daimler did not make serious efforts for signing a licence with Sharp or Avanci [125] .

  • [75] Sharp v Daimler, District Court of Munich, judgment dated 10 September 2020, Case-No. 7 O 8818/19
  • [76] Ibid, paras. 68 et seqq
  • [77] Ibid, paras. 25 et seqq
  • [78] Ibid, para. 90
  • [79]  Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13
  • [80] Sharp v Daimler, District Court of Munich, judgment dated 10 September 2020, Case-No. 7 O 8818/19, para. 121
  • [81] Ibid, para. 124
  • [82] Ibid, para. 125
  • [83] Ibid, para. 128
  • [84] Ibid, paras. 130 et seqq
  • [85] Ibid, para. 126
  • [86] Ibid, paras. 132 et seqq
  • [87] Ibid, paras. 134 et seq
  • [88] Ibid, paras. 136 et seq
  • [89] Ibid, paras. 138 et seqq
  • [90] Ibid, para. 140
  • [91] Ibid, para. 141
  • [92] Ibid, paras. 142 et seq
  • [93] Ibid, paras. 143 et seq
  • [94] Ibid, para. 144
  • [95] Ibid, paras. 146-149
  • [96] Ibid, para. 150
  • [97] Ibid, paras. 151 and 153
  • [98] Ibid, para. 152
  • [99] Ibid, para. 154
  • [100] Ibid, paras. 154 et seqq
  • [101] Ibid, paras. 158 and 159
  • [102] Ibid, para. 158
  • [103] Ibid, paras. 161 et seqq
  • [104] Ibid, para. 162
  • [105] Ibid, para. 164
  • [106] Ibid, para. 165
  • [107] Ibid, para. 168
  • [108] Ibid, para. 169
  • [109] Ibid, paras. 170 et seqq
  • [110] Ibid, para. 171
  • [111] Ibid, paras. 173 et seq
  • [112] Ibid, para. 174
  • [113] Ibid, paras. 175 et seqq
  • [114] Ibid, paras. 177 et seqq
  • [115] Ibid, para. 178
  • [116] Ibid, paras. 180-183. The Court referred particularly to the decision of the European Commission, Case No. AT.39985 – Motorola; the Communication on the Guidelines on the applicability of Article 101 TFEU to horizontal co-operation agreements (2011/C 11/01); and the Communication on ICT Standardisation Priorities for the Digital Single Market, COM(2016) 176 final.
  • [117] Ibid, para. 167
  • [118] Ibid, para. 185
  • [119] Ibid, paras. 92-102
  • [120] Ibid, para. 93
  • [121] Ibid, para. 94
  • [122] Ibid, para. 95
  • [123] Ibid, paras. 97 et seq
  • [124] Ibid, paras. 100 et seq
  • [125] Ibid, para. 99

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 [126] . 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 [127] .

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 [128] . 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 [129] . 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 [130] . In March 2020, the Federal Court of Justice (FCJ or Court), basically, confirmed this decision in second instance [131] .

With the present judgment dated 5 May 2020 [132] (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 [133] .

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) [134] .

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 [135] .

The FCJ explained that a dominant market position does not arise alone from the exclusivity rights granted by a patent [136] . For this, several factors need to be considered [137] . 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 [138] .

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 [139] .

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 [140] . 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 [141] . 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 [142] . 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 [143] .

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 [144] . 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 [144] . 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 [144] .

Having said that, the Court pointed out that Sisvel's dominant market position ended, when the patent in suit expired [145] . An SEP holder is no longer dominant, if the legal power to exclude infringing products from entering a (downstream) market is no longer given [145] .

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 [146] .

The Court made clear that SEP holders are not per se prevented from enforcing the exclusivity rights arising from their patents [147] . 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 [147] . 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 [148] .

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) [149] ;

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 [150] .

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

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 [153] . 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 [153] . 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 [154] .

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 [155] . In terms of content, the notification must name the patent(s) infringed and describe the specific infringing use and the attacked embodiments [156] . 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 [156] . As a rule, presenting claim charts, as it is often the case in practice, will be sufficient (but not mandatory) [156] .

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 [157] . This applies also to cases, in which a number of patents and standards are involved [157] .

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 [158] .

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 [159] . 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 [160] . 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 [160] . 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 [160] . 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 [161] . 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 [162] .

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) [163] . The implementer is, subsequently, obliged to engage in licensing negotiations in a 'target-oriented' manner [163] . 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 [163] .

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 [164] .

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 [165] . 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 [165] .

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 [166] .

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 [167] .

SEP holder’s licensing offer

Having found that Haier did not act as a willing licensee, the Court explained that there was no need to examine whether Sisvel had made a FRAND licensing offer to Haier in the present case [168] . Nevertheless, the FCJ decided to address certain findings of the Appeal Court in this context, which were based on flawed assumptions.

In contrast to the Appeal Court, the FCJ questioned that Sisvel was obliged to make a FRAND licensing offer to Haier, since the latter did not adequately declare its willingness to enter into a licence [169] . Moreover, such an obligation would have arisen only after Haier had expressed its sincere willingness to sign an agreement with Sisvel [170] . Besides that, the FCJ also pointed out that – in contrast to the view taken by the Appeal Court – Sisvel’s offers to Haier were FRAND.

According to the Court, which terms are FRAND in each individual case depends on several factors [171] . The SEP holder is not obliged to apply a ‘standard tariff’ and offer all licensees identical terms [171] . Such an obligation does not arise from the FRAND commitment towards the relevant standardisation body, which only aims at securing access to the standard [171] . As a rule, reasonable conditions for a contractual relationship and especially the adequate price are not objectively fixed, but a result of market processes based on negotiations [171] . This is the reason why an implementer has to actively engage in licensing negotiations in a ‘target-oriented’ manner [171] .

The Court noted that an offer for a portfolio licence regularly does not raise concerns, as long as no obligation to pay fees also for non-essential patent is established and fees are calculated in a manner which does not discriminate against licensees that wish to develop products only for a limited geographical area [172] . Looking at the common practice, the Court highlighted that worldwide portfolio licences are – from an efficiency point of view – beneficial for both patent holders and implementers [172] .

In this context, the FCJ expressed the view that the SEP holder can be obliged to substantiate the FRAND conformity of its licensing request [173] . In principle, implementers bear the weight to demonstrate (both in negotiations and in court proceedings) that a licensing request is discriminatory [173] . On the other hand, patent holders have to establish that there is a justification behind an unequal treatment of licensees [173] . In cases, in which an implementer willing to take a licence is not in a position to frame the content of FRAND licensing conditions, the SEP holder can be required to explain its offer in detail, in order to allow the implementer to assess the FRAND conformity of the offered conditions [173] . This is particularly the case, when a portfolio licence is offered [174] . The scope, level of detail and timing of the information needed shall be determined on a case-by-case basis, considering the conduct of the implementer [175] . The respective requirements will, however, usually not go beyond the information that should be shared with a notification of infringement [166] .

Focusing on the non-discrimination element of FRAND, the Court held that Sisvel had not discriminated against Haier by offering different (higher) rates than those previously agreed with another licensee (allegedly) as a result of undue pressure by foreign state authorities [176] . The Appeal Court had argued that this fact –irrespective of whether it was true or not– could per se not justify an unequal treatment between similarly situated licensees. The FCJ disagreed with this view and made clear that even dominant companies are, basically, not prohibited from safeguarding their business interests, if threatened [177] . In cases, in which –from the patent holder’s point of view– it was economically reasonable to accept unsatisfactory conditions due to the lack of realistic opportunities to enforce patent claims and for avoiding financial or personal disadvantages threatened by state authorities, offering market-based conditions to other similarly situated licensees might (under consideration of the mutual interests) be a justifiable exception from the non-discrimination obligation, as far as these conditions are reasonable and do not impact the competitiveness of the licensees [177] .

C. Other important issues

The Court made clear that the expiration of the patent in suit does not exclude claims for the recall and destruction of infringing products [177] . This fact only leads to a limitation of these claims to products that were in the possession of the infringer or had been manufactured and delivered until the patent lapsed [178] .

Claims for damages and the rendering of accounts are also limited in terms of time by the expiration of the patent (covering only infringing uses until the end of the patent’s term) [179] . Apart from that, the Court found, however, that Sisvel’s claim for damages against Haier was not subject to any limitations [180] .

The FCJ agreed with the finding of the Appeal Court that negligence establishing Haier’s liability for damages was given, even prior to the receipt of Sisvel’s notification of infringement in December 2012 [181] . In the Court’s view, the implementer is, in principle, obliged to make sure that no third party rights are infringed, before starting manufacturing or selling products [181] . The fact that in the ICT sector it might be challenging to gain an overview of all existing relevant rights does not lower the level of diligence required, since any information deficits are not rooted in the behaviour of the patent holder [181] .

On the other hand, the FCJ rejected the view taken previously by the Appeal Court, according to which Sisvel’s damage claims were limited to the amount of a FRAND licensing rate (‘licensing analogy’). The Court explained that this was not the case here: Claiming damages for the infringement of SEPs cannot constitute an abuse of dominant position [182] . Accordingly, the SEP holder is entitled to full damages, unless the implementer can assert an own counterclaim, requesting to be placed in the position, in which it would have been, in case that the SEP holder had fulfilled the obligations arising from its dominant market position [182] . In the view of the Court, an implementer is entitled to such (counter)claim, only when it adequately expressed its willingness to enter into a licence, requested the conclusion of a FRAND licence and the SEP holder ignored this request without justification [182] . In the present case, Haier could not assert such a (counter)claim against Sisvel, since it had failed to sufficiently express its willingness to sign a licence with the latter [180] .

  • [126] Sisvel v Haier, District Court of Duesseldorf, judgment dated 3 November 2015, Case No. 4a O 93/14.
  • [127] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 13 January 2016, Case No. I-15 U 66/15.
  • [128] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [129] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 30 March 2017, Case No. I-15 U 66/15.
  • [130] Federal Patent Court, judgment dated 6 October 2017, Case No. 6 Ni 10/15 (EP).
  • [131] Federal Court of Justice, judgment dated 10 March 2020, Case No. X ZR 44/18.
  • [132] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17.
  • [133] Ibid, paras. 9 et seqq. and 59.
  • [134] Ibid, para. 52.
  • [135] Ibid, para. 54.
  • [136] Ibid, para. 56.
  • [137] Ibid, paras. 57 et seqq.
  • [138] Ibid, para. 58.
  • [139] Ibid, paras. 59 et seq.
  • [140] Ibid, para. 61.
  • [141] Ibid, para. 63.
  • [142] Ibid, para. 62.
  • [143] 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.
  • [144] Ibid, para. 64.
  • [145] Ibid, para. 65.
  • [146] Ibid, paras. 67 et seqq.
  • [147] Ibid, para. 69.
  • [148] Ibid, para. 70.
  • [149] Ibid, para. 71.
  • [150] Ibid, para. 72.
  • [151] Ibid, paras. 73 et seqq.
  • [152] 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.
  • [153] Ibid, para. 74.
  • [154] Ibid, para. 74 and 85.
  • [155] Ibid, para. 89.
  • [156] Ibid, para. 85.
  • [157] Ibid, para. 87.
  • [158] Ibid, paras. 86 et seqq.
  • [159] Ibid, paras. 91 et seqq.
  • [160] Ibid, para. 92.
  • [161] Ibid, paras. 93 et seq.
  • [162] Ibid, para. 94.
  • [163] Ibid, para. 83.
  • [164] Ibid, para. 95.
  • [165] Ibid, para. 96.
  • [166] Ibid, para. 98.
  • [167] Ibid, para. 97.
  • [168] Ibid, paras. 90 and 101.
  • [169] Ibid, para. 90.
  • [170] Ibid, para. 99.
  • [171] Ibid, para. 81.
  • [172] Ibid, para. 78.
  • [173] Ibid, para. 76.
  • [174] Ibid, para. 77.
  • [175] Ibid, para. 79.
  • [176] Ibid, paras. 101 et seq.
  • [177] Ibid, para. 102.
  • [178] Ibid, para. 105.
  • [179] Ibid, para. 108.
  • [180] Ibid, para. 112.
  • [181] Ibid, para. 109.
  • [182] Ibid, para. 111.

