Case Law post CJEU ruling Huawei v ZTE

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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. [108] 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 [109] and that the claimant had not made a license offer on FRAND conditions. [110] 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. [111] 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’). [112] 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). [113]

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. [114] 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. [115] 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. [115] On this basis, the Higher Regional Court had no doubts that the claimant was in a dominant market position [116] because the patent in question was related to data transfer, an essential function of the GPRS standard. [117]

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). [118] 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. [119] 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. [119] 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 [120]

The Higher Regional Court also held that it was sufficient to notify the defendants’ parent companies. [121] 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’). [121]

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. [122] 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. [123] 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’). [123] The Higher Regional Court held that the statements made by the defendants in the course of the negotiations did not justify such a conclusion. [123]

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. [124] 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. [125] 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’). [125] 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. [125] 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 [126] because it discriminated against the defendants. [127] 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. [128]

The court held that dominant undertakings are under no obligation to treat all business partners in exactly the same way. [129] SEP owners have discretion regarding the license fees that they charge. [130] Different treatment of licensees is accepted if it can be justified as a result of normal market behavior. [131] Further, license conditions can be abusive only if they are significantly different between licensees. [131] These principles also apply to SEP owners who have given a FRAND declaration because this commitment refers to Art 102 lit. c) TFEU. [132] The burden of proof for such substantially unequal treatment lies with the defendant, [133] whilst the onus is on the claimant to prove that this unequal treatment is justified. [133] 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. [133] On this basis the Higher Regional Court concluded that the claimant had treated the defendants significantly differently from their competitors [134] without having a proper justification. [135] In particular, the claimant could not prove that discounts given to a competitor were common in the industry, [136] or that these discounts were a result of the particularities of the case. [137]

  • [108] LG Düsseldorf, 3 November 2015, File No. 4a O 93/14
  • [109] 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.
  • [110] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 34.
  • [111] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 75.
  • [112] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 74 and 175.
  • [113] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 47.
  • [114] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 177 et seqq.
  • [115] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 182.
  • [116] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 185.
  • [117] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 186.
  • [118] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 202.
  • [119] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 203.
  • [120] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 215.
  • [121] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 213.
  • [122] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 220.
  • [123] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 240.
  • [124] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 244.
  • [125] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 245.
  • [126] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 242.
  • [127] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 251.
  • [128] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 249.
  • [129] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 254.
  • [130] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 255 and 257.
  • [131] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 256.
  • [132] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 257.
  • [133] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 258.
  • [134] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 263.
  • [135] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 268.
  • [136] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 270 et seqq.
  • [137] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 275 et seqq. and paras 290 et seqq.

Updated 23 January 2018

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

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

A. Facts

The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue (EP (UK) 2 229 744, EP (UK) 2 119 287, EP (UK) 2 485 514, EP (UK) 1 230 818, EP (UK) 1 105 991, EP (UK) 0 989 712) relate to telecommunication network coding and procedures. [218] Most were part of a large patent portfolio that the claimant had acquired from a major telecommunications company in 2013. [219] 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. [220]

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. [221] 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. [222] Between August and October 2016 the parties exchanged further offers without reaching an agreement. [223]

The Patents Court (Birrs J) held that the claimant was in a dominant position, but did not abuse this position. [224] 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. [225]

B. Court’s Reasoning

1. Market Power

The court defined the relevant market for assessing dominance as a distinct market for licensing each SEP individually. [226] European case law indicated that owning an SEP could be a rebuttable presumption for the existence of a dominant position. [227] 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. [228]

2. SEP Proprietor’s Licensing Offer

a. FRAND Declaration as Conceptual Basis

The court pointed out that that the FRAND undertaking also applied in the case that the SEP proprietor was not in a dominant position. It held that the FRAND undertaking operated as a practical constraint on a SEP owner’s market power. [229] 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, [230] 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. [231] 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. [231]

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. [232] 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. [233] This approach also means that the SEP proprietor is under an obligation to make a FRAND offer and to enter into FRAND license agreements. [234]

b. ‘True FRAND Rate’

The court considered that there is only a single set of terms for a given set of circumstances that would meet FRAND conditions (‘true FRAND rate’). [235] This eliminates the so-called Vringo-problem, [236] 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. [237]

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. [238] However, the court took the view that FRAND-compliance and compliance with Art. 102 TFEU are not the same thing (the court pointed out that the CJEU in the Huawei ruling appears to equate an obligation to make a FRAND offer with compliance with Art 102 TFEU).Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154./span> Since Art. 102 TFEU condemns excessive pricing, [240] 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. [240]

c. Discrimination

The court held that the correct approach is to start from a global rate as a benchmark and to then adjust this rate as appropriate. [241] 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. [242] 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. [243]

Second, the ‘hard-edged’ non-discrimination obligation, which takes into account the nature of the potential licensee, [242] 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. [244] 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. [243]

d. Territorial Scope of License

The court held that the defendant’s offer that was limited to UK licenses was not FRAND. In the court’s opinion country by country licensing is inefficient for goods such as mobile telecommunications devices that are distributed across borders. [245] 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. [245] This was illustrated by the fact that the vast majority of licenses introduced in the trial were worldwide licenses. [246] 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. [247] 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. [248]

