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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. [1] 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 [2] and that the claimant had not made a license offer on FRAND conditions. [3] 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. [4] 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’). [5] 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). [6]

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. [7] 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. [8] 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. [8] On this basis, the Higher Regional Court had no doubts that the claimant was in a dominant market position [9] because the patent in question was related to data transfer, an essential function of the GPRS standard. [10]

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). [11] 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. [12] 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. [12] 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 [13]

The Higher Regional Court also held that it was sufficient to notify the defendants’ parent companies. [14] 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’). [14]

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. [15] 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. [16] 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’). [16] The Higher Regional Court held that the statements made by the defendants in the course of the negotiations did not justify such a conclusion. [16]

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. [17] 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. [18] 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’). [18] 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. [18] 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 [19] because it discriminated against the defendants. [20] 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. [21]

The court held that dominant undertakings are under no obligation to treat all business partners in exactly the same way. [22] SEP owners have discretion regarding the license fees that they charge. [23] Different treatment of licensees is accepted if it can be justified as a result of normal market behavior. [24] Further, license conditions can be abusive only if they are significantly different between licensees. [24] These principles also apply to SEP owners who have given a FRAND declaration because this commitment refers to Art 102 lit. c) TFEU. [25] The burden of proof for such substantially unequal treatment lies with the defendant, [26] whilst the onus is on the claimant to prove that this unequal treatment is justified. [26] 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. [26] On this basis the Higher Regional Court concluded that the claimant had treated the defendants significantly differently from their competitors [27] without having a proper justification. [28] In particular, the claimant could not prove that discounts given to a competitor were common in the industry, [29] or that these discounts were a result of the particularities of the case. [30]

  • [1] LG Düsseldorf, 3 November 2015, File No. 4a O 93/14
  • [2] 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.
  • [3] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 34.
  • [4] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 75.
  • [5] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 74 and 175.
  • [6] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 47.
  • [7] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 177 et seqq.
  • [8] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 182.
  • [9] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 185.
  • [10] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 186.
  • [11] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 202.
  • [12] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 203.
  • [13] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 215.
  • [14] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 213.
  • [15] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 220.
  • [16] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 240.
  • [17] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 244.
  • [18] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 245.
  • [19] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 242.
  • [20] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 251.
  • [21] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 249.
  • [22] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 254.
  • [23] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 255 and 257.
  • [24] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 256.
  • [25] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 257.
  • [26] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 258.
  • [27] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 263.
  • [28] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 268.
  • [29] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 270 et seqq.
  • [30] 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. [31] Most were part of a large patent portfolio that the claimant had acquired from a major telecommunications company in 2013. [32] 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. [33]

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. [34] 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. [35] Between August and October 2016 the parties exchanged further offers without reaching an agreement. [36]

The Patents Court (Birrs J) held that the claimant was in a dominant position, but did not abuse this position. [37] 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. [38]

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. [39] European case law indicated that owning an SEP could be a rebuttable presumption for the existence of a dominant position. [40] 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. [41]

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. [42] 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, [43] 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. [44] 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. [44]

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. [45] 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. [46] This approach also means that the SEP proprietor is under an obligation to make a FRAND offer and to enter into FRAND license agreements. [47]

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’). [48] This eliminates the so-called Vringo-problem, [49] 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. [50]

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. [51] 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, [53] 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. [53]

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. [54] 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. [55] 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. [56]

Second, the ‘hard-edged’ non-discrimination obligation, which takes into account the nature of the potential licensee, [55] 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. [57] 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. [56]

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. [58] 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. [58] This was illustrated by the fact that the vast majority of licenses introduced in the trial were worldwide licenses. [59] 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. [60] 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. [61]

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. [62] Other freely-negotiated license agreements might be used as comparables. [63] This may be compared with a top down approach [64] 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. [65] 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. [62] License agreements must meet certain criteria to be comparable. [66] 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. [66] 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%). [67]