Updated 17 January 2018

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

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

A. Facts and Main Judgment

The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue relate to telecommunication network coding and procedures. In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents and one non-technical trial relating to competition law issues, FRAND issues, injunctive relief and damages for past infringements.Unwired Planet v. Huawei [2017] EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html In its decision on 5 April 2017 (the ‘main judgment’), the Patents Court (Birrs J) held that two patents were valid and that they had been infringed, and that the claimant was in a dominant position, but had not abused this position. The court stated that a final decision about an injunction to restrain patent infringements should be made separately. A few weeks after the main judgment, a license representing the FRAND terms between the two parties was prepared (the ‘settled license’), but had not yet been entered into. [184] 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. [185]

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. [186] The court granted an injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 (the ‘final order’). [187] 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. [187]

B. Court’s Reasoning

1. Injunction

The main issue considered by the court was the interplay between the injunction, the settled license and the undertaking offered by the defendant. Patent EP (UK) 2 229 744 will expire in 2028. The settled license’s expiry date is 31 December 2020, [188] 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). [189] 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. [188] 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’). [190] 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. [190]

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. [191] Although the practical effect of a defendant’s undertaking and an injunction are similar, rights holders usually insist on an injunction. [192] One reason is that it involves a public vindication of the claimant’s rights. [192] As the claimant has been forced to come to court, an offer of undertaking after judgment is usually considered too late. [192] In this case, the defendant had maintained throughout the negotiations and the trial that it was under no obligation to accept a worldwide license. [193] 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. [194] 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). [194]

The parties also disagreed about the wording of the court declaration regarding the FRAND terms of the settled license. [195] 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’. [196] Further, the court rejected the defendant’s petition to make a declaration that the claimant had not abused its dominant market position. [197] 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). [198] The defendant argued the claimant had been clearly wrong regarding the applicable FRAND rate [199] 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. [200] The ensuing question was whether any deductions were appropriate. [201] The court held that neither party had offered terms that were essentially FRAND. [202] However, the rates offered by the claimant were significantly further away from the end result than the rates offered by the defendant. [202] 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); [203] second, the hard-edged non-discrimination point; [204] and third, the issue of injunctive relief and abuse of market dominance under the CJEU ruling Huawei v. ZTE. [205] 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). [206]

  • [183] Unwired Planet v. Huawei [2017] EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html
  • [184] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 2.
  • [185] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 8.
  • [186] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 1.
  • [187] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 70.
  • [188] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 22.
  • [189] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 19.
  • [190] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 20.
  • [191] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 25.
  • [192] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 26.
  • [193] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 29.
  • [194] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 33.
  • [195] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 34.
  • [196] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 36.
  • [197] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 38.
  • [198] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), paras 39-40.
  • [199] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 41.
  • [200] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 44.
  • [201] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 45.
  • [202] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 56.
  • [203] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 170 et seqq.
  • [204] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 177 and 481 et seqq.
  • [205] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 627 et seqq.
  • [206] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 537 et seqq.

Updated 16 June 2021

Conversant v Daimler, District Court (Landgericht) of Munich I

LG Munich
30 October 2020 - Case No. 21 O 11384/19

A. Facts

The claimant, Conversant, holds patents declared as (potentially) essential to the practice of several wireless telecommunications standards (standard essential patents, or SEPs). Conversant has made a commitment towards the European Telecommunications Standards Institute (ETSI) to make patents essential to a standard accessible to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions.

The defendant, Daimler, is a global car company with headquarters in Germany. Daimler manufactures and sells vehicles with connectivity features complying with the LTE standard developed by ETSI.

In October 2018, Conversant joined the Avanci licensing platform, which offers a patent licensing program tailored to connected cars. On 18 December 2018, Conversant made an offer for a bilateral worldwide licence to Daimler and provided information about its SEP portfolio including claim charts concerning several individual patents to the latter.

On 27 February 2019, following a respective reminder sent by Conversant, Daimler replied that it was willing to sign a FRAND licence, highlighted, however, that in the automotive sector it is common that intellectual property rights (IPRs) are licensed to suppliers. Daimler also requested information about existing licensees to Conversant's portfolio as well as an explanation which patents read on which components and why the terms offered were FRAND. Subsequently, Daimler started negotiations for a pool licence with Avanci.

On 5 July 2019, Conversant sent an e-mail to Daimler suggesting a meeting in person on 15 July 2019, since it had been informed by Avanci that the negotiations with Daimler had not been successful. Conversant also pointed out that the car makers participating in the Avanci-programme are licensed under its SEP portfolio and explained the royalty calculation underlying its own bilateral offer -inter alia- by reference to court cases (especially Unwired Planet v Huawei, UK High Court of Justice, judgment dated 5 April 2017). Conversant also intended to provide a full list of patents included in its portfolio to Daimler, the respective document was, however, not attached by mistake to the e-mail sent to Daimler.

On 29 July 2019, Daimler responded and referred to the ongoing negotiations with Avanci. It repeated the view that licensing at supplier level was more efficient and countered that a meeting in person should take place at a later point in time, since Conversant had not shared all necessary information yet.

On 13 August 2019, Conversant filed an infringement action against Daimler before the District Court of Munich I (Court), which did not include a claim for injunctive relief. On 24 August 2019, Conversant informed Daimler about the case filed in Munich and noted that it assumed that Daimler had no actual interest in obtaining a FRAND licence. Conversant also highlighted that for the calculation of royalties the value generated at end-device level should be taken into account.

On 18 September 2019, Daimler reiterated its willingness to obtain a licence and pointed out for the first time that Conversant's e-mail dated 5 July 2019 had not contained the full list of portfolio patents referred to by Conversant. This list was shared with Daimler on 20 September 2019. At the same time, Conversant suggested a meeting in person in the beginning of October 2019. On 8 October 2019, Daimler responded that a meeting could take place only in the end of October, since information needed was still missing.

On 4 December 2019, the parties met in person in Daimler's headquarters. On 15 January 2020, Conversant sent the presentation held in this meeting to Daimler and pointed out that it was willing to establish a licensing programme for Daimler's tier-1 suppliers and that it was prepared to have a meeting with Daimler and all supplier to that end. Conversant had also offered to take recourse to a neutral third party, e.g. in arbitration proceedings, for the determination of the licensing value. On 24 January 2020, Daimler explained that it had already discussed with its suppliers and was willing to organise a meeting.

On 29 January 2020, Conversant additionally raised claims for injunctive relief and the recall and destruction of infringing products against Daimler in the pending proceedings in Munich.

In February and March 2020, the parties discussed about a meeting with Daimler's tier-1 suppliers. Daimler did, however, not organise a meeting with the participation of all suppliers.

On 8 April 2020, Daimler made a counteroffer to Conversant. The counteroffer was based on the value of the Telematic Control Unit (TCU), which is the component enabling LTE-connectivity in cars.

On 30 June 2020, Conversant made a further offer to Daimler that was not accepted. On 10 August 2020, Daimler provided information to Conversant about past vehicle sales and placed security for past uses.

With the present judgment [207] , the Court found in favour of Conversant and – among other things – granted an injunction against Daimler.
 

B. Court's reasoning

The Court found that the patent in suit is essential to the LTE standard and infringed [208] . Consequently, the claims asserted by Conversant were given. The claims for injunctive relief as well as the recall and destruction of infringing products were also to be granted. By initiating infringement proceedings against Daimler, Conversant neither abused a dominant market position in terms of Article 102 TFEU (competition law defence, cf. item 1), nor violated its contractual obligations under ETSI's IPR Policy (contract law defence, cf. item 2.) [209] .
 

1. Competition law defence
Dominant market position

The Court held that Conversant had a dominant market position within the meaning of Article 102 TFEU [210] .

The exclusivity rights arising from a patent do not establish a dominant market position by themselves. [211] A market dominant position is established, when the patent is technically essential for complying with a standard developed by a standardisation body (or a de facto standard) and technical alternatives are not available for products brought on a (downstream) market [212] . In the Court's eyes, this applied to the patent in suit. [213]

Exceptional circumstances that could exclude Conversant's market dominant position here were not present. According to the Court, the sole fact that Conversant had made a FRAND commitment towards ETSI establishing an obligation to grant FRAND licences did not per se exclude market dominance; decisive is, moreover, whether the SEP holder actually meets this obligation. [214] Furthermore, the additional option to get a license from the patent in suit from Avanci did not limit Conversant's market dominant position. [215]
 

No abuse of market dominance

The Court found, however, that Conversant had not abused its dominance by filing an action for injunctive relief as well as the recall and destruction of infringing products against Daimler.

In cases, in which the implementer already uses protected standardised technology, the assessment of the SEP holder's behaviour requires a comprehensive analysis, in which the constitutionally guaranteed strong protection of IPRs, on the one hand, and the interest of users to access the standard, on the other hand, must be balanced against one another. [216] In this context, not only private interests, but also the public interest must be taken into account. [217] The Court highlighted that the public interest is not to be seen as just the 'sole sum of private interests in using standardised technology', but equally includes the substantial interest of the public to protect the integrity of IPRs and secure effective enforcement. [218]

Considering the 'particular nature' of SEPs especially in the telecommunications field, the Court held -in line with the Huawei v ZTE judgment (Huawei judgment) of the Court of Justice of the EU (CJEU) [219] - that it is justified to impose certain conduct obligations on SEP holders. Reason for this is, basically, that -unlike 'regular' patents- SEPs are established in the market through their inclusion in the standard, without further action by the patent holder. [220] Consequently, the need to secure a competitive advantage for the inventor of a patented technology in the market by granting exclusivity rights for a certain period of time is less compelling in relation to SEPs compared to non-standard-essential patents. [221]

Having said that, the Court made, however, clear that the conduct duties imposed on the SEP holder by the Huawei judgement exist only towards an implementer, who 'seriously and not only in words' wants to sign a licence. [222] Accordingly, a defence based on an alleged abuse of market dominance can be successful, only when the implementer that wants to use, or already uses the patent without authorisation is willing to obtain a FRAND licence and refrain from delaying tactics throughout the licensing negotiations with the SEP holder. [223] The Court noted that the key notion underlying the Huawei judgment that parties are best situated to determine FRAND in fair, balanced and swift negotiations relies on a constructive involvement of both parties which is driven by the actual 'sincere motivation' to reach an agreement. [224]
 

Notification of infringement

Looking at the parties' behaviour, the Court held that Conversant fulfilled the duty to notify Daimler about the infringement of its SEPs by sending the letter dated 18 December 2018, which contained sufficient information about its portfolio, including claim charts covering several patents. [225] Whether Conversant had sufficiently explained the royalty calculation underlying the licensing offer that was also attached to this letter, was not relevant, since, at this stage, Conversant had not even been obliged to make an offer to Daimler. [226]
 

Willingness

On the other hand, the Court found that Daimler had not been willing to take a licence from Conversant: On the contrary, the Court identified a 'particularly clear case of missing willingness'. [227]

In terms of content, the implementer must 'clearly' and 'unambiguously' declare willingness to conclude a licence agreement with the SEP holder on 'whatever terms are in fact FRAND' and, subsequently, engage in negotiations in a 'target-oriented' and 'constructive' manner. [228] By contrast, it is not sufficient, in response to the (first) 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. [228]

The Court explained that the assessment of willingness requires a comprehensive analysis of all facts until the end of the oral hearings in the infringement proceedings. [229] Establishing whether willingness is given cannot be a question answered by a 'formalistic snapshot' of the implementer's conduct; what is more, the implementer cannot remain inactive until -in its view- the SEP holder has met its obligations first. [229]

In addition, the Court highlighted that timing in negotiations is a factor, which must be considered in the assessment of willingness as well. [230] Otherwise, implementers would lack motivation to seriously engage in negotiations in a timely manner. [231] Rigid deadlines cannot be set, a case-by-case assessment is needed. [232] An implementer, who has been notified about the infringement, is, however, obliged to legitimize the -unlawful- use of the patent(s) as soon as possible by signing a FRAND-licence with the SEP holder. [232]

Furthermore, the Court reasoned that whether and at which time the implementer made a counteroffer to the SEP holder can also be an 'important indicator' of (un-)willingness. [233] A counteroffer made after the initiation of infringement proceedings will, as a rule, not be acceptable. [234] According to the Court, implementers should not be allowed to engage in negotiations only 'for appearance's shake' and then pull the 'emergency brake' against a potential conviction in infringement proceedings by making a counteroffer. [231] Exceptionally, a counteroffer made during trial could be considered in the assessment of willingness in cases, in which the implementer was willing from the start of the negotiations and always engaged constructively in the discussions with the patent holder. [235]

In line with the above, the Court pointed out that, in general terms, delaying tactics initially applied by an implementer cannot be 'undone' at a later point in time without more ado. [236] Nevertheless, the belated declaration of willingness does not 'automatically' prevent an implementer from raising a 'FRAND-defence' in infringement proceeding: Whether this will be the case or not, shall be decided on a case-by-case basis on grounds of the overall circumstances of the negotiation history. [237]

Against this backdrop and under consideration of Daimler's overall behaviour, the Court reached the conclusion that -although acting in a FRAND-compliant manner would have actually been possible and reasonable [238] - Daimler had chosen to apply delaying tactics [239] .