C. Other Important Issues

1. Comparable agreements and reasonable aggregate royalty rate

The court held that for determining the royalty rate, the evidence of the parties would be relevant, including evidence of how negotiations actually work in the industry. [249] Other freely-negotiated license agreements might be used as comparables. [250] This may be compared with a top down approach [251] 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. [252] 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. [249] License agreements must meet certain criteria to be comparable. [253] 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. [253] 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%). [254]

2. Principles derived from Huawei v. ZTE

The court also provided a compiled overview of its interpretation of the Huawei v. ZTE ruling. [255] 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.
  • [218] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 2.
  • [219] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 54 et seqq.
  • [220] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 3.
  • [221] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 5.
  • [222] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 7-8.
  • [223] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 11-14.
  • [224] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 807.
  • [225] Unwired Planet v Huawei, EWHC 1304 (Pat).
  • [226] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 631.
  • [227] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 634.
  • [228] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 636-646.
  • [229] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 656.
  • [230] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 108-145.
  • [231] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 146.
  • [232] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 162.
  • [233] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 163.
  • [234] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 159.
  • [235] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 164.
  • [236] See Vringo v ZTE [2013] EWHC 1591 (Pat) and [2015] EWHC 214 (Pat).
  • [237] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 158.
  • [238] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 152.
  • [239] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154./span> Since Art. 102 TFEU condemns excessive pricing,Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153. a royalty rate can be somewhat higher than the true FRAND rate and still not be contrary to competition law. Conversely, for a breach of competition law, it will be necessary but not sufficient that the rate is not the true FRAND rate.Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153.
  • [240] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153.
  • [241] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 176.
  • [242] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 177.
  • [243] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 503.
  • [244] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 501.
  • [245] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 544.
  • [246] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 534.
  • [247] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 546.
  • [248] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 572.
  • [249] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 171.
  • [250] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 170
  • [251] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 178
  • [252] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 806 (10)
  • [253] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 175.
  • [254] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 476.
  • [255] Unwired Planet v. Huawei [2017] EWHC 711(Pat), 744.

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. [326] 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. [327]

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. [328] The court granted an injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 (the ‘final order’). [329] 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. [329]

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, [330] 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). [331] 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. [330] 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’). [332] 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. [332]

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. [333] Although the practical effect of a defendant’s undertaking and an injunction are similar, rights holders usually insist on an injunction. [334] One reason is that it involves a public vindication of the claimant’s rights. [334] As the claimant has been forced to come to court, an offer of undertaking after judgment is usually considered too late. [334] In this case, the defendant had maintained throughout the negotiations and the trial that it was under no obligation to accept a worldwide license. [335] 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. [336] 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). [336]

The parties also disagreed about the wording of the court declaration regarding the FRAND terms of the settled license. [337] 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’. [338] Further, the court rejected the defendant’s petition to make a declaration that the claimant had not abused its dominant market position. [339] 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). [340] The defendant argued the claimant had been clearly wrong regarding the applicable FRAND rate [341] 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. [342] The ensuing question was whether any deductions were appropriate. [343] The court held that neither party had offered terms that were essentially FRAND. [344] However, the rates offered by the claimant were significantly further away from the end result than the rates offered by the defendant. [344] 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); [345] second, the hard-edged non-discrimination point; [346] and third, the issue of injunctive relief and abuse of market dominance under the CJEU ruling Huawei v. ZTE. [347] 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). [348]

  • [325] Unwired Planet v. Huawei [2017] EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html
  • [326] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 2.
  • [327] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 8.
  • [328] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 1.
  • [329] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 70.
  • [330] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 22.
  • [331] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 19.
  • [332] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 20.
  • [333] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 25.
  • [334] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 26.
  • [335] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 29.
  • [336] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 33.
  • [337] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 34.
  • [338] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 36.
  • [339] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 38.
  • [340] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), paras 39-40.
  • [341] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 41.
  • [342] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 44.
  • [343] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 45.
  • [344] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 56.
  • [345] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 170 et seqq.
  • [346] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 177 and 481 et seqq.
  • [347] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 627 et seqq.
  • [348] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 537 et seqq.

Updated 3 December 2018

District Court, LG Düsseldorf

LG Düsseldorf
11 July 2018 - Case No. 4c O 81/17

A. Facts

The Claimant holds a patent essential to the data communication standards ADSL2+ and VDSL2 (Standard Essential Patent or SEP) [393] . The previous holder of the patent in question had declared towards the standardization organisation International Telecommunication Union (ITU) its willingness to make the patent accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [394] .

The Defendant offers communication services in Germany to retail and wholesale clients, including DSL connections using the standards ADSL2+ and VDSL2 [395] .

The Intervener supplies the Defendant with equipment (especially DSL transceivers and DSL Boards), allowing network services based on the above standards [395] .