2. Principles derived from Huawei v. ZTE

The court also provided a compiled overview of its interpretation of the Huawei v. ZTE ruling. [68] 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.
  • [31] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 2.
  • [32] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 54 et seqq.
  • [33] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 3.
  • [34] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 5.
  • [35] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 7-8.
  • [36] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 11-14.
  • [37] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 807.
  • [38] Unwired Planet v Huawei, EWHC 1304 (Pat).
  • [39] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 631.
  • [40] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 634.
  • [41] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 636-646.
  • [42] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 656.
  • [43] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 108-145.
  • [44] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 146.
  • [45] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 162.
  • [46] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 163.
  • [47] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 159.
  • [48] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 164.
  • [49] See Vringo v ZTE [2013] EWHC 1591 (Pat) and [2015] EWHC 214 (Pat).
  • [50] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 158.
  • [51] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 152.
  • [52] 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.
  • [53] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153.
  • [54] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 176.
  • [55] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 177.
  • [56] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 503.
  • [57] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 501.
  • [58] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 544.
  • [59] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 534.
  • [60] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 546.
  • [61] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 572.
  • [62] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 171.
  • [63] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 170
  • [64] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 178
  • [65] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 806 (10)
  • [66] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 175.
  • [67] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 476.
  • [68] Unwired Planet v. Huawei [2017] EWHC 711(Pat), 744.

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 [69] . 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 [70] .

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 [71] . 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 [72] . 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 [73] . In March 2020, the Federal Court of Justice (FCJ or Court), basically, confirmed this decision in second instance [74] .

With the present judgment dated 5 May 2020 [75] (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 [76] .

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) [77] .

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 [78] .

The FCJ explained that a dominant market position does not arise alone from the exclusivity rights granted by a patent [79] . For this, several factors need to be considered [80] . 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 [81] .

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 [82] .

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 [83] . 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 [84] . 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 [85] . 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 [86] .

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 [87] . 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 [87] . 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 [87] .

Having said that, the Court pointed out that Sisvel's dominant market position ended, when the patent in suit expired [88] . An SEP holder is no longer dominant, if the legal power to exclude infringing products from entering a (downstream) market is no longer given [88] .

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 [89] .

The Court made clear that SEP holders are not per se prevented from enforcing the exclusivity rights arising from their patents [90] . 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 [90] . 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 [91] .

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) [92] ;

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 [93] .

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 [94] . 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 [96] . 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 [96] . 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 [97] .

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 [98] . In terms of content, the notification must name the patent(s) infringed and describe the specific infringing use and the attacked embodiments [99] . 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 [99] . As a rule, presenting claim charts, as it is often the case in practice, will be sufficient (but not mandatory) [99] .

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 [100] . This applies also to cases, in which a number of patents and standards are involved [100] .

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 [101] .

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 [102] . 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 [103] . 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 [103] . 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 [103] . 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 [104] . 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 [105] .

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) [106] . The implementer is, subsequently, obliged to engage in licensing negotiations in a 'target-oriented' manner [106] . 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 [106] .

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 [107] .

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 [108] . 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 [108] .

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 [109] .

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 [110] .

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 [111] . 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 [112] . Moreover, such an obligation would have arisen only after Haier had expressed its sincere willingness to sign an agreement with Sisvel [113] . 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 [114] . The SEP holder is not obliged to apply a ‘standard tariff’ and offer all licensees identical terms [114] . Such an obligation does not arise from the FRAND commitment towards the relevant standardisation body, which only aims at securing access to the standard [114] . 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 [114] . This is the reason why an implementer has to actively engage in licensing negotiations in a ‘target-oriented’ manner [114] .

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 [115] . 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 [115] .

In this context, the FCJ expressed the view that the SEP holder can be obliged to substantiate the FRAND conformity of its licensing request [116] . In principle, implementers bear the weight to demonstrate (both in negotiations and in court proceedings) that a licensing request is discriminatory [116] . On the other hand, patent holders have to establish that there is a justification behind an unequal treatment of licensees [116] . 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 [116] . This is particularly the case, when a portfolio licence is offered [117] . 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 [118] . The respective requirements will, however, usually not go beyond the information that should be shared with a notification of infringement [109] .

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 [119] . 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 [120] . 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 [120] .

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 [120] . 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 [121] .

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) [122] . Apart from that, the Court found, however, that Sisvel’s claim for damages against Haier was not subject to any limitations [123] .

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 [124] . 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 [124] . 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 [124] .

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 [125] . 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 [125] . 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 [125] . 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 [123] .