The Court found that by directing Conversant to its suppliers, Daimler had not expressed willingness to take a licence on 'whatever terms are in fact FRAND', but rather made clear that it was not prepared to take a licence from Conversant itself. [240] Indemnification clauses regarding third-party IPRs potentially agreed between Daimler and its suppliers played insofar no role, as Daimler infringed Conversant's patents independently and must, therefore, be held accountable for that. [240]

A further indication of Daimler's unwillingness was the fact that it took Daimler more than two months to inform Conversant that it had not received a list of portfolio patents that was unintentionally not attached to the e-mail sent by Conversant on 5 July 2020. [241] The Court equally criticized the fact that Daimler had at no point in time posed questions to Conversant on the claim charts provided by the later, but raised concerns against the quality of the patents only in the pending infringement trial. [242]

The Court saw an additional 'substantial' indication of unwillingness in Daimler's response dated 27 July 2020, in which the latter had expressly limited its willingness to sign a licence to products, which were either not licenced yet or purchased by suppliers unwilling to take a licence from Conversant themselves. [243] The Court particularly objected Daimler's choice to define the 'unwillingness' of its suppliers as a condition for signing an own licence with Conversant. [244]

The fact that Daimler had not responded to the proposal to use alternative dispute resolution methods and particularly arbitration for the determination of FRAND-royalties, which Conversant had made at the parties' meeting on 4 December 2019, was also considered as a sign of unwillingness on the side of Daimler. [245]

An additional 'clear' indication of unwillingness and delaying tactics was -according to the Court- the fact that, following the discussion of 4 December 2019, Daimler did not organise a meeting with all tier-1 suppliers, in order to discuss a potential direct licensing option with Conversant, despite having implied that this option had already been discussed with its suppliers. [246]
 

Counteroffer

Subsequently, the Court noted that Daimler's counteroffer dated 8 April 2020 could not remedy the missing willingness which Daimler had displayed until then. [247] Moreover, it rather served as an 'alibi'. [238]

In the eyes of the Court, the counteroffer was belated, since it was made more than 1 year and 4 months after Conversant's offer. [247] What is more, Daimler made the counteroffer during the pendency of the infringement proceedings, which was not acceptable, given that until that point it had been clearly unwilling to take a licence. [248] The Court also explained that Daimler could not excuse the delay by claiming that Conversant had not provided necessary information, since the counteroffer was based on generally known and available data without an underlying detailed analysis; accordingly, it could have been made earlier, that is shortly after receipt of Conversant's initial offer. [249]

Besides that, the Court found that Daimler's counteroffer was, in terms of content, 'evidently not FRAND'. [250] Based on a summary analysis, the licensing fees offered by Daimler were considered to be evidently too low. [251]

The Court noted that FRAND is a range and that there are several methods for calculating FRAND royalties. [251] The Court relied on the so-called 'top-down'-approach (which both Conversant and Daimler had used). [252] Looking at Daimler's 'top-down'-calculation, the Court held that taking the number of all patents declared as standard-essential towards ETSI as the basis for determining Conversant's share of LTE-related SEPs was not in line with FRAND-principles. [253] Considering that not all declared patents are actually standard-essential (a phenomenon described as 'over-declaration'), the use of the total number of declared patents benefits Daimler: Conversant's share of SEPs would per se be higher, if the (lower) number of actually standard-essential LTE patents would be used as basis for the calculation. [253]

In addition, the Court pointed out that the average purchase price of the TCU is no adequate royalty base under FRAND principles. [254] The value of a SEP is reflected by a royalty, which is adequately in proportion to the value of the service provided. [255] According to the Court, in the present case, economic value is created by the offering of LTE-enabled functionalities in Daimler's cars and the use of such functionalities by Daimler's customers. [255] As a consequence, relevant is the value, which Daimler's customers attach to the LTE-based features in a car. [255] The purchase price of TCUs paid by Daimler to its suppliers does not mirror this value. [255]
 

FRAND defence raised by suppliers / licensing level

The Court further explained that Daimler could not invoke the (alleged) willingness of its suppliers to take a licence from Conversant for establishing a FRAND defence. [256]

If an implementer, along with its own declaration of willingness, expresses the wish that licensing takes place at supplier level, it is obliged to comprehensively disclose in writing, which standard-compliant components are integrated in its products and which suppliers provide such components. [257] If this information and disclosure duty is not met, as it was the case here, a request for licensing at supplier level contradicts the implementer's declaration that it is willing to sign an own licence with the SEP holder, and is, therefore, a sign of bad faith (Sec. 242 German Civil Code). [258] In this context, the Court made clear that the implementer is obliged to still pursue bilateral negotiations with the SEP holder in a timely and target-oriented manner, even if -after having provided the aforementioned information to the latter- it is in parallel actively engaged towards facilitating the establishment of a licensing regime at supplier level. [259] In the bilateral negotiations with the SEP holder, the implementer could, however, insist that a clause excluding double payments for components already licensed to suppliers is included in the agreement. [259]

In line with the above, the Court confirmed that by seeking to license Daimler, Conversant did not act in an abusive or discriminatory way. [260]

In the view of the Court, the fundamental question whether the so-called 'license-to-all' or 'access-to-all' approach should be followed with respect to SEP licensing in a supply chain, did not need to be answered here. [261] In legal disputes between a SEP holder and an end-device manufacturer it is sufficient from a competition law angle that the objectives pursued by the SEP holder in the proceedings do not exclude suppliers from the market; this is true, when suppliers are granted access to the standardised technology through 'have-made' rights established by the licence signed by the end-device manufacturer, as Conversant had offered. [261] Whether suppliers have individual claims for being granted a licence is a distinct question, that could be potentially raised in separate proceedings between the SEP holder and the supplier. [262]

The Court added that the SEP holder is free to decide against which infringer within a supply chain court proceedings will be initiated. [263] The respective right of choice is derived from the constitutionally guaranteed protection of property as well as the very nature of patents as exclusionary rights. [264]

According to the Court, the common practice in the automotive field that components are sold to car manufacturers free of third-party rights does not render Conversant's pursuit to license Daimler abusive in antitrust terms. [265] Respective agreements between end-device manufacturers and suppliers have only bilateral (contractual) effects and cannot impair the legal position of third parties. [265] In particular, they cannot limit the SEP holder's right to choose the level of the value chain for the assertion of its patents. [266] The Court noted that the need to abandon existing practices in the automotive sector is of no importance from an antitrust angle, given that the integration of additional technologies serves Daimler's economic interest to access new markets and customer groups. [266]

In this context, the Court also explained that the SEP holder is not obliged to perform duties under the Huawei judgment towards suppliers, as far as infringement proceedings are initiated only towards the end-device manufacturer. [267] Accordingly, a supplier joining such proceedings cannot invoke that the SEP holder abused its market dominance e.g. by omitting a separate notification of infringement addressed to the supplier. [268] The Court denied such comprehensive notification duty of SEP holders, since in multi-level supply chains it is neither feasible nor reasonable to identify all suppliers involved. [269]

In the Court's view, the question whether the SEP holder has abused its market dominance by denying a direct licence to a supplier is subject to general competition law principles. [270] In the present case, the Court did not see sufficient grounds for such abuse. [270] It was not convinced that -absent an own bilateral licence- suppliers are left without rights or face legal uncertainty. [271] The fact that an individual bilateral licence would give suppliers broader freedom to operate than 'have-made' rights might serve their commercial interests, is, however, not of relevance with respect to proceedings between SEP holders and end-device manufacturers, as long as adequate access to the standard is provided to suppliers through 'have-made' rights. [272] Insofar, the Court noted that co-operation within a supply chain on basis of 'have-made' rights is wide-spread and common in practice and also supported by EU law (Commission notice of 18 December 1978 concerning its assessment of certain subcontracting agreements in relation to Article 85 (1) of the EEC Treaty, OJ C 1, 3 January 1979). [272]

Finally, the Court dismissed the argument, that Conversant had allegedly colluded with other members of the Avanci platform to specifically discriminate implementers by excluding access to the relevant standards. [273] The Court saw no indication that this was the case here, but rather highlighted the pro-competitive effects which patent pools are generally recognised to have, not least by EU law (para. 245 of the Guidelines on the application of Article 101 TFEU to technology transfer agreements; 2014/C 89/03). [273]
 

2. Contract law defence

The Court further found that Daimler could not defend itself against the claim for injunctive relief by invoking a contractual claim against Conversant for being granted a FRAND licence, since such claim did not exist. [274] Daimler had argued that Conversant's FRAND commitment towards ETSI prevented the latter from asserting claims for injunctive relief before court.

The Court found that the ETSI FRAND undertaking does not establish duties or rights different than those established by European competition law (especially Art. 102 TFEU), which Conversant had met in the present case. [275] In legal terms, the ETSI FRAND undertaking is a contract for the benefit of a third party under French law ('stipulation pour l'autrui'), containing a binding promise of the SEP holder to grant a FRAND licence at a later point in time. [276] The content and the extent of the corresponding obligation to negotiate a licence is, however, to be interpreted in line with the Huawei judgment, which has defined a standard of conduct based on Art. 102 TFEU. [276] The fact that the ETSI FRAND commitment materialises the requirement to provide access to the standard stipulated by Art. 101 TFEU speaks also in favour of applying a uniform standard of conduct. [276] In the eyes of the Court, French law cannot establish further going conduct duties, since it must be interpreted within the spirit of EU law. [276]
 

C. Other important issues

Finally, the Court took the view that there are no grounds for a limitation of Conversant's claim for injunctive relief due to proportionality considerations. [277] Under German law, proportionality is a general principle of constitutional rank to be considered also with respect to injunctive relief, if a respective objection is raised by the defendant in trial. [277] The Federal Court of Justice (Bundesgerichtshof) has also recognised that an injunction might not be immediately enforceable in exceptional cases, in which the implementer would suffer hardships not justified by the patent holder's exclusionary right in violation of the principle of good faith ('Wärmetauscher'ruling dated 10 May 2016, Case No. X ZR 114/13). [277] In the eyes of the Court, Daimler had, however, not pleaded any relevant facts in the present proceedings. [277]

  • [207] Conversant v Daimler, District Court of Munich I, 30 October 2020, Case-No. 21 O 11384/19 (cited by juris).
  • [208] Ibid, paras.122-265.
  • [209] Ibid, para. 285.
  • [210] Ibid, para.286.
  • [211] Ibid, para.288.
  • [212] Ibid, paras.287 et seqq.
  • [213] Ibid, paras.291 et seqq.
  • [214] Ibid, para.295.
  • [215] Ibid, para.296.
  • [216]  Ibid, para. 299.
  • [217] Ibid, para. 300.
  • [218] Ibid, para.300.
  • [219] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [220] Conversant v Daimler, District Court of Munich I, 30 October 2020, Case-No. 21 O 11384/19, para.301.
  • [221] Ibid, para.301.
  • [222] Ibid, para.307.
  • [223] Ibid, para.308.
  • [224] Ibid, paras.302 and 308.
  • [225] Ibid, paras. 323 et seqq.
  • [226] Ibid, para.324. The Court expressed, nevertheless, doubts that the sole reference to the calculation method used by the UK High Court in Unwired Planet v Huawei would prove sufficient for the explanation of the rates offered by Conversant to Daimler.
  • [227] Ibid, para. 309.
  • [228] Ibid, para. 310.
  • [229] Ibid, para. 316.
  • [230]  Ibid, para. 311.
  • [231] Ibid, para. 312.
  • [232] Ibid, para. 320.
  • [233] Ibid, para. 311.
  • [234] Ibid, paras. 312 and 316.
  • [235] Ibid, para. 315.
  • [236] Ibid, paras.317 et seqq.
  • [237] Ibid, para. 321.
  • [238] Ibid, para.357.
  • [239] Ibid, paras.322 and 358.
  • [240] Ibid, para.328.
  • [241] Ibid, paras.331 and 336.
  • [242] Ibid, para.332.
  • [243] Ibid, paras.334 and 336.
  • [244] Ibid, para.335.
  • [245] Ibid, para.337.
  • [246] Ibid, para.338.
  • [247] Ibid, para.339.
  • [248] Ibid, para.340.
  • [249] Ibid, paras.355 et seq.
  • [250] Ibid, paras.341 and 354.
  • [251] Ibid, para.341.
  • [252] Ibid, paras.341 and 348.
  • [253] Ibid, para.352.
  • [254] Ibid, para.353.
  • [255] Ibid, para.353
  • [256] Ibid, para.360.
  • [257] Ibid, para.362.
  • [258] Ibid, paras.362 and 364.
  • [259] Ibid, para.363.
  • [260] Ibid, para.365.
  • [261] Ibid, para.366.
  • [262] Ibid, para.367.
  • [263] Ibid, paras.368 and 382.
  • [264] Ibid, para.368.
  • [265] Ibid, para.370.
  • [266] Ibid, para.372.
  • [267] Ibid, paras.373 and 376-378.
  • [268] Ibid, para.373.
  • [269] Ibid, paras.373 and382.
  • [270] Ibid, paras.373 and 379.
  • [271] Ibid, para.374.
  • [272] Ibid, para.375.
  • [273] Ibid, para.380.
  • [274] Ibid, para.384.
  • [275] Ibid, paras.384 et seqq.
  • [276] Ibid, para.385.
  • [277] Ibid, para.269.

Updated 6 May 2021

Sisvel v Haier

Federal Court of Justice - BGH
24 November 2020 - Case No. KZR 35/17

A. Facts

The claimant, Sisvel, holds patents declared as (potentially) essential to the practice of several wireless telecommunications standards (standard essential patents, or SEPs). Sisvel has made a commitment towards the European Telecommunications Standards Institute (ETSI) to make SEPs accessible to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions.

The defendants are two European subsidiaries of the Haier group (Haier), which has its headquarters in China. The Haier group produces and markets -among other things- mobile phones and tablets complying with various standards, including the GPRS and UMTS standards developed by ETSI.