In January 2016, the Claimant brought an action against the Defendant before the District Court (Landgericht) of Düsseldorf (Court) requesting for a declaratory judgement recognizing Defendant’s liability for damages arising from the infringement of its SEP as well as the provision of information and the rendering of accounts (liability proceedings) [396] . During the course of these proceedings, the Claimant made two offers for a licensing agreement to the Defendant. The Defendant made a counter-offer to the Claimant and provided security for the use of the SEP [397] . The parties failed to reach an agreement.

In June 2016, the Defendant filed an action for a declaratory judgement against the Claimant before the Dublin High Court in Ireland, requesting the High Court to declare that both Claimant’s offers were not FRAND and that Defendant’s counter-offer was FRAND [398] . Taking the ongoing liability proceedings in Germany into account, the Dublin High Court stayed its proceedings [398] .

In September 2017, the Claimant brought a second action against the Defendant before the District Court of Düsseldorf, requesting for injunctive relief (injunction proceedings) [399] . In February 2018, the Claimant made another licensing offer to the Defendant in the pending injunction proceedings [397] .

With the present judgment, the Court dismissed Claimant’s action in the injunction proceedings [400] .


B. Court’s reasoning

Although the Court held that the services offered by the Defendant infringe the SEP in suit [401] , it found that the Claimant cannot enforce its patent rights for the time being [402] , since it failed to fully comply with the obligations stipulated by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTEHuaweiv ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13. (Huawei obligations or framework) with respect to dominant undertakings in terms of Article 102 of the Treaty for the Functioning of the EU (TFEU) [400] .

1. Dominant market position

The Court found that the Claimant holds a dominant market position in terms of Article 102 TFEU [404] .

In the Court’s eyes, the relevant market for assessing dominance with regards to SEPs is, as a rule, the (downstream) market for products or services implementing the standard, to which the SEP refers [405] . Each SEP outlines an own relevant (licensing) market, unless – from the SEP users’ perspective – equivalent alternative technologies for the same technical problem exist [406] . Since the Court held that, in the present case, none of the existing technological alternatives to the standards ADSL2+ and VDSL2 (e.g. HFC networks, LTE, HDSL, SHDSL, ADSL, SDSL, VDSL, fibre optic networks, radio relay technology or internet services via satellite) offers an equivalent solution to users [407] , it defined the relevant market as the market for products and services allowing for internet connections through DSL technology [408] .

Regarding to the subsequent question of whether the Claimant has a dominant position in the above market, the Court first made clear that ownership of a SEP does not per se establish such condition [409] . The fact that a patent is essential to a standard does neither give rise to the (rebuttable) presumption that the SEP holder can distort competition in downstream markets, because products complying with the standard need to use the SEP [409] . Since a high number of patents is usually declared as standard essential, not every SEP can actually (significantly) affect the competitiveness of products or services in downstream markets; the effect of each SEP on a downstream market has, therefore, to be established on a case-by-case basis by taking into account the circumstances of each individual case [409] .

The Court explained that a dominant market position is given, when the use of the SEP is required for entering the market, particularly for securing the general technical interoperability and compatibility of products or services under a standard [409] . The same is true, if the patent user could not market competitive products or services without a licence (for instance, because only a niche market exists for non-compliant products) [409] . No market dominance exists, however, when the SEP covers a technology which is only of little importance to the majority of the buyers in the relevant market [409] .

According to the Court, the latter was not the case here; on the contrary, the Defendant cannot offer competitive products or services in the market for DSL internet connections, without using the SEP in suit [410] .

2. Huawei framework

In the Court’s view, the parties to SEP licensing negotiations need to fulfill the mutual conduct obligations under the Huawei framework step by step and one after another [411] . The Court did not see any flaws in the parties’ conduct with respect to the first two steps of the Huawei framework (SEP holder’s notification of infringement and SEP user’s declaration of willingness to obtain a licence), held, however, that the Claimant did not meet its consequent obligation to make a FRAND licensing offer to the Defendant [412] .

Notification of infringement

The Court found that the Claimant had fulfilled its obligation to notify the Defendant about the infringing use of the SEP in suit prior to the commencement of the injunction proceedings [413] .

First, the Court pointed out that a respective notification (as well as a later licensing offer) can be made by the SEP holder itself, or by any other affiliated company within the same group of companies, especially by the patent holder’s parent company [414] . On the other hand, it is not required that the infringement notification is addressed to the company that will later be party to the infringement proceedings; in general, it is sufficient to address the notification to the parent company within a group of companies [414] .

In terms of content, the notification of infringement must name the patent in suit (including the patent number) and indicate the contested embodiments as well as the (allegedly) infringing acts of use [415] . A detailed (technical and/or legal) explanation of the infringement (particularly an analysis of how the individual features of the patent claims are infringed) is not required; the addressee needs just to be put in the position to assess the infringement allegations, if necessary by seeking expert advice [415] . In this context, the Court disagreed with the District Court of Mannheim which had requested the SEP holder to inform the user about the essentiality of the patent to the standard and/or attach claim charts to the notification of infringement [415] .