  • [69] Sisvel v Haier, District Court of Duesseldorf, judgment dated 3 November 2015, Case No. 4a O 93/14.
  • [70] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 13 January 2016, Case No. I-15 U 66/15.
  • [71] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [72] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 30 March 2017, Case No. I-15 U 66/15.
  • [73] Federal Patent Court, judgment dated 6 October 2017, Case No. 6 Ni 10/15 (EP).
  • [74] Federal Court of Justice, judgment dated 10 March 2020, Case No. X ZR 44/18.
  • [75] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17.
  • [76] Ibid, paras. 9 et seqq. and 59.
  • [77] Ibid, para. 52.
  • [78] Ibid, para. 54.
  • [79] Ibid, para. 56.
  • [80] Ibid, paras. 57 et seqq.
  • [81] Ibid, para. 58.
  • [82] Ibid, paras. 59 et seq.
  • [83] Ibid, para. 61.
  • [84] Ibid, para. 63.
  • [85] Ibid, para. 62.
  • [86] 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.
  • [87] Ibid, para. 64.
  • [88] Ibid, para. 65.
  • [89] Ibid, paras. 67 et seqq.
  • [90] Ibid, para. 69.
  • [91] Ibid, para. 70.
  • [92] Ibid, para. 71.
  • [93] Ibid, para. 72.
  • [94] Ibid, paras. 73 et seqq.
  • [95] 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.
  • [96] Ibid, para. 74.
  • [97] Ibid, para. 74 and 85.
  • [98] Ibid, para. 89.
  • [99] Ibid, para. 85.
  • [100] Ibid, para. 87.
  • [101] Ibid, paras. 86 et seqq.
  • [102] Ibid, paras. 91 et seqq.
  • [103] Ibid, para. 92.
  • [104] Ibid, paras. 93 et seq.
  • [105] Ibid, para. 94.
  • [106] Ibid, para. 83.
  • [107] Ibid, para. 95.
  • [108] Ibid, para. 96.
  • [109] Ibid, para. 98.
  • [110] Ibid, para. 97.
  • [111] Ibid, paras. 90 and 101.
  • [112] Ibid, para. 90.
  • [113] Ibid, para. 99.
  • [114] Ibid, para. 81.
  • [115] Ibid, para. 78.
  • [116] Ibid, para. 76.
  • [117] Ibid, para. 77.
  • [118] Ibid, para. 79.
  • [119] Ibid, paras. 101 et seq.
  • [120] Ibid, para. 102.
  • [121] Ibid, para. 105.
  • [122] Ibid, para. 108.
  • [123] Ibid, para. 112.
  • [124] Ibid, para. 109.
  • [125] Ibid, para. 111.

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 [126] , 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 [127] . 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.) [128] .
 

1. Competition law defence
Dominant market position

The Court held that Conversant had a dominant market position within the meaning of Article 102 TFEU [129] .

The exclusivity rights arising from a patent do not establish a dominant market position by themselves. [130] 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 [131] . In the Court's eyes, this applied to the patent in suit. [132]

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. [133] Furthermore, the additional option to get a license from the patent in suit from Avanci did not limit Conversant's market dominant position. [134]
 

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. [135] In this context, not only private interests, but also the public interest must be taken into account. [136] 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. [137]

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) [138] - 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. [139] 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. [140]

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. [141] 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. [142] 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. [143]
 

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. [144] 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. [145]
 

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'. [146]

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. [147] 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. [147]

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. [148] 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. [148]

In addition, the Court highlighted that timing in negotiations is a factor, which must be considered in the assessment of willingness as well. [149] Otherwise, implementers would lack motivation to seriously engage in negotiations in a timely manner. [150] Rigid deadlines cannot be set, a case-by-case assessment is needed. [151] 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. [151]

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. [152] A counteroffer made after the initiation of infringement proceedings will, as a rule, not be acceptable. [153] 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. [150] 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. [154]

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. [155] 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. [156]

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 [157] - Daimler had chosen to apply delaying tactics [158] .