On 20 December 2012, Sisvel informed the parent company of the Haier group (Haier China) that it offers licences for its SEPs and shared a list of approx. 235 patents included in its portfolio. 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 'hope' to have 'a formal negotiation' with Sisvel and asked for information regarding potential discounts mentioned in previous communi­cations.

In August 2014, Sisvel made an offer for a global portfolio licence to Haier, which was rejected.

Shortly after that, Sisvel filed infringement actions against Haier before the District Court of Duesseldorf (District Court). One of the actions was based on a SEP reading on the UMTS standard (patent in suit). The other action involved a patent reading on the GPRS standard. Haier filed nullity actions against both patents asserted before the German Federal Patent Court.

During the infringement proceedings, Haier made certain counteroffers to Sisvel. These offers had a limited scope, since they covered only the patents (patent families) asserted against Haier in court.

On 3 November 2015, the District Court decided in favour of Sisvel in both cases [278] . It granted injunctions against Haier and ordered the recall and destruction of infringing products. The District Court 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 both decisions.

In the subsequent proceedings before the Higher District Court of Duesseldorf (Appeal Court), 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 Huawei v ZTE ruling [279] (Huawei judgment) rendered after Sisvel had filed the infringement actions.

On 16 January 2016, during the course of the proceedings before the Appeal Court, Haier declared that it 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. Haier also requested claim charts with respect to all patents included in Sisvel's portfolio.

In December 2016, Sisvel made a further licensing offer to Haier, which was also rejected.

On 20 January 2017, that is a few weeks prior to the end of the oral arguments in the appeal proceedings, Haier made a further counteroffer to Sisvel. The licence offered would cover only the two subsidiaries of the Haier group sued in Germany. An agreement was not reached.

By two judgments dated 30 March 2017, the Appeal Court partially granted Haier's appeals in both parallel proceedings [280] . The claims for injunctive relief as well as the recall and destruction of infringing products were dismissed on the grounds that Sisvel had not complied with its obligations under the Huawei judgment, especially by failing to make a FRAND licensing offer to Haier.

Sisvel appealed the decisions of the Appeal Court.

In April 2020, the Federal Court of Justice (FCJ or Court) finally dismissed the invalidity action filed by Haier against the patent in suit [281] .

On 5 May 2020, FCJ rendered a judgment in the parallel proceedings pending between the parties concerning the patent reading on the GPRS standard [282] . The Court decided in favour of Sisvel and reversed the judgment of the Appeal Court. With the present judgmentSisvel v Haier, Federal Court of Justice, judgment dated 24 November 2020, Case No. KZR 35/17 (cited by )., the Court reversed the decision of the Appeal Court also in the case involving the patent in suit.

B. Court's reasoning

The Court found that the patent in suit was essential to the UMTS standard and infringed [284] .

Contrary to the view previously taken by the Appeal Court, FCJ found 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) [285] .

Dominant market position

The Court held that Sisvel had a dominant market position within the meaning of Article 102 TFEU [286] .

FCJ explained that a dominant market position is given, 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 [287] . Even when alternative (technical) options exist, market domi­nance can arise as long as products not using the teaching of the patent cannot compete in a (downstream) market. [287] According to the FCJ, this applied with respect to the patent in suit.

Abuse of market dominance

The Court found, however, that Sisvel had not abused its dominant market position by filing infringement actions against Haier [288] . An abuse of market dominance can occur, when the SEP holder

  • refuses to grant a FRAND licence to an implementer willing to take such licence and brings a court action against the latter, asserting claims for injunctive relief (and/or the recall and destruction of infringing products), or
  • has not made 'sufficient efforts' in line with the 'particular responsibility' attached to its dominant position to facilitate the signing of a licence agreement with an implementer, who is, basically, willing to take a licence [289] .

In the eyes of the Court, in both above scenarios, the filing of an action against a 'willing' implementer amounts to an abuse, only because the latter has a claim to be contractually allowed by the SEP holder to use the teachings of the patent under FRAND conditions [290] . On the other hand, an abuse is regularly not per se established by an offer made by the patent holder at the beginning of negotiations, even when the terms offered would unreasonably impede or discriminate the implementer, if contractually agreed. [290] An abuse would be given, if the SEP holder insisted on such conditions also at the end of licensing negotiations with the imple­menter. [290]

Notification of infringement

The Court explained that the 'particular responsibility' of a market dominant patent holder materializes in an obligation to notify the implementer about the infringement of the patent in suit prior to filing an action, in case that the implementer is (potentially) not aware that by complying with the standard said patent is used [291] .

In the present case, the Court found that by the letter dated 20 December 2012 and the following correspondence Sisvel had given proper notification of infringement to Haier [292] .

Willingness

On the other hand, the Court found that Haier did not act as a licensee willing to obtain a FRAND licence from Sisvel [293] . In this respect, FCJ disagreed with the Appeal Court, which had taken the opposite view.

In the Court's eyes, the implementer must 'clearly' and 'unambiguously' declare willingness to conclude a licence agreement with the SEP holder on FRAND terms and, subsequently, engage in negotiations in a 'target-oriented' manner [294] . By contrast, 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 [294] .

The Court reasoned that the willingness of the implementer to legitimise the unauthorized use of the patent for the future by creating a respective contractual base is a prerequisite for placing the burden on the SEP holder to negotiate a FRAND licence with the implementer. [295] What is more, willingness (on both sides) is essential, because an adequate solution balancing the opposing interests of the parties results, as a rule, from an interest-based negotiation. [296] The fact that a party fails to contribute in negotiations towards a FRAND agreement will regularly be considered to its detriment. [297] An implementer, who has not shown interest in a FRAND-licence over a longer period after receipt of an infringement notification will have to undertake 'additional efforts' to make sure, that despite the delay caused a licence can be signed as soon as possible. [298]

The Court highlighted particularly that implementers should not engage in 'patent hold-out' by exploiting the 'structural disadvantage', which SEP holders face due to the limitation of their right to assert patents in court. [299] Otherwise, competition could be distorted, because the infringer would gain unfair advantages over implementers that have taken a licence in a timely manner. [299]

FCJ took the view that the above interpretation of the requirements related to the implementers' obligation to demonstrate willingness to obtain a FRAND-licence is in line with the Huawei judgment; a new referral of the respective questions to the CJEU, as requested by Haier, was not needed. [300] The Huawei judgment created a 'safe harbour' against antitrust liability in the sense that compliance with the obligations established will regularly suffice to exclude an abuse of market dominance. [301] Under special circumstances, however, stricter or less strict conduct duties of the parties could be justified. [301]

The Court observed that the Huawei judgment supports the notion that the implementer should remain willing to obtain a licence throughout the course of negotiations. [301] The 'continuous' willingness is an 'indispensable condition' for successful negotiations or, in case negotiations fail, for a finding of abuse of market dominance on the side of the SEP holder. [302] The refusal of SEP holder to grant a FRAND licence would, indeed, have no relevance in antitrust terms, when the implementer is not objectively willing and able to obtain such licence. [303]

Accordingly, FCJ explained that willingness shall (still) be in place, also when the SEP holder makes a licensing offer. [304] In this regard, the Court disagreed with the District Court of Duesseldorf, which had expressed the opposite view in the recent referral of certain FRAND-related questions to the CJEU in the matter Nokia v Daimler. [305] According to FCJ, the offer of the SEP holder is just the 'starting point' of negotiations; since FRAND is a range, it is the goal of negotiations to reach a fair and reasonable result considering the interests of both sides. [306] The implementer has, therefore, a duty to examine the FRAND-conformity of the terms of the SEP holder's offer. [307] If the offer is 'obviously' not FRAND, it will be sufficient that the implementer explains the reasons why this is the case. [307]

In this context, the Court made clear that the implementer's duty to examine SEP-holder's licensing offer exists, irrespective of whether the offer is, in terms of content, FRAND-compliant in every respect. [308] If one would require from the SEP holder to make a 'perfect' FRAND offer right away, licensing negotiations would be obsolete. [309] It is also not possible to assess the FRAND-conformity of the offer in the abstract, without reference to the aspects which each side considers relevant. [310] The Court reiterated that an non-FRAND licensing offer does not per se amount to an abuse of market dominance. [311]

Having said that, FCJ noted that for the assessment of the willingness of the implementer its entire conduct (including its reaction to the SEP holder's licensing offer) must be taken into account. [312] Consequently, willingness can change in the course of time: a court action filed by the SEP holder could become abusive at a later point in time, if the implementer adequately raises a request for a FRAND-licence. [313] However, the longer the implementer waits with asserting such request, the higher the threshold for considering it as a willing licensee will be. [314] The Court again noted that the above inter­pretation is in line with the Huawei judgment, so that no additional referral to the CJEU is needed, as Haier had requested. [312]

Against this background, the Court observed that the first response of Haier China to Sisvel's notification almost one year after receipt of the infringement notification was belated [315] . 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 [315] . Besides that, FCJ 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, in terms of content [316] . Since it had reacted belatedly to the notification of infringement, Haier should have undertaken 'additional efforts' to demonstrate willingness, which had been, however, not the case. [317]

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 [318] . Although the implementer is, in principle, allowed to preserve the right to contest the validity of a licensed patent after conclusion of an agreement, the Court held that a declaration of willingness cannot be placed under a respective condition [319] . Besides that, requesting the production of claim charts for all patents of Sisvel's portfolio almost three years after the receipt of the notification of infringement was, according to the Court, an indication that Haier was only interested in delaying the negotiations until the expiration of the patent in suit [320] .

Furthermore, FCJ found that Haier's willingness to enter into a FRAND licence could also not be extracted from the counteroffers made during the infringement proceedings. [321] The fact that these counteroffers were, in terms of scope, limited only to the patents asserted by Sisvel in court indicated that Haier had not seriously addressed Sisvel's request for a worldwide portfolio licence. [322] Given that it had more than sufficient time to examine Sisvel's portfolio, one could expect from Haier to provide substantive grounds for such 'selective licensing'. [322]

What is more, the Court held that the counteroffer dated 20 January 2017, which Haier had made shortly before the end of the appeal proceedings, was no sufficient demonstration of willingness either. [323] The Court focused particularly on the fact that the licence would cover only the two affiliates of the Haier group sued in Germany. [324] According to FCJ, Haier had no 'legitimate interest' on such 'selective licensing'; on the contrary, a limited licence would offer no sufficient protection against infringement by other companies of the Haier group and force Sisvel to a cost-intensive assertion of its SEPs 'patent to patent and country-by-country'. [325]

In addition, the Court also criticised the proposed royalty regime. [326] Haier based the royalty calculation only on a small portion (four patent families) of the SEPs that should be included in the licence, which, in its eyes, were 'probably' essential. [327] The Court reasoned that the scope of the licence must be clarified in negotiations, whereas in the ICT-sector, due to the large number of relevant patents, it is common to rely on estimations regarding both essentiality and validity, which, on the one hand, allow to take 'necessary remaining uncertainties' adequately into account and, on the other hand, help to avoid disproportionate high transaction costs. [328]

Apart from that, the fact that the counteroffer was made only in the 'last minute' of the appeal proceedings allowed the conclusion that Haier was not actually aiming at signing a FRAND licence, but was rather motivated by tactical considerations with respect to the pending proceedings. [329]

SEP holder's licensing offer

Having found that Haier had not sufficiently demonstrated willingness to obtain a FRAND licence, the Court did not examine the FRAND-conformity of Sisvel's licensing offers to Haier in the present case [330] . According to FCJ, this question is not relevant, when the implementer has not adequately expressed willingness to sign a FRAND licence. [331]

The Court highlighted that -apart from the obligation to notify the implementer about the infringement- duties of the SEP holder (including the duty to make a FRAND licensing offer) arise only if the implementer has demonstrated willingness to obtain a licence on FRAND terms. [332] The FRAND-undertaking of the patent holder towards the relevant standardisation body does not change the fact that the user of a patent is, in principle, obliged to seek a licence from the right holder. [332]

C. Other important issues

Patent ambush

The Court dismissed Haier's defence based on the 'patent ambush' argument. [333] Haier argued that the patent in suit was unenforceable, because the initial patent holder, from whom Sisvel had acquired said patent, had failed to disclose the patent towards ETSI in due course during the development of the UMTS standard.