In terms of timeliness, the Court took the view that the notification of infringement can be made alongside with SEP holder’s offer for a FRAND licence to the user (prior to the initiation of court proceedings) [416] . In this case, the second step under the Huawei framework will be skipped (that is the SEP user’s declaration of its willingness to obtain a licence). According to the Court, this fact does not, however, have an impact on the SEP holder’s position: If the SEP user is willing to enter into a licence, this approach would safe time (although the SEP user should be granted more time than usual to assess and react to both the notification of infringement and the FRAND offer) [416] . If, on the other hand, the SEP user is unwilling to obtain a FRAND licence, then the SEP holder will just have made a licensing offer absent a respective obligation under the Huawei framework [416] .

In the present case, the fact that the Claimant did not make a separate notification of infringement prior to the initiation of the injunction proceedings, was not considered problematic. The Court pointed out that the Defendant was fully informed about the infringement allegation by the action for damages raised by the Claimant long before the injunction proceedings, so that a separate notification was not required [417] .

Willingness to obtain a FRAND licence

The Court further found that the Defendant had fulfilled its Huawei obligation to express its willingness to obtain a FRAND licence [418] .

In terms of content, no high demands should be placed on the SEP user’s respective declaration; it is not subject to formal requirements and can be of a general nature, as long as the willingness to obtain a licence is clearly stated [419] . Given the circumstances of the specific case, even an implicit behaviour can suffice [419] .

In terms of timeliness, the Court held that a strict deadline, within which the SEP user ought to make its declaration, cannot be set [420] . The respective time frame must be determined on a case-by-case basis under consideration of the circumstances of each case [420] . If the SEP holder’s notification of infringement contains only the minimum required information, a reaction within a period of five or even three months at the most could be expected [420] . In case that the infringement notification contains information going beyond the required minimum, an even quicker reaction could be required from the SEP user under certain circumstances [420] .

In the present case, the Court held that the Defendant has implicitly declared its willingness to enter into a FRAND licence with the Claimant at the latest at the point in time, in which the injunction proceedings were initiated [421] . At that time, the Defendant had already made a counter-offer for a FRAND licence to the Claimant and had also provided security for the use of Claimant’s patents [422] .

In this context, the Court noted that neither the fact that the Defendant contested Claimant’s claims in the parallel liability proceedings not the fact that it raised an action for declaratory judgement against the Claimant before the Dublin High Court can support the argument that the Defendant has deviated from its previous declaration of willingness [423] .

SEP holder’s licensing offer

The Court held that the offer which the Claimant made to the Defendant in course of the injunction proceedings was not FRAND [424] . Since the Claimant expressly relied only on this offer to establish its compliance with the Huawei framework, the Court did not assess the FRAND conformity of the two previous offers of the Claimant to the Defendant [397] .

In terms of timeliness, the Court stressed out that the SEP holder must make a FRAND licensing offer to the user before the initiation of infringement proceedings [425] . Under German procedural law, proceedings are initiated after the claimant has made the required advance payment on costs, even if the statement of claims has not been served to the defendant, yet [426] .

The Court did not rule out that SEP holder’s failure to fulfil its Huawei obligations prior to the commencement of infringement proceedings can be remedied during the course of the proceedings [427] . Depending on the circumstances of each case, the SEP holder should be given the opportunity – within the limits of procedural deadlines – to react to (justified) objections of the SEP user and eventually modify its offer [427] . Denying the SEP holder this opportunity without exceptions would be contrary to the principle of procedural economy; the patent holder would be forced to withdraw its pending action, make a modified licensing offer to the patent user and, subsequently, sue the latter again [427] . In this context, the Court explained that failure to meet the Huawei obligations does not permanently impair SEP holder’s rights [428] . Notwithstanding the above, the Court made, however, clear that the possibility of remedying a flawed licensing offer is subject to narrow limits; the CJEU intended to relieve licensing negotiations between SEP holder and SEP user from the burden imposed on parties by ongoing infringement proceedings, and particularly the potential undue pressure to enter into a licensing agreement which such proceedings can put on the SEP user [429] .

Against this background, the Court expressed doubts that the Claimant’s licensing offer, which was made in the course of the pending injunction proceedings could be considered as timely [399] . Nevertheless, the Court left this question open, because, in its eyes, the Claimant’s offer was not FRAND in terms of content [430] .

The Court did not deem necessary to decide whether the FRAND conformity of the SEP holder’s offer must be fully assessed in infringement proceedings, or whether only a summary assessment of its compatibility with FRAND suffices [431] . In the Court’s view, Claimant’s offer was anyway both not fair and discriminatory [432] .

Fair and reasonable terms

The Court held that the licensing terms offered by the Claimant to the Defendant were not fair and reasonable [433] .

First, the terms did not adequately consider the effects of patent exhaustion [434] . As a rule, FRAND requires licensing offers to contain respective provisions [435] . The clause contained in Claimant’s offer, establishing the possibility of a reduction of the royalties owed by the Defendant in case of the exhaustion of licensed patents, is not fair, because it puts the burden of proof regarding to the amount of the reasonable reduction of the royalties on the Defendant’s shoulders [436] .