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. [159] 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. [159]

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. [160] 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. [161]

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. [162] The Court particularly objected Daimler's choice to define the 'unwillingness' of its suppliers as a condition for signing an own licence with Conversant. [163]

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. [164]

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. [165]
 

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. [166] Moreover, it rather served as an 'alibi'. [157]

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. [166] 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. [167] 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. [168]

Besides that, the Court found that Daimler's counteroffer was, in terms of content, 'evidently not FRAND'. [169] Based on a summary analysis, the licensing fees offered by Daimler were considered to be evidently too low. [170]

The Court noted that FRAND is a range and that there are several methods for calculating FRAND royalties. [170] The Court relied on the so-called 'top-down'-approach (which both Conversant and Daimler had used). [171] 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. [172] 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. [172]

In addition, the Court pointed out that the average purchase price of the TCU is no adequate royalty base under FRAND principles. [173] The value of a SEP is reflected by a royalty, which is adequately in proportion to the value of the service provided. [174] 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. [174] As a consequence, relevant is the value, which Daimler's customers attach to the LTE-based features in a car. [174] The purchase price of TCUs paid by Daimler to its suppliers does not mirror this value. [174]
 

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. [175]

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. [176] 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). [177] 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. [178] 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. [178]

In line with the above, the Court confirmed that by seeking to license Daimler, Conversant did not act in an abusive or discriminatory way. [179]

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. [180] 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. [180] 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. [181]

The Court added that the SEP holder is free to decide against which infringer within a supply chain court proceedings will be initiated. [182] 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. [183]

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. [184] Respective agreements between end-device manufacturers and suppliers have only bilateral (contractual) effects and cannot impair the legal position of third parties. [184] In particular, they cannot limit the SEP holder's right to choose the level of the value chain for the assertion of its patents. [185] 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. [185]

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. [186] 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. [187] 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. [188]

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. [189] In the present case, the Court did not see sufficient grounds for such abuse. [189] It was not convinced that -absent an own bilateral licence- suppliers are left without rights or face legal uncertainty. [190] 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. [191] 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). [191]

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. [192] 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). [192]
 

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. [193] 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. [194] 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. [195] 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. [195] 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. [195] 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. [195]
 

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. [196] 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. [196] 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). [196] In the eyes of the Court, Daimler had, however, not pleaded any relevant facts in the present proceedings. [196]

  • [126] Conversant v Daimler, District Court of Munich I, 30 October 2020, Case-No. 21 O 11384/19 (cited by juris).
  • [127] Ibid, paras.122-265.
  • [128] Ibid, para. 285.
  • [129] Ibid, para.286.
  • [130] Ibid, para.288.
  • [131] Ibid, paras.287 et seqq.
  • [132] Ibid, paras.291 et seqq.
  • [133] Ibid, para.295.
  • [134] Ibid, para.296.
  • [135]  Ibid, para. 299.
  • [136] Ibid, para. 300.
  • [137] Ibid, para.300.
  • [138] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [139] Conversant v Daimler, District Court of Munich I, 30 October 2020, Case-No. 21 O 11384/19, para.301.
  • [140] Ibid, para.301.
  • [141] Ibid, para.307.
  • [142] Ibid, para.308.
  • [143] Ibid, paras.302 and 308.
  • [144] Ibid, paras. 323 et seqq.
  • [145] 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.
  • [146] Ibid, para. 309.
  • [147] Ibid, para. 310.
  • [148] Ibid, para. 316.
  • [149]  Ibid, para. 311.
  • [150] Ibid, para. 312.
  • [151] Ibid, para. 320.
  • [152] Ibid, para. 311.
  • [153] Ibid, paras. 312 and 316.
  • [154] Ibid, para. 315.
  • [155] Ibid, paras.317 et seqq.
  • [156] Ibid, para. 321.
  • [157] Ibid, para.357.
  • [158] Ibid, paras.322 and 358.
  • [159] Ibid, para.328.
  • [160] Ibid, paras.331 and 336.
  • [161] Ibid, para.332.
  • [162] Ibid, paras.334 and 336.
  • [163] Ibid, para.335.
  • [164] Ibid, para.337.
  • [165] Ibid, para.338.
  • [166] Ibid, para.339.
  • [167] Ibid, para.340.
  • [168] Ibid, paras.355 et seq.
  • [169] Ibid, paras.341 and 354.
  • [170] Ibid, para.341.
  • [171] Ibid, paras.341 and 348.
  • [172] Ibid, para.352.
  • [173] Ibid, para.353.
  • [174] Ibid, para.353
  • [175] Ibid, para.360.
  • [176] Ibid, para.362.
  • [177