The Court did not examine whether a 'patent ambush' in the above sense indeed occurred in the present case. [334] FCJ took the view that an implementer can assert 'patent ambush' only against the patent holder that actually participated in the standard development process; on the contrary, such defence cannot be raised against its successor (here: Sisvel). [334]

Notwithstanding the above, the Court noted that a 'patent ambush' requires that the decision-making process within the relevant standardisation body was distorted by the withheld information. [335] Insofar, the implementer must establish at least some indication that the standard would have taken a different form, if the information considering the relevant patent application had been disclosed in time. [336] Haier had, however, failed to do so. [336]

Damages

Finally, the Court found that Sisvel's damage claims were given on the merits. Negligence establishing Haier's liability for damages was given: The implementer is, in principle, obliged to make sure that no third party rights are infringed, before starting manufacturing or selling products, which Haier had not done. [337]

What is more, Sisvel's claim for damages was not limited to the amount of a FRAND licensing rate ('licensing analogy'). [338] The SEP holder is entitled to full damages, unless the implementer can assert an own counterclaim, requesting to be placed in the position, in which it would have been, in case that the SEP holder had fulfilled the obligations arising from its dominant market position. [337] An implementer is, however, entitled to such (counter)claim, only when it adequately expressed its willingness to enter into a licence, which had not been the case here. [337]

  • [278] Sisvel v Haier, District Court of Duesseldorf, judgment dated 3 November 2015, Case No. 4a O 144/14 (UMTS-related patent) and Case No. 4a O 93/14 (GPRS-related patent).
  • [279] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [280] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 30 March 2017, Case No. I-15 U 65/15 (UMTS-related patent) and Case No. I-15 U 66/15 (GPRS-related patent).
  • [281] Federal Court of Justice, judgment dated 28 April 2020, Case No. X ZR 35/18.
  • [282] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17.
  • [283] Sisvel v Haier, Federal Court of Justice, judgment dated 24 November 2020, Case No. KZR 35/17 (cited by ).
  • [284] Ibid, paras. 10-43.
  • [285] Ibid, para. 44.
  • [286] Ibid, paras. 48 et seqq.
  • [287] Ibid, para. 49.
  • [288] Ibid, para. 52.
  • [289] Ibid, para. 53.
  • [290] Ibid, para. 54.
  • [291] Ibid, para. 55.
  • [292] Ibid, para. 84.
  • [293] Ibid, paras. 86 et seqq.
  • [294] Ibid, para. 57.
  • [295] Ibid, para. 58.
  • [296] Ibid, para. 59.
  • [297] Ibid, para. 60.
  • [298] Ibid, para. 62.
  • [299] Ibid, para. 61.
  • [300] Ibid, para. 63.
  • [301] Ibid, para. 65.
  • [302] Ibid, para. 68.
  • [303] Ibid, paras. 66 and 68.
  • [304] Ibid, para. 69.
  • [305] Ibid, para. 69. See Nokia v Daimler, District Court of Duesseldorf, order dated 26 November 2020, Case No. 4c O 17/19.
  • [306] Ibid, paras. 70 and 71.
  • [307] Ibid, para. 71.
  • [308] Ibid, para. 72.
  • [309] Ibid, para. 73.
  • [310] Ibid, para. 74.
  • [311] Ibid, para. 76.
  • [312] Ibid, para. 77.
  • [313] Ibid, paras. 79 et seqq.
  • [314] Ibid, para. 83.
  • [315] Ibid, para. 87.
  • [316] Ibid, paras. 88 et seqq.
  • [317] Ibid, para. 89.
  • [318] Ibid, paras. 93 et seqq.
  • [319] Ibid, para. 95.
  • [320] Ibid, paras. 96-99.
  • [321] Ibid, paras. 102 et seqq.
  • [322] Ibid, para. 102.
  • [323] Ibid, paras. 108 et seqq.
  • [324] Ibid, para. 116.
  • [325] Ibid, para. 118.
  • [326] Ibid, paras. 124 et seqq.
  • [327] Ibid, para. 124.
  • [328] Ibid, para. 125.
  • [329] Ibid, para. 126.
  • [330] The Court had, however, undertaken such analysis in its earlier decision between the same parties dated May 2020. See Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17, especially paras. 76-81 and 101 et seqq.
  • [331] Sisvel v Haier, Federal Court of Justice, judgment dated 24 November 2020, Case No. KZR 35/17, para. 107.
  • [332] Ibid, para. 56.
  • [333] Ibid, paras. 127 et seqq.
  • [334] Ibid, para. 130.
  • [335] Ibid, para. 131.
  • [336] Ibid, paras. 131 et seq.
  • [337] Ibid, para. 135.
  • [338] Ibid, paras. 134 et seqq.

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) [339] . 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 [340] .

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 [341] . The Defendant filed an action for invalidity against the Claimant’s SEP in Germany [341] .

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 [341] . Subsequently, several licensing offers and counter-offers were made by the Claimant and the parent company respectively [341] . 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 [342] . In response, the parent company confirmed that it is willing to obtain a licence, among others, by letter dated 7 September 2016 [343] . 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 [344] .

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 [345] . 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) [345] . This deadline was extended for almost three weeks until 7 May 2018 [345] .

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) [345] .

With the present judgment the Court ruled that the Defendant is liable for damages arising from the infringement of the SEP in suit [346] . The Court also ordered the Defendant to render accounts and to provide relevant information to the Claimant [346] . 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 [347] .


B. Court’s reasoning

The Court held that the products sold by the Defendant in Germany infringe Claimant’s SEP [348] . Thus, the Defendant is obliged to compensate the damages suffered by the Claimant and the previous holder of the patent in suit [346] . 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) [346] .

In the Court’s view, the Defendant cannot raise a defence based on a so-called “patent ambush” against these claims [349] . 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 [350] . 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” [350] . The Court held that the Defendant failed to establish such fact [349] . 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?) [349] .

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 [351] .

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 [352] . The wording of Article 6.1. ETSI IPR Policy establishes a respective assumption [352] . 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 [342] . 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 [342] . 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 [353] .

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 [351] . 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 [351] .

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 [351] . 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 [355] .

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 [356] .

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) [357] .

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 [342] . 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) [342] .

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) [358] .

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) [343] .

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 [343] .

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) [359] . 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 [343] .

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 [360] . Only then, the SEP user’s consequent obligation under the Huawei framework to make a FRAND counter-offer to the SEP holder is triggered [360] . 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 [360] . For the assessment of the non-discriminatory character of the offer, information on comparable agreements is needed [360] .

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 [361] . 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 [361] . 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”) [361] . 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 [362] . Otherwise, the initiation of the infringement proceedings shall be considered as abusive in terms of antitrust law [362] . In the present case, the Claimant chose to not ask for a stay in the proceedings, ignoring the Court’s respective indication [362] .


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 [363] . On the other hand, it does not define the ownership of the patent in material legal terms [364] . Nevertheless, the patent registration establishes an assumption of ownership which must be rebutted by the defendant in infringement proceedings based on concrete indications [365] .

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 [366] . As a rule, it must be expected with a sufficient degree of probability that the patent(s) in suit will be invalidated [366] . The Defendant failed convince the Court that this was the case with the SEP in suit [366] .

  • [339] District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, page 2 and 23.
  • [340] Ibid, page 23 et seq.
  • [341] Ibid, page 5.
  • [342] Ibid, page 25.
  • [343] Ibid, page 26.
  • [344] Ibid, pages 5 et seq.
  • [345] Ibid, page 6.
  • [346] Ibid, page 19.
  • [347] Ibid,page 23.
  • [348] Ibid, pages 16 et seqq.
  • [349] Ibid, page 20.
  • [350] Ibid, page 21.
  • [351] Ibid, page 22.
  • [352] Ibid, page 24.
  • [353] Ibid, pages 24 et seq.
  • [354] Huawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-130/13.
  • [355] District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, pages 22.
  • [356] Ibid,pages 23 and 25.
  • [357] Ibid, page 23.
  • [358] Ibid, pages 23 and 25 et seq.
  • [359] Ibid, pages 26 et seqq.
  • [360] Ibid, page 27.
  • [361] Ibid, page 28.
  • [362] Ibid, page 29.
  • [363] Ibid, page 10.
  • [364] Ibid, pages 10 et seq.
  • [365] Ibid, page 11.
  • [366] Ibid, page 30.

Updated 1 November 2017

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

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

  1. Facts
    The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue (EP (UK) 2 229 744, EP (UK) 2 119 287, EP (UK) 2 485 514, EP (UK) 1 230 818, EP (UK) 1 105 991, EP (UK) 0 989 712) relate to telecommunication network coding and procedures [367] . Most were part of a large patent portfolio that the claimant had acquired from a major telecommunications company in 2013. [368] 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. [369]
    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. [370] 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. [371] Between August and October 2016 the parties exchanged further offers without reaching an agreement. [372]
    The Patents Court (Birrs J) held that the claimant was in a dominant position, but did not abuse this position. [373] 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. [374]
  2. Court’s reasoning
    1. Market power
      The court defined the relevant market for assessing dominance as a distinct market for licensing each SEP individually. [375] European case law indicated that owning an SEP could be a rebuttable presumption for the existence of a dominant position. [376] 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. [377]
    2. SEP Proprietor’s Licensing Offer
      1. FRAND Declaration as Conceptual Basis
        The court pointed out that that the FRAND undertaking also applied in the case that the SEP proprietor was not in a dominant position. It held that the FRAND undertaking operated as a practical constraint on a SEP owner’s market power. [378] 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, [379] 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. [380] 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. [380]
        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. [381] 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. [382] This approach also means that the SEP proprietor is under an obligation to make a FRAND offer and to enter into FRAND license agreements. [383]
      2. ‘True FRAND Rate’
        The court considered that there is only a single set of terms for a given set of circumstances that would meet FRAND conditions (‘true FRAND rate’). [384] This eliminates the so-called Vringo-problem, [385] 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. [386]
        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. [387] 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). [388] Since Art. 102 TFEU condemns excessive pricing, [389] 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. [389]
      3. Discrimination
        The court held that the correct approach is to start from a global rate as a benchmark and to then adjust this rate as appropriate. [390] 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. [391] 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. [392]
        Second, the ‘hard-edged’ non-discrimination obligation, which takes into account the nature of the potential licensee, [391] 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. [393] 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. [392]
      4. Territorial Scope of License
        The court held that the defendant’s offer that was limited to UK licenses was not FRAND. In the court’s opinion country by country licensing is inefficient for goods such as mobile telecommunications devices that are distributed across borders. [394] 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. [394] This was illustrated by the fact that the vast majority of licenses introduced in the trial were worldwide licenses. [395] 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. [396] 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. [397]
  3. Court’s reasoning
    1. Comparable agreements and reasonable aggregate royalty rate
      The court held that for determining the royalty rate, the evidence of the parties would be relevant, including evidence of how negotiations actually work in the industry. [398] Other freely-negotiated license agreements might be used as comparables. [399] This may be compared with a top down approach [400] 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. [401] 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. [398] License agreements must meet certain criteria to be comparable. [402] 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. [402] 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%). [403]
    2. Principles derived from Huawei v. ZTE
      The court also provided a compiled overview of its interpretation of the Huawei v. ZTE ruling. [404] 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.
  • [367] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 2
  • [368] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 54 et seqq.
  • [369] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 3
  • [370] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 5
  • [371] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 7-8
  • [372] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 11-14
  • [373] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 807
  • [374] Unwired Planet v Huawei, EWHC 1304 (Pat)
  • [375] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 631
  • [376] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 634
  • [377] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 636-646
  • [378] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 656
  • [379] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 108-145
  • [380] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 146
  • [381] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 162
  • [382] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 163
  • [383] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 159
  • [384] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 164
  • [385] See Vringo v ZTE [2013] EWHC 1591 (Pat) and [2015] EWHC 214 (Pat)
  • [386] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 158
  • [387] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 152
  • [388] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154
  • [389] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153
  • [390] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 176
  • [391] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 177
  • [392] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 503
  • [393] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 501
  • [394] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 544
  • [395] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 534
  • [396] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 546
  • [397] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 572
  • [398] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 171
  • [399] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 170
  • [400] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 178
  • [401] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 806 (10)
  • [402] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 175
  • [403] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 476
  • [404] Unwired Planet v. Huawei [2017] EWHC 711(Pat), 744

Updated 6 June 2019

Koninklijke Philips N.V. v Asustek Computers INC., Court of Appeal of The Hague

Dutch court decisions
7 May 2019 - Case No. 200.221.250/01

A. Facts

The present case concerns a dispute between Philips—a consumer electronics manufacturer and holder of a portfolio of patents declared potentially essential to the practice of various standards (Standard Essential Patents or SEPs) developed by the European Telecommunications Standards Institute (ETSI)—and Asus—a manufacturer of wireless devices, such as laptops, tablets and smartphones.

Philips had committed towards ETSI to make its SEPs accessible to users on Fair, Reasonable, and Non-Discriminatory (FRAND) terms. In particular, in 1998 Philips had provided ETSI with a general (blanket) commitment to offer access to its SEPs on FRAND terms.

In 2013, Philips notified Asus of its portfolio reading on the 3G-UMTS and 4G-LTE wireless telecommunications standards and proposed a licensing agreement. In subsequent meetings between the parties, Philips provided further details on its patents, as well as claim charts mapping its patents on the standards on which they were reading. Philips also submitted to Asus its standard licensing agreement, which included the standard royalty rate in Philips’s licensing program and the way it is calculated.

In 2015, negotiations fell apart and Philips initiated infringement proceedings based, among others, on its European Patent 1 623 511 (EP 511) in various European jurisdictions, namely England, France, Germany. The EP 511 patent was declared by Philips to be potentially essential to the 3G-UMTS and 4G-LTE standards. The High Court of Justice of England and Wales delivered a preliminary verdict, upholding the validity of the EP 511 patent.

In the Netherlands, Philips had brought an action against Asus before the District Court of The Hague (District Court), requesting inter alia for an injunction. The District Court dismissed Philips’s request for an injunction based on the EP 511 patent. [405] Philips appealed before the Court of Appeal of The Hague (Court of Appeal).