Second, the clause, according to which Defendant’s payment obligations regarding to past uses of the SEP in suit should be finally settled without exceptions and/or the possibility to claim reimbursement, was also considered not fair [437] . The Defendant would be obliged to pay royalties for past uses, although it is not clear whether the Claimant is entitled to such payments [438] .

Third, the Court found that the exclusion of the Defendant’s wholesale business from Claimant’s licensing offer was also not fair [439] . According to the principle of contractual autonomy, patent holders are free to choose to which stage of the distribution chain they offer licences [440] . In the present case, however, excluding a significant part of the Defendant’s overall business, namely the wholesale business, from the licensing offer, hinders a fair market access [440] .

Non-discrimination

Besides from the above, the Court ruled that the Claimant’s offer was discriminatory [441] .

To begin with, the Court stressed out that FRAND refers to a range of acceptable royalty rates: As a rule, there is not only a single FRAND-compliant royalty rate [431] . Furthermore, as far as a corresponding commercial/industry practice exists, offers for worldwide portfolio licences are, in general, in line with the Huawei framework, unless the circumstances of the individual case require a different approach (for instance a limitation of the geographical scope of the licence, in case that the user is active only in a single market) [442] .

Furthermore, the Court explained that the non-discriminatory element of FRAND does not oblige the SEP holder to treat all users uniformly [443] . The respective obligation applies only to similarly situated users, whereas exceptions are allowed, provided that a different treatment is justified [443] . In any case, SEP holders are obliged to specify the royalty calculation in a manner that allows the user to assess whether the offered conditions are non-discriminatory or not. The respective information needs to be shared along with the licensing offer; only when the SEP user has obtained this information a licensing offer triggering an obligation of the latter to react is given [444] .

In the Court’s view, presenting all existing essential licensing agreements concluded with third parties, covering the SEPs in suit or a patent portfolio including said SEPs (comparable agreements), has priority over other means for fulfilling this obligation [445] . In addition, SEP holders have to produce also court decisions rendered on the FRAND-conformity of the rates agreed upon in the comparable agreements, if such decisions exist [446] .

Whether presenting comparable agreements (and relevant case law) suffices for establishing the non-discriminatory character of the offered royalty rates depends on the number and the scope of the available agreementsI [447] . In case that no or not enough comparable agreements exist, SEP holders must (additionally) present decisions referring to the validity and/or the infringement of the patents in question and agreements concluded between other parties in the same or a comparable technical field, which they are aware of [448] . If the SEP in suit is part of a patent portfolio, SEP holders must also substantiate the content of the portfolio and its impact on the offered royalty rates [449] .

Having said that, the Court pointed out that an unequal treatment resulting in a discrimination in antitrust terms is not only at hand, when a dominant patent holder grants preferential terms to specific licensees, but also when it chooses to enforce its exclusion rights under a SEP in a selective manner [450] . The latter is the case, when the SEP holder brings infringement actions only against certain competitors and, at the same time, allows other competitors to use its patent(s) without a licence [450] . However, such a conduct is discriminatory only if, depending on the overall circumstances of each case (for instance, the extend of the infringing use and the legal remedies available in the country, in which claims need to be asserted), it would have been possible for the SEP holder with reasonable efforts to enforce its patent rights against other infringers (which it was or should have been aware of) [450] . In favour of an equal treatment of competitors, the level of action which must be taken by the SEP holder in this respect should not be defined narrowly [450] . However, it has to be taken into account, that – especially in the early stages of the implementation of a standard – the SEP holder will usually not have the means required to enforce its rights against a large number of infringers; in this case, the choice to enforce its rights only against infringers with market strength first appears reasonable [451] .

Based on the above considerations, the Court ruled that the Claimant’s choice to sue only the Defendant and its two main competitors, without asserting the SEP in suit against the rest of their competitors, respectively against their suppliers, was discriminatory [452] . The Claimant should have already, at least, requested the companies, against which no action was filed, to obtain a licence, particularly since the remaining period of validity of the SEP in suit is limited [453] . Furthermore, the Court found that the Claimant’s refusal to make a licensing offer to the Intervener, although the latter had requested for a licence, was also discriminatory; in the Court’s view, the Claimant failed to provide an explanation justifying this choice [454] .

Since the Claimant’s offer was found to be non-compliant with FRAND, the Court refrained from ruling on the conformity of Defendant’s counter-offer and the security provided with the Huawei framework [455] .


C. Other issues

The Court ruled that in accordance with Article 30 para. 3 of the German Patent Law (PatG) the registration in the patent register establishes the presumption of ownership, allowing the entity which is registered as patent holder to assert the rights arising from the patent before court [456] .