With the present judgment, the Court of Appeal upheld the validity and essentiality of the EP 511, rejected Asus’s FRAND defence based on Article 102 TFEU, and entered an injunction against Asus for its products infringing the patent in suit. [406]

B. Court’s Reasoning

The Court of Appeal dismissed Asus’s invalidity challenge, upholding the novelty and inventiveness of the EP 511 patent. [407] Moreover, the Court of Appeal found the patent essential and infringed. [408]

The Court of Appeal went on to examine the claims put forward by Asus, namely that Philips, in initiating infringement proceedings requesting injunctive relief, had violated its contractual FRAND obligations towards ETSI and infringed Article 102 TFEU, by failing to meet the requirements set forth in the decision of the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE (Huawei requirements) [409] . In particular, Asus argued that Philips (a) failed to properly and timely disclose the EP 511 in accordance with ETSI IPR Policy, and (b) that Philips failed to comply with the Huawei requirements, because it did not clarify why its proposed terms were FRAND.

With regard to the former, the Court of Appeal found that, in declaring EP 511 as potentially essential two years after it was granted, Philips had not breached its contractual obligations under Article 4.1 ETSI IPR Policy which requires ‘timely disclosure’ of SEPs.

Starting with the general purpose underlying the ETSI disclosure obligation, the Court of Appeal found that it was not—as Asus maintained—to allow ETSI participants to choose the technical solutions with the lowest cost, since ETSI standards seek to incorporate the best available technologies. [410] Rather, the purpose of the declaration obligation was to reduce the risk of SEPs being ex post unavailable to users. [411]

Having said that, the Court of Appeal found that the general blanket declaration by Philips was sufficient to fulfil its obligations under the ETSI IPR Policy. In this regard, the Court of Appeal dismissed the argument raised by Asus that Philips’s late declaration of specific SEPs would result in over-declaration: on the contrary, the Court of Appeal held, early disclosure is more likely to include patents that are not in fact essential to ETSI standards. [412] Moreover, the Court of Appeal pointed out that Philips’s blanket declaration did not infringe Article 101 TFEU, as per the Horizontal Guidelines by the EU Commission, blanket declarations are also an acceptable form of declaration of SEPs for the purposes of EU competition law. [413]

Having dismissed Asus’s first ground for a FRAND defence, the Court of Appeal assessed the compliance of both parties with the Huawei requirements in their negotiations. The Court of Appeal noted, as a preliminary point, that the decision of the CJEU in Huawei did not develop a strict set of requirements such that patent holders that failed to abide by they would automatically infringe Article 102 TFEU. [414] For such a finding an overall assessment of the particular circumstances of the case and the parties’ conduct is necessary.

The Court of Appeal then examined Philips’s compliance with the first Huawei requirement, the proper notification to the infringer. According to the Court of Appeal, the case record showed that Philips had clearly discharged its burden to notify Asus, by submitting a list of patents that were allegedly infringed, the standards to which they were essential, and by declaring its willingness to offer a licence on FRAND terms. [415] Moreover, in further technical discussions, Philips provided more technical details on its portfolio and licensing program, including claim charts and its standard licensing royalty rate. [416] However, Asus failed to demonstrate its willingness to obtain a licence on FRAND terms. The Court of Appeal found that talks commenced always at Philips’s initiative, and that Asus was not represented in these talks by technical experts able to evaluate Philips’s portfolio. [417] The technical issues raised by Asus in negotiations were merely pretextual with a view to stall the process, or as the Court of Appeal put it a ‘behaviour also referred to as “hold-out.”’ [418]

Although the Court of Appeal held that at this point Asus was already in breach of its obligations under Huawei and thus Philips was entitled to seek an injunction, the Court went on to discuss compliance with the further steps in the Huawei framework. The Court of Appeal found that Philips’s proposal of its standard licensing agreement fully satisfied the CJEU requirements in that it was specific and explained how the how the proposed rate was calculated. [419] Moreover, the Court of Appeal held that the counteroffer submitted by Asus after the initiation of proceedings in Germany did not in itself alter the conclusion that Philips was compliant with Huawei, and thus entitled to seek an injunction. [420] Finally, the Court rejected the request on behalf of Asus to access comparable licences signed by Philips to assess the latter’s FRAND compliance. According the Court, neither the ETSI IPR Policy nor Article 102 TFEU and the Huawei framework provide a basis for such a request. [421]

  • [405] Koninklijke Philips N.V. v. Asustek Computers INC, District Court of the Hague, 2017, Case No. C 09 512839 /HA ZA 16-712.
  • [406] Koninklijke Philips N.V. v. Asustek Computers INC, Court of Appeal of The Hague, judgment 7 May 2019, dated Case No. 200.221.250/01.
  • [407] ibid, paras 4.63, 4.68, 4.75, 4.80, 4.82, 4.93, 4.100, and 4.117.
  • [408] ibid, paras 4.118 et seq.
  • [409] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case-No. C-170/13.
  • [410] Koninklijke Philips N.V. v. Asustek Computers INC, Court of Appeal of The Hague, judgment 7 May 2019, dated Case No. 200.221.250/01, paras 4.153 et seq.
  • [411] ibid, paras 4.155 and 4.157.
  • [412] ibid, para 4.159.
  • [413] ibid, para 4.164.
  • [414] ibid, para 4.171.
  • [415] ibid, para 4.172.
  • [416] ibid.
  • [417] ibid, paras 4.172-4.179.
  • [418] ibid, para 4.179.
  • [419] ibid, para 4.183.
  • [420] ibid, para 4.185.
  • [421] ibid, paras 4.202 et seq.

Updated 9 November 2020

Nokia v Daimler

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

A. Facts

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

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

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

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

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

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

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

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

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

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

With the present judgment [422] (cited by www.juris.de), the Court granted an injunction against Daimler and also recognised Daimler's liability to pay damages on the merits. The Court further ordered Daimler to render accounts and provide information necessary for the calculation of damages to Nokia.


B. Court's reasoning

The Court found that Daimler infringed the patent-in-suit [423] . For this reason, Nokia was entitled -among other claims- to injunctive relief [424] .

Daimler and its suppliers that joined the proceedings asserted so-called 'FRAND-defences', arguing that by filing infringement actions, Nokia had abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) and should, therefore, be denied an injunction. In particular, it was argued that Nokia had failed to comply with the conduct requirements established by the CJEU in the matter Huawei v ZTE [425] (Huawei decision, or framework).

The Court dismissed the FRAND-defences raised by Daimler and its suppliers as unfounded [426] .

Huawei framework

The Court made clear that SEP holders are not per se prevented from enforcing the exclusivity rights arising from their patents Ibid, para. 146. The fact that a patent is standard essential does not mean that the patent holder is obliged to tolerate the use of its technology, unless it has allowed such use or was under an obligation to allow such use, as a consequence of holding a dominant market position Ibid, para. 146.

An abuse of market dominance by the enforcement of patent rights does not occur, if the patent holder complies with its duties under the Huawei framework [428] . These duties presuppose, however, that the implementer, who already uses the protected technology without authorization by the right holder, is willing to take a licence on FRAND terms [429] . The Court explained that it cannot be requested by the patent holder to 'impose' a licence to any standards user, not least because it has no legal claim to request the signing of a licensing agreement [429] . Moreover, the 'particular responsibility' attached to its dominant position requires from the SEP holder to make 'sufficient efforts' to facilitate the signing of an agreement towards a licensee in principle willing to take a licence [430] .

Notification of infringement

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

In terms of content, the notification of infringement must name the patent infringed and describe the specific infringing use and the attacked embodiments [431] . 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 [431] . As a rule, presenting claim charts will be sufficient (but not mandatory) [431] . The Court also pointed out that the patent holder is not required to address a separate notification of infringement to each supplier of an end-device manufactures infringing its patents [433] .

In the eyes of the Court, Nokia's e-mails dated 21 June 2016, 9 November 2016 and 7 December 2016 meet the above requirements [434] . The fact that -at least initially- Nokia did not indicate the concrete section of the standards documentation to which the patent-in-suit referred to was not considered harmful, since the notification of infringement is not required to facilitate a final assessment of infringement [435] .

Furthermore, the Court held that it was not necessary for Nokia to identify in the notification of infringement the specific components which generate connectivity according to the relevant standard, e.g. the TCUs built into Daimler's cars [436] . Since Daimler purchases and uses these components in its products, no information deficit could occur [436] .

Willingness

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

In the Court's eyes, the implementer has to 'clearly' and 'unambiguously' declare that it is willing to sign a licence with the SEP holder 'on whatever terms are in fact FRAND' and, subsequently, engage in licensing negotiations in a 'target-oriented' manner (citing Federal Court of Justice, judgment dated 5 May 2020 – Sisvel v Haier, Case No. KZR 36/17 and High Court of Justice of England and Wales, judgment dated 5 April 2017, Case No. [2017] EWHC 711(Pat) – Unwired Planet v Huawei) [438] . The 'target-oriented' engagement of the implementer in licensing negotiations is of decisive importance: since implementers, as a rule, already use the patented standardized technology prior to the initiation of licensing negotiations, they could have an interest to delay the signing of a licence until the expiration of the patent, which, however, conflicts with the spirit of the Huawei decision [439] . Accordingly, it is not sufficient, in response to a notification of infringement, to just demonstrate willingness to consider signing a licensing agreement or to enter into negotiations about whether and under which conditions taking a licence comes into question [438] .

The Court further pointed out that making the declaration of willingness subject to conditions was not acceptable [438] . What is more, refusing to discuss about any improvement of a counteroffer made to the patent holder could also be considered as an indication of unwillingness from the side of the implementer [438] .

Based on the above, the Court took the view that by initially making the signing of a licence subject to the condition that its products actually infringe Nokia's patents, Daimler did not adequately express willingness to sign a FRAND licence [440] . The Court added that Daimler's counteroffers could neither be considered as a sufficient sign of willingness: especially the second counteroffer, giving Daimler the right to contest the royalty rates that Nokia would unilaterally set, would just postpone the actual dispute between the parties about the determination of the licensing fees to later court proceedings [441] .

The Court also held that Daimler did not act as an 'willing' licensee, since it did not engage in negotiations with Nokia, but insisted that its suppliers take a direct licence from the latter, instead [442] . Furthermore, the missing willingness of Daimler was also confirmed by its insistence on applying the average selling price of TCUs purchased by Daimler by its suppliers as base for the calculation of the licensing fees for Nokia's SEP portfolio [443] .

Calculation of FRAND fees

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

In general, there is not only a single set of FRAND terms and conditions; usually, there is a range of licensing conditions and fees which are FRAND [445] . Moreover, what can be considered as FRAND may differ from industry sector to industry sector as well as in time [445] .

The Court pointed out, however, that the patent holder must, in principle, 'be given a share' in the 'economic benefits of the technology to the saleable end product at the final stage of the value chain' [446] . Reason for that is, that the use of the protected invention 'creates the chance' to gain an 'economic profit' with the end product, which is based on the invention [446] . The Court did not agree with the notion that by considering the value of the patented technology for the end product SEP holders benefit from innovation taking place at other stages of the value chain [447] . The Court noted that there are several instruments available to make sure that this will not occur [447] .

Accordingly, the Court rejected the notion of using the so-called 'Smallest Saleable Patent Practising Unit' (SSPPU), that is the smallest technical unit integrated in a product, as base for the calculation of FRAND royalty rates [447] . The effects of patent exhaustion would prevent the SEP holder from participating in the value created at the final stage of the value chain [447] . Apart from that, this option would make it more complex to identify and avoid 'double-dipping', meaning licensing the same patent at several stages of the value chain [447] .

Having said that, the Court clarified that the above principle does not necessarily mean that licensing agreements should be signed exclusively with end-device manufacturers [448] . The Court considered that there are various possibilities to factor the value of the patented technology for the saleable end product also at other stages of a supply chain [448] .

Against this background, the Court found that the selling price of TCUs did not sufficiently mirror the value of Nokia's SEPs for the cars produced by Daimler, which are the relevant end devices in the present case [449] . The selling price of TCUs corresponds only to Daimler's respective costs [450] . Connectivity, on the other hand, allows Daimler to generate income from additional services offered to its clients, save costs and optimise R&D expenses [451] . Connectivity secures the chance to create this value [452] . In addition, the Court noted that the acceptance of the licensing model of the Avanci platform (which grants licences exclusively to car manufacturers) by several of Daimler's main competitors serves as a further indication that focusing on the value of the protected technology for the end product is reasonable also in the automotive sector [453] .


Non-discrimination

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

The Court explained that the patent holder is, basically, allowed to freely choose the stage of the supply chain, at which it will assert its rights [455] . The same is true with respect to patent holders with a dominant market position, since competition law does not per se limit this possibility [455] . What is more, a dominant patent holder is not obliged to offer all potential licensees a 'standard-rate' [455] . The non-discrimination obligation established by Article 102 TFEU intends to prevent a distortion of competition in upstream or downstream markets, but does not exclude different treatment of licensees, if sufficient justification exists [456] .

In the present case, the Court saw no indication that Nokia's claim to use the end-product as a royalty base could impact competition [457] . Especially the fact that in the automotive sector it is common that suppliers take licences for components sold to car manufacturers, does not require Nokia to change its practice, not least because the licences granted by the Avanci platform to Daimler's competitors show that the respective practice -which is prevailing in the telecommunications sector- has already been applied also in the automotive field [458] . Furthermore, the Court did not consider that the assertion of SEPs against end-device manufacturers could lead to limitations in production, sales and technical development to the detriment of consumers [459] . In this respect, the Court referred to so-called 'have-made-rights' which according to the ETSI IPR Policy should be included in a FRAND licence and allow component manufacturers to produce, sell and develop their products [460] .

SEP holder's offer / information duty

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

The Court pointed out that the SEP holder can be obliged to substantiate the FRAND conformity of its licensing request [462] . In case that the patent holder has already concluded agreements with third licensees on non-standard terms, it will be, as a rule, under a duty to disclose and present –at least– the content of the key contractual provisions in a way, which would allow the implementer to assess whether it has been offered different commercial conditions [462] . The scope and level of detail of the respective duty shall be determined on a case-by-case basis [462] .

Considering this, the Court expressed the view that Nokia had provided sufficient information to Daimler, by sharing –among other things– a study on the value of connectivity for vehicles and a licensing agreement signed with another major car manufacturer [463] . In this context, the Court denied that Nokia was under a duty to disclose licensing agreements with smartphone manufacturers to Daimler. The Court rejected the notion that the SEP holder's information duty extends to the full content of every licensing agreement previously signed and that the SEP holder is obliged to disclose all existing agreements [464] . Adding to that, the Court noted that licensing agreements from the telecommunications sector are not relevant for the assessment of FRAND conformity of licences in the automotive field [464] .

FRAND defence raised by suppliers

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

The Court left the question open whether an end-device manufacturer that has been sued can, in principle, rely on a FRAND defence raised by one of its suppliers, or not. According to the Court, this would, however, in any case require that the supplier is willing to obtain a licence from the patent holder calculated on basis of the value of the patent(s) in question for the end-product (and not for the component it produces) [466] . This had not been the case in the present proceedings [467] .

The Court did not ignore that it can be challenging for suppliers to pass on the royalty fees paid to the SEP holder to their clients [468] . However, the contractual arrangements of third parties (here: the arrangements between suppliers and end-device manufacturers) should not, in the eyes of the Court, direct the SEP holder towards licencing agreements that do not allow a participation in the value created by the patented technology for the end-product [468] .


C. Other issues

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

The Court left this question open, since neither Daimler nor its suppliers were willing to obtain a licence on FRAND terms from Nokia based on the value of the protected technology for the cars manufactured by Daimler  Ibid, paras. 253 and 291. The Court also noted that the fact that the patent-in-suit would expire in few years from now would also speak against ordering a stay of the proceedings [470]

  • [422] Nokia v Daimler, District Court of Mannheim, judgment dated 18 August 2020, Case-No. 2 O 34/19
  • [423] Ibid, paras. 49-136
  • [424] Ibid, para. 138
  • [425] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13
  • [426] Nokia v Daimler, District Court of Mannheim, judgment dated 18 August 2020, Case-No. 2 O 34/19, para. 144
  • [427] Ibid, para. 146
  • [428] Ibid, para. 147
  • [429] Ibid, para. 148
  • [430] Ibid, para. 149
  • [431] Ibid, para. 152
  • [432] Ibid, paras. 151-156
  • [433] Ibid, para. 248
  • [434] Ibid, paras. 153 et seq
  • [435] Ibid, para. 154
  • [436] Ibid, para. 155
  • [437] Ibid, paras. 157-231
  • [438] Ibid, para. 158
  • [439] Ibid, para. 159
  • [440] Ibid, para. 161
  • [441] Ibid, para. 197-199
  • [442] Ibid, paras. 157, 160 and 162-164
  • [443] Ibid, paras. 160 and 165-168
  • [444] Ibid, para. 169
  • [445] Ibid, para. 170
  • [446] Ibid, para. 171
  • [447] Ibid, para. 172
  • [448] Ibid, para. 173
  • [449] Ibid, paras. 174 et seqq
  • [450] Ibid, paras. 174
  • [451] Ibid, paras. 177
  • [452] Ibid, para. 180
  • [453] Ibid, paras. 187 et seqq
  • [454] Ibid, paras. 201-212
  • [455] Ibid, para. 202
  • [456] Ibid, para. 203
  • [457] Ibid, para. 205
  • [458] Ibid, para. 210
  • [459] Ibid, para. 213
  • [460] Ibid, para. 215
  • [461] Ibid, paras. 216 et seqq
  • [462] Ibid, para. 217
  • [463] Ibid, para. 218
  • [464] Ibid, para. 230
  • [465] Ibid, paras. 232 et seqq
  • [466] Ibid, paras. 234 and 236 et seqq
  • [467] Ibid, paras. 240 et seqq
  • [468] Ibid, para. 239
  • [469]  Ibid, paras. 253 and 291
  • [470] Ibid, para. 291.

Updated 30 October 2018

Unwired Planet v Huawei, UK Court of Appeal

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

A. Facts

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

Starting in September 2013, the Claimant contacted the Defendants several times, requesting the latter to engage in discussions for a licence regarding its SEP portfolio. [471] 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). [472] The Claimant also initiated parallel infringement proceedings against the Defendants in Germany. [473]

The High Court conducted three technical trials first, focusing on the validity and essentiality of four of the SEPs in suit. [474] 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. [474] The parties agreed to postpone further technical trials indefinitely. [474]

In July 2016, Samsung took a licence from the Claimant covering, among other, the SEPs in suit. [475] The Claimant also settled the infringement proceedings with Google. [476]

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. [477]

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) [478] in accordance with the undertaking given by the Claimant towards the European Telecommunications Standards Institute (ETSI). [479] Pending appeal, the High Court stayed the injunction. [480]

Shortly after the High Court delivered its decision, the Defendants began proceedings against the Claimant in China, which are still pending. [481]

With the present judgment, the UK Court of Appeal dismissed the Defendants’ appeal against the decision of the High Court. [482]


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. [483]

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. [484]

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 [485] (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”). [486]

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. [487]


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). [488]

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) [489] . [490]

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. [491] Such an undertaking has international effect. [492] It applies to all SEPs of the patent holder irrespective of the territory in which they subsist. [493] This is necessary for two reasons: first, to protect implementers whose equipment may be sold and used in a number of different jurisdictions. [493] 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. [494]

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. [495] German Courts (in Pioneer Acer [496] and St. Lawrence v Vodafone [497] ) as well as the European Commission in its Communication dated 29 November 2017 [498] had also adopted a similar approach. [499]

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. [494] 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. [500] In this way, the implementer would have an incentive to hold out country-by-country, until it was compelled to pay. [500]

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. [501]

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. [502] The reality is that a number of sets of terms may all be fair and reasonable in a given set of circumstances. [502] Whether there is only one true set of FRAND terms or not, is, therefore, more of a “theoretical problem” than a real one. [503] 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. [503]

Furthermore, the Court of Appeal dismissed Defendants’ claim that imposing a worldwide licence is contrary to public policy and disproportionate. [504] In particular, the Defendants argued that this approach encourages over-declaration of patents [505] and is not compatible with the spirit of the Directive 2004/48/EC on the enforcement of intellectual property rights, [506] which requires relief for patent infringement to be proportionate. [507]

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. [508] 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. [509]


2. Non-discrimination

The Court of Appeal rejected the Defendants’ argument [510] 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. [511]

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. [512] 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 [513] 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. [514]

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). [515] 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. [516] 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. [517]

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. [518]

Conversely, the Court of Appeal followed the notion described by the High Court as the “general” non-discrimination approach: [519] 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. [519] For determining the benchmark rate, prior licences granted by the SEP holder to third parties will likely form the “best comparables”. [520]

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. [521] 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. [521]

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. [522] 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. [522] 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. [523]


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. [524]

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. [525] 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 [526] ) and that the constrains imposed upon the SEP holder’s market power by the limitations attached to the FRAND undertaking [527] and the risk of hold-out that is immanent to the structure of the respective market, [528] can either alone or together rebut the assumption that it most likely holds market power. [529]

Notwithstanding the above, the Court of Appeal held that the Claimant had not abused its market power in the present case. [530]

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. [531] 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. [532] 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. [533]

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. [534] This follows from the clear language used by the CJEU with respect to this obligation. [535] The precise content of such notice will depend upon all the circumstances of the particular case. [535] 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. [536]

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. [537]

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. [538] Insofar the court agreed with the respective approach developed by German courts in co-called “transitional” cases (Pioneer v Acer, [539] St. Lawrence v Vodafone [539] and Sisvel v Haier [540] ) [541] .

  • [471] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, Case-No. A3/2017/1784, [2018] EWCA Civ 2344, para. 233.
  • [472] Ibid, para. 6 et seqq.
  • [473] Ibid, para. 233.
  • [474] Ibid, para. 7.
  • [475] Ibid, paras. 8 and 137 et seqq.
  • [476] Ibid, para. 8.
  • [477] Ibid, para. 9 et seqq.; para. 31 et seqq.
  • [478] Ibid, para 17.
  • [479] Ibid, para 130.
  • [480] Ibid, para 18.
  • [481] Ibid, para 112.
  • [482] Ibid, para 291.
  • [483] Ibid, paras. 19 and 45 et seqq.
  • [484] Ibid, paras. 20 and 132 et seqq.
  • [485] Huawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-170/13.
  • [486] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 21, paras. 211 et seqq and para. 251.
  • [487] Ibid, para. 17.
  • [488] Ibid, paras. 74 and 77 et seq.
  • [489] Ibid, para. 82.
  • [490] Ibid, para. 80.
  • [491] Ibid, para. 79 et seq.
  • [492] Ibid, para. 26.
  • [493] Ibid, para. 53.
  • [494] Ibid, para. 54 et seq., para. 59.
  • [495] Ibid, para. 56.
  • [496] Pioneer v Acer, District Court of Mannheim, judgement dated 8 January 2016, Case No. 7 O 96/14.
  • [497] St. Lawrence v Vodafone, District Court of Düsseldorf, judgement dated 31 March 2016, Case No. 4a O 73/14.
  • [498] 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.
  • [499] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 74.
  • [500] Ibid, para. 111.
  • [501] Ibid, para. 128.
  • [502] Ibid, para. 121.
  • [503] Ibid, para. 125.
  • [504] Ibid, para. 75.
  • [505] Ibid, para. 92
  • [506] 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)
  • [507] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 94.
  • [508] Ibid, para. 96.
  • [509] Ibid, para. 98.
  • [510] Ibid, para. 20 and 132 et seqq.
  • [511] Ibid, paras. 207 and 210.
  • [512] Ibid, para. 176.
  • [513] Ibid, para. 173.
  • [514] Ibid, para. 169 et seq.
  • [515] Ibid, paras. 194 et seqq.
  • [516] Ibid, para. 198.
  • [517] Ibid, para. 198.
  • [518] Ibid, para. 199.
  • [519] Ibid, para. 195.
  • [520] Ibid, para. 202.
  • [521] Ibid, para. 196.
  • [522] Ibid, para. 197.
  • [523] Ibid, para. 200.
  • [524] Ibid, para. 21, paras. 211 et seqq and para. 251.
  • [525] Ibid, para. 212.
  • [526] Ibid, para. 216.
  • [527] Ibid, para. 219.
  • [528] Ibid, para. 220.
  • [529] Ibid, para. 229.
  • [530] Ibid, para. 284.
  • [531] Ibid, para. 269.
  • [532] Ibid, para. 270.
  • [533] Ibid, para. 269 and 282.
  • [534] Ibid, para. 253 and 281.
  • [535] Ibid, para. 271.
  • [536] Ibid, para. 273.
  • [537] Ibid, para. 284
  • [538] Ibid, para. 275
  • [539] See above
  • [540] Sisvel v Haier, Higher District Court of Düsseldorf, judgement dated 30 March 2017, Case No. 15 U 66-15.
  • [541] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 279.

Updated 6 October 2020

Unwired Planet v Huawei & Conversant v Huawei and ZTE, UK Supreme Court

English court decisions
26 August 2020 - Case No. [2020] UKSC 37

A. Facts

The present judgment of the UK Supreme Court (Supreme Court) addresses appeals resulting from two separate cases, both of which concern the infringement of patents declared as (potentially) essential to the practice of wireless telecommunications standards (Standard Essential Patents or SEPs) developed by the European Telecommunications Standards Institute (ETSI). Under the Intellectual Property Rights Policy of ETSI (ETSI IPR Policy), patent holders are encouraged to commit that their SEPs will be made accessible to standards users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions.

Unwired Planet v Huawei

The first case involves a dispute between Unwired Planet International Limited (Unwired Planet), a company holding a portfolio of SEPs reading on several wireless telecommunications standards, and two companies of the Huawei group (Huawei), a Chinese manufacturer and vendor of -among other things- standard compliant mobile phones.