  • [393] District Court of Düsseldorf, 11 July 2018, Case-No. 4c O 81/17Ibid, paras. 3 and 82.
  • [394] Ibid, para. 13.
  • [395] Ibid, para. 12.
  • [396] Ibid, paras. 14 and 211.
  • [397] Ibid, para. 15.
  • [398] Ibid, para. 16.
  • [399] Ibid, para. 236.
  • [400] Ibid, paras. 140 and 313 et seqq.
  • [401] Ibid, paras. 114 et seqq.
  • [402] Ibid, paras. 60 and 140.
  • [403] Huaweiv ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
  • [404] Ibid, para. 142.
  • [405] Ibid, para. 148.
  • [406] Ibid, paras. 153 and 146.
  • [407] Ibid, paras. 159 - 181.
  • [408] Ibid, para. 158.
  • [409] Ibid, para. 147.
  • [410] Ibid, paras. 183 et seqq.
  • [411] Ibid, para. 191.
  • [412] Ibid, para. 188.
  • [413] Ibid, paras. 195 et seqq.
  • [414] Ibid, para. 199.
  • [415] Ibid, para. 198.
  • [416] Ibid, para. 200.
  • [417] Ibid, para. 203.
  • [418] Ibid, para. 205.
  • [419] Ibid, para. 208.
  • [420] Ibid, para. 207.
  • [421] Ibid, para. 210.
  • [422] Ibid, para. 212.
  • [423] Ibid, paras. 215 et seq.
  • [424] Ibid, para. 220.
  • [425] Ibid, paras. 222 et seqq.
  • [426] Ibid, para. 225.
  • [427] Ibid, para. 233.
  • [428] Ibid, para. 228.
  • [429] Ibid, para. 230.
  • [430] Ibid, para. 237.
  • [431] Ibid. para. 241.
  • [432] Ibid, para. 242.
  • [433] Ibid, paras. 283 et seqq.
  • [434] Ibid, para. 285.
  • [435] Ibid, para. 288.
  • [436] Ibid, paras. 292 et seq.
  • [437] Ibid, paras. 298 et seqq.
  • [438] Ibid, para. 301.
  • [439] Ibid, para. 306.
  • [440] Ibid, para. 311.
  • [441] Ibid, para. 271.
  • [442] Ibid, para. 250.
  • [443] Ibid, para. 248.
  • [444] Ibid, para. 267.
  • [445] Ibid, paras. 256 and 259 et seq.
  • [446] Ibid, para. 262.
  • [447] bid, paras. 258 and 264.
  • [448] Ibid, paras. 263 and 265.
  • [449] Ibid, para. 265.
  • [450] Ibid, para. 273.
  • [451] Ibid, para. 274.
  • [452] Ibid, para. 276.
  • [453] Ibid, para. 277.
  • [454] Ibid, para. 281.
  • [455] Ibid, para. 315.
  • [456] Ibid, paras. 75 et seq.

Updated 6 June 2017

Archos v. Philips, Rechtbank Den Haag

Dutch court decisions
8 February 2017 - Case No. C/09/505587 / HA ZA 16-206 (ECLI:NL:RBDHA:2017:1025)

  1. Facts
    Defendant (Koninklijke Philips N.V.) is the proprietor of a number of patents declared essential to ETSI’s UMTS (3G) and LTE (4G) standards. Defendant made FRAND commitments towards ETSI on 15 January 1998 and 26 November 2009. Claimant (Archos S.A.) markets mobile devices which are alleged to infringe upon Defendant’s patents.
    By letter of 5 June 2014, Defendant brought her UMTS and LTE patent portfolio and her licensing program to the attention of Claimant. In this letter, Defendant made clear that Claimant was infringing her patents by marketing products incorporating the UMTS and LTE standards and explained the possibility of obtaining a FRAND license. On 15 September 2014, a meeting took place to inform Claimant of Defendant’s patent portfolio and to discuss the licensing offer. In another meeting on 25 November 2014, Claimant suggested Defendant to grant her a royalty-free license to all of Defendant’s patents (i.e. not only to the UMTS/LTE patents but also to other patents related to so-called ‘Portable Features’) in exchange for the transfer of certain patents of Claimant to Defendant. Defendant informed Claimant by email of 23 December 2014 that it was not interested in Claimant’s patents because it considered them to represent ‘relatively low value’.
    By letter of 28 July 2015 Defendant sent Claimant an updated list of UMTS/LTE patents as well as a draft licensing agreement in which she confirmed her earlier licensing offer. The proposed royalty amounted to $ 0.75 per product containing UMTS and/or LTE functionality. For products already sold, a royalty of $ 1 would need to be paid. At a next meeting on 3 September 2015, it became clear that Claimant did not wish to obtain the license offered. On behalf of Claimant, it was made clear during the meeting that Defendant would have to take legal action if she wished to obtain a license fee. In October 2015, Defendant started proceedings before the Rechtbank Den Haag for infringement of her European Patents EP 1 440 525, EP 1 685 659 and EP 1 623 511.
    By letter of 12 January 2016, Claimant made a written counter offer of 0.071% of her net revenue from products incorporating the UMTS and/or LTE standards. For a net sale price per product of € 100, the offered royalty would amount to 7 eurocent per product.
  2. Court’s reasoning
    Claimant asked the court to declare that Defendant’s licensing offer of 28 July 2015 is not FRAND and to declare that a royalty fee of € 0.007 for every product sold by Claimant incorporating the UMTS standard and a royalty fee of € 0.020 for every product sold by Claimant incorporating the UMTS and LTE standards is FRAND. In addition, Claimant asked the court to rule that its own licensing offer of 12 January 2016 is higher than what a fair, reasonable and non-discriminatory royalty fee would require.
    1. Market power and notice of infringement
      The court left open whether the SEPs conferred market power to Defendant since it did, in any case, find no abuse of such potential market power. The court argued that it is generally accepted and to be inferred from the system laid down in the Huawei/ZTE judgment that a FRAND license has a certain bandwidth. After all, the Huawei/ZTE judgment contemplates that the SEP holder makes a FRAND offer first and afterwards, if the SEP user does not agree with the offer, makes a counter offer which also has to be FRAND. During this negotiation process, the characteristics of the SEP user as well as its specific objections can be taken account in the license at the discretion of the parties. As such, the court noted that the fact that Defendant’s initial offer would turn out to be unreasonable for Claimant because she finds itself in the low budget segment of the market and her margins are small does not imply that the offer made by Defendant on 28 July 2015 is not FRAND.
      The court also made clear that until the Huawei/ZTE judgment the initiative to obtain a license was incumbent on the SEP user and not on the SEP holder in line with the common interpretation of the judgment of the Rechtbank Den Haag in Philips/SK Kassetten and the Orange Book ruling of the Bundesgerichtshof. In the view of the court the, on this crucial point, contrary Huawei/ZTE judgment that was delivered on 15 July 2015 constituted a new moment for negotiation between the parties. The court noted that, in line with the Huawei/ZTE judgment, Defendant took initiative with its licensing offer of 28 July 2015. Since Claimant made clear in the meeting on 3 September 2015 that Defendant would have to take legal action if she wished to obtain more than a few thousand euros in licensing fees, it seems unfitting that Archos reproaches Philips to have not been open to negotiation, or at least that position is insufficiently substantiated (par. 4.3).
    2. The SEP owner’s licensing offer
      Claimant put forward a number of arguments for its claim that Defendant’s offer of 28 July 2015 is not FRAND. All of these arguments were rejected by the court on the ground that Claimant had not sufficiently substantiated them. The main arguments raised are as follows.
      Claimant argued that Defendant’s rights regarding devices incorporating Qualcomm baseband chips had been exhausted due to the cross-license that Defendant had already concluded with Qualcomm for these chips. Since a number of Claimant’s products rely on Qualcomm baseband chips, the compensation that Defendant had already received from Qualcomm should, in the view of Claimant, at least have been taken into account in the license offer. The court noted that Claimant had not sufficiently contested that the Qualcomm license did not cover production and sales of mobile phones – as Defendant had made clear before the court – and that Claimant could have raised this point during the negotiations (par. 4.4).
      The court continued by stating that the fact that Defendant’s licensing offer covered both UMTS and LTE SEPS could not affect the FRAND-ness of the offer in the case at hand considering that Claimant’s products do not merely require a license under the LTE SEPs but also under the UMTS SEPs (par. 4.5).
      While the parties agreed that the Defendant’s share of the absolute number of SEPs in the UMTS-SEP portfolio is an important factor for assessing the FRAND-character of Defendant’s offer, they each reached different absolute numbers. The court concluded that the calculations in the consultancy reports on which Claimant relied do not lead to accurate results and are rather speculative in nature. As such, the Claimant downplayed the value of Defendant’s SEPs (par. 4.6-4.7).
      With regard to Claimant’s argument that Defendant’s proposed royalty rate would amount to impermissible royalty stacking, the court argued that this was insufficiently substantiated by Claimant (par. 4.8).
      Claimant also argued that the royalty rate should not be based on the total price of a phone but merely on the part in which the technology at issue is incorporated (the Smallest Saleable Patent-Practising Unit, SSPPU). In this context, the court noted that Defendant rightly pointed out that the requested royalty was set at a fixed amount as a result of which there is no relationship with the market value of the phone. Furthermore, since the SSPPU concept is at the very least subject to debate, the court noted that this issue could have been considered in the negotiations. That the royalty rate suggested by Defendant, which was not based on the SSPPU price, would not be FRAND for that mere reason could not be established by the court (par. 4.10).
      The court also dismissed Claimant’s reference to patent hold-up on the ground that a situation of hold-up can only occur in the case of a non-FRAND license which had not been established in the case at issue (par. 4.13).
      In the end, the court dismissed Claimant’s request to make a declaratory statement that Defendant’s offer of 28 July 2015 was not FRAND.
    3. The standard implementer’s reaction
      Considering that Claimant’s counter offer of 12 January 2016 is more than a factor 10 lower than the Defendant’s offer and is based on an inaccurate (at least insufficiently substantiated) share of Defendant’s SEPs in the relevant UMTS standard, the court refused to declare the counter offer to be FRAND, let alone to declare that this counter offer is higher than a FRAND royalty rate as requested by Claimant (par. 4.17-4.18).
  3. Other important issues
    AA defence that Defendant invoked was that Claimant had no interest (anymore) in the requested declaratory statements because its respective FRAND commitments were exhausted due to the unwilling attitude of Claimant. However, as Claimant’s requests for the declaratory statements were found not to be sufficiently substantiated, there was no need for the court to discuss this issue anymore (par. 4.18).