In March 2014, Unwired Planet sued Huawei as well as Samsung and a third company for infringement of five of its UK SEPs before the High Court of Justice for England and Wales (High Court). During the course of these proceedings, Unwired Planet made several licensing offers to Huawei, which, however, did not lead to the conclusion of an agreement. On the other hand, Unwired Planet signed a licence with Samsung.

On 5 April 2017, the High Court granted an injunction against Huawei, until such time as it entered into a worldwide licensing agreement with Unwired Planet on the specific terms, which the court determined to be FRAND [542] . Huawei appealed this decision. Pending appeal, the High Court stayed the enforcement of the injunction.

On 23 October 2018, the UK Court of Appeal (Court of Appeal) dismissed Huawei's appeal against the decision of the High Court [543] . Subsequently, Huawei appealed before the Supreme Court for the United Kingdom (Supreme Court or Court).

Conversant v Huawei and ZTE

The second case revolves around a dispute between the licensing company Conversant Wireless Licensing S.A.R.L. (Conversant), on the one hand, and Huawei as well as two companies of the ZTE group (ZTE), on the other hand. ZTE is a China-based group of companies manufacturing network equipment, mobile phones, and consumer electronics sold worldwide.

In 2017, Conversant brought an infringement action against Huawei and ZTE before the High Court. Conversant requested -among other claims- injunctive relief for the infringement of four of its UK patents and also asked the High Court to determine the terms of a global FRAND licence for its SEP portfolio. Both Huawei and ZTE contested the jurisdiction of the High Court to hear and decide the case and initiated proceedings in China challenging the validity of Conversant's Chinese patents.

On 16 April 2018, the High Court confirmed its jurisdiction over the dispute, including its competence to determine the terms for a global portfolio licence [544] . Huawei and ZTE appealed the decision of the High Court.

On 30 January 2019, the Court of Appeal dismissed the appeal and affirmed the jurisdiction of UK courts to determine FRAND terms for a global licence on the basis of infringement of UK patents [545] . Huawei and ZTE appealed before the Supreme Court.

With the present judgment [546] , the Supreme Court unanimously dismissed the appeals in both cases.


B. Court's reasoning

The Supreme Court identified and addressed the following five issues raised by the appeals:

1. Jurisdiction

The Supreme Court confirmed that UK courts have jurisdiction to determine the terms of a global FRAND licence for a multinational SEP portfolio and, accordingly, grant an injunction based on UK SEPs, in case a standards implementer refuses to enter into such licence [547] .

The Court held that under the ETSI IPR Policy SEP holders are not prohibited from seeking an injunction by national courts [548] . On the contrary, the possibility to stop infringement by means of an injunction granted by a national court was considered to be 'a necessary component of the balance which the IPR Policy seeks to strike', by ensuring that implementers are incentivised to negotiate a FRAND licence [548] .

Apart from granting an injunction based on UK patents, English courts can also set the terms of a global FRAND licence. In the view of the Supreme Court, the 'contractual arrangement' established by the ETSI IPR Policy gives UK courts the jurisdiction to exercise the respective power [549] .

According to the Court, the ETSI IPR Policy is 'intended to have an international effect', as it attempts to 'mirror commercial practice in the telecommunications industry' [550] . In the telecommunications industry, it is common practice to sign global licences for a portfolio of patents, 'without knowing precisely how many of the licenced patents are valid or infringed' [551] . On the one hand, the patent holder cannot know at the time of the declaration of a patent as (potentially) essential whether it will be valid and infringed by the still developing standard [551] . The implementer, on the other hand, does not know which patents are valid and infringed when using the standard [551] .

This 'unavoidable uncertainty' is dealt with by the conclusion of portfolio licences covering all declared SEPs of the patent holder worldwide, at a price which 'ought to reflect the untested nature of many patents in the portfolio' [551] . By taking such a licence, the implementer 'buys access' to the standard and 'certainty' that it has authorisation to use all technology needed to comply with the standard [551] .

Since, according to the commercial practice, FRAND licences include 'untested' patents, the Supreme Court took the view that the determination of the terms and conditions of a global licence does not imply an assessment of the validity of all patents covered. Therefore, when setting the terms of a worldwide portfolio licence, English courts do not rule on the validity and infringement of foreign patents, which is, indeed, a question subject to the exclusive jurisdiction of the national courts of the state that granted each patent [552] . Accordingly, it will, as a rule, be 'fair and reasonable' for the implementer to 'reserve the right to challenge those patents or a sample of those patents in the relevant foreign court and to require that the licence provide a mechanism to alter the royalty rates as a result' [553] .

In this context, the Supreme Court highlighted that the above approach is not unique to UK jurisprudence, but is in line with case law delivered in other jurisdictions, particularly in the United States, Germany, China and Japan [554] .


2. Suitable forum (forum conveniens)

The second issue which the Supreme Court addressed dealt also with the jurisdiction of the English courts. In the Conversant v Huawei case, the defendants had argued that English courts should have declined jurisdiction in favour of Chinese courts or at least stayed their proceedings, until the Chinese courts have decided on validity challenges raised against Conversant's Chinese patens.

The Supreme Court found that UK Courts were not obliged to decline jurisdiction in favour of the Chinese courts [555] . The so-called 'forum conveniens' doctrine was not applicable in the present case, since -unlike the courts in England- Chinese courts had currently no jurisdiction to determine the terms of global FRAND portfolio licences in the absence of an agreement of the parties to the dispute [555] . What is more, the Court found that it could reasonably not be expected by Conversant to consent in granting jurisdiction to the Chinese courts in the current setting [555] .

In the eyes of the Supreme Court, the English courts involved in the present dispute were also not obliged to stay their proceedings in expectation of the outcome of the Chinese validity proceedings [556] . The latter concerned only the validity of Conversant's Chinese patents, whereas the proceedings initiated in England referred to the determination of the terms of a FRAND licence for Conversant's global SEP portfolio [556] .


3. Non-discrimination

The third issue examined by the Supreme Court referred to the interpretation of the non-discrimination element of FRAND. In the proceedings, the question had arisen whether Unwired Planet had breached the non-discrimination prong of FRAND by offering to Huawei licensing terms less favourable than those agreed with Samsung after the start of the trial.

The Supreme Court agreed with both the High Court and the Court of Appeal and found that this was not the case. The Court explained that FRAND does not imply a so-called 'hard-edged' non-discrimination obligation, requiring from the patent holder to offer the same or similar terms to all similarly situated licensees [557] .

Under the ETSI IPR Policy (Article 6.1.), the patent holder must commit to make licences available on FRAND terms. In the eyes of the Supreme Court, this is a 'single, unitary obligation', not three distinct obligations that the licence terms should be fair, and separately, reasonable, and separately, non-discriminatory [558] . Accordingly, the terms and conditions should be 'generally available as a fair market price for any market participant' and reflect the 'true value' of the SEP portfolio, 'without adjustment depending on the individual characteristics' of a particular licensee [559] .

The Supreme Court made further clear, that the FRAND undertaking under the ETSI IPR Policy does not imply a so-called 'most favourable licence' clause, obliging patent holders to grant licences on terms equivalent to the most favourable licence terms to all similarly situated licensees [560] . Looking in detail at the creation of the ETSI IPR Policy, the Court observed that ETSI had previously expressly rejected proposals to include such a clause in the FRAND undertaking [561] .

Furthermore, the Court noted that there is no 'general presumption' that differential pricing is harmful to private or public interests involved [562] . On the contrary, there are circumstances in which the SEP holder's choice to offer lower than the benchmark rates to specific licensees is reasonable in a commercial sense [563] . This applies, for instance, with respect to the so-called 'first mover advantage': The Court recognised that it can be 'economically rational' and 'commercially important' to agree a lower rate with the first ever licensee, because, apart from generating initial income on the SEPs, the licence signed can also 'validate' the portfolio in the market and facilitate licensing in the future [563] . The same is also true with respect to so-called 'fire sales', that is cases, in which the patent holder is forced to licence at lower rates in order to secure its commercial survival, as it has been the case at the time, in which Unwired Planet signed the licensing agreement with Samsung [564] .


4. Abuse of market dominance / Huawei framework

The fourth issue examined by the Supreme Court was whether, by bringing infringement proceedings against Huawei, Unwired Planet had abused a dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) and should, therefore, be denied access to injunctive relief. In particular, Huawei had argued that an injunction should be denied, because Unwired Planet had failed to comply with the conduct requirements established by the Court of Justice of the European Union (CJEU) in the matter Huawei v ZTE (Huawei judgment or scheme) [565] .

The Supreme Court held that this was not the case [566] . In the eyes of the Court, the Huawei judgment establishes an obligation of the patent holder to notify the standards implementer about the infringing use of the SEPs in question, prior to filing an action for injunctive relief, which, if breached, results in abusive behaviour in terms of Article 102 TFEU [567] . The 'nature' of this obligation depends on the circumstances of each individual case [567] . The Court held that Unwired Planet had given adequate notice to Huawei prior to filing the present infringement action [568] .

Considering the further duties established by the Huawei judgment, the Supreme Court confirmed the view previously taken by the High Court and the Court of Appeal that the Huawei scheme is not 'mandatory', but rather establishes a 'route map, which, if followed precisely, will ensure that [the patent holder] can seek an injunction without risking infringing article 102' [569] . Other than that, the Huawei judgment provides 'a number of points of reference to assist in assessing the all-important question of whether each of the parties is willing to enter into a licence on FRAND terms' [568] . Having said that, the Supreme Court found that Unwired Planet had been willing to grant a FRAND licence to Huawei, so that it had not behaved abusively [568] .


5. Damages instead of injunctive relief?

The fifth and final issue addressed by the Court concerned the proper remedies for the infringement of SEPs. In the appeal proceedings before the Supreme Court, it was argued for the first time that the most appropriate and proportionate measure to remedy the infringement of Unwired Planet's SEPs would have been an award of damages instead of an injunction.

The Supreme Court found that there is no basis for substituting an injunction by an award of damages in the present case [570] . On the one hand, neither Unwired Planet nor Conversant could employ the 'threat of an injunction' as a means for imposing 'exorbitant fees' on Huawei or ZTE, since they would be entitled to an injunction, only if they have offered a licence on terms which the court would have already confirmed as FRAND [571] .

Furthermore, the Court took the view that an award of damages is 'unlikely to be an adequate substitute for what would be lost by the withholding of an injunction', since the SEP holder would be required to bring proceedings against an implementer patent-by-patent and country-by-country, which was considered to be 'impractical' [572] . What is more, standards implementers would then have 'an incentive to continue infringing until, patent by patent, and country by country, they were compelled to pay royalties', a fact that would make FRAND licensing more difficult, since, as the Supreme Court pointed out, 'it would not make economic sense' for infringers to voluntarily take a licence [573] .

On the other hand, an injunction 'is likely to be a more effective remedy': By prohibiting infringement altogether, an injunction may give an infringer 'little option' but to accept the FRAND terms offered by the SEP holder, 'if it wishes to remain in the market' [573] . For the above reasons, the Supreme Court highlighted that an injunction is 'necessary in order to do justice' [574] .

  • [542] Unwired Planet v Huawei, High Court of Justice for England and Wales, judgment dated 5 April 2017, Case No. [2017] EWHC 711(Pat).
  • [543] Unwired Planet v Huawei, UK Court of Appeal, judgment dated 23 October 2018, Case No. [2018] EWCA Civ 2344.
  • [544] Conversant v Huawei and ZTE, High Court of Justice for England and Wales, judgment dated 16 April 2018, Case No. [2018] EWHC 808 (Pat).
  • [545] Conversant v Huawei and ZTE, UK Court of Appeal, judgment dated 30 January 2019, Case No. [2019] EWCA Civ 38.
  • [546] Unwired Planet v Huawei and Conversant v Huawei and ZTE, UK Supreme Court, judgment dated 30 January 2019, Case No. [2019] EWCA Civ 38.
  • [547] Ibid, paras. 49 et seqq.
  • [548] Ibid, para. 61.
  • [549] Ibid, para. 58.
  • [550] Ibid, para. 62.
  • [551] Ibid, para. 60.
  • [552] Ibid, para. 63.
  • [553] Ibid, para. 64.
  • [554] Ibid, paras. 68-84.
  • [555] Ibid, para. 97.
  • [556] Ibid, paras. 99 et seqq.
  • [557] Ibid, paras. 112 et seqq.
  • [558] Ibid, para. 113.
  • [559] Ibid, para. 114.
  • [560] Ibid, para. 116.
  • [561] Ibid, paras. 116 et seqq.
  • [562] Ibid, para. 123.
  • [563] Ibid, para. 125.
  • [564] Ibid, para. 126.
  • [565] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [566] Unwired Planet v Huawei and Conversant v Huawei and ZTE, UK Supreme Court, judgment dated 30 January 2019, Case No. [2019] EWCA Civ 38, paras. 149 et seqq.
  • [567] Ibid, para. 150.
  • [568] Ibid, para. 158.
  • [569] Ibid, paras. 157 and 158.
  • [570] Ibid, para. 163.
  • [571] Ibid, para. 164.
  • [572] Ibid, para. 166.
  • [573] Ibid, para. 167.
  • [574] Ibid, para. 169.