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 [502] . Most were part of a large patent portfolio that the claimant had acquired from a major telecommunications company in 2013. [503] 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. [504]
    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. [505] 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. [506] Between August and October 2016 the parties exchanged further offers without reaching an agreement. [507]
    The Patents Court (Birrs J) held that the claimant was in a dominant position, but did not abuse this position. [508] 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. [509]
  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. [510] European case law indicated that owning an SEP could be a rebuttable presumption for the existence of a dominant position. [511] 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. [512]
    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. [513] 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, [514] 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. [515] 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. [515]
        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. [516] 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. [517] This approach also means that the SEP proprietor is under an obligation to make a FRAND offer and to enter into FRAND license agreements. [518]
      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’). [519] This eliminates the so-called Vringo-problem, [520] 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. [521]
        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. [522] 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). [523] Since Art. 102 TFEU condemns excessive pricing, [524] 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. [524]
      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. [525] 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. [526] 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. [527]
        Second, the ‘hard-edged’ non-discrimination obligation, which takes into account the nature of the potential licensee, [526] 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. [528] 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. [527]
      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. [529] 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. [529] This was illustrated by the fact that the vast majority of licenses introduced in the trial were worldwide licenses. [530] 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. [531] 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. [532]
  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. [533] Other freely-negotiated license agreements might be used as comparables. [534] This may be compared with a top down approach [535] 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. [536] 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. [533] License agreements must meet certain criteria to be comparable. [537] 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. [537] 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%). [538]
    2. Principles derived from Huawei v. ZTE
      The court also provided a compiled overview of its interpretation of the Huawei v. ZTE ruling. [539] 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.
  • [502] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 2
  • [503] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 54 et seqq.
  • [504] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 3
  • [505] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 5
  • [506] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 7-8
  • [507] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 11-14
  • [508] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 807
  • [509] Unwired Planet v Huawei, EWHC 1304 (Pat)
  • [510] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 631
  • [511] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 634
  • [512] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 636-646
  • [513] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 656
  • [514] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 108-145
  • [515] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 146
  • [516] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 162
  • [517] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 163
  • [518] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 159
  • [519] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 164
  • [520] See Vringo v ZTE [2013] EWHC 1591 (Pat) and [2015] EWHC 214 (Pat)
  • [521] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 158
  • [522] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 152
  • [523] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154
  • [524] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153
  • [525] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 176
  • [526] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 177
  • [527] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 503
  • [528] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 501
  • [529] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 544
  • [530] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 534
  • [531] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 546
  • [532] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 572
  • [533] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 171
  • [534] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 170
  • [535] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 178
  • [536] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 806 (10)
  • [537] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 175
  • [538] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 476
  • [539] Unwired Planet v. Huawei [2017] EWHC 711(Pat), 744

Updated 6 June 2017

OLG Düsseldorf

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

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




  2. Court’s Reasoning
    In its first decision, the court found that the German rules of Civil Procedure do not provide a legal basis for granting an order in the form requested by the Claimant. [1] Such an order would exclude Defendant’s right to be heard with respect to Claimant’s FRAND calculation, in breach of Art. 103 Sec. 1 of the German Constitutional Law (Grundgesetz). [1] The fact that Defendant’s counsels would have access to the relevant information, does not suffice to meet the requirements set forth by the aforementioned provision. Party’s right to be heard contains also the right to personally participate in the proceedings. Consequently, a limitation of a party’s right to be heard reaching so far as Claimant requested, is not possible, unless the party affected expressly waives its right to personally participate in the proceedings. [1] Since the Defendant decided to not do so, a respective order cannot be rendered against it.
    The fact that the Intervener waived its respective right, can also not justify rendering such an order against the Defendant. [2] The Intervener does not join the proceedings as a party, but merely in support of one of the parties. [3] Accordingly, it cannot make decisions that would affect the party’s standing, such as a declaration to waive the right to be heard. In the present case, the Intervener’s decision to waive its respective right may, therefore, impact its own standing in the proceedings, but cannot affect Defendant’s position.

    As a result, the Claimant can either make the confidential information available to the Defendant or keep this information redacted, accepting that the court cannot take redacted information into consideration for its decision. [4]

    Notwithstanding the above, under reference to the “Umweltengel für Tragetaschen” judgement of the German Federal Supreme Court (Bundesgerichtshof) [5] the court held, that, as a rule, it can be expected from the implementer of SEPs to enter into a NDA reinforced by a contractual penalty with the SEP holder. [6] SEP implementer is obliged to facilitate FRAND licensing negotiations to the best of its ability. This includes also taking justified confidentiality interests of the SEP holder into account. [6]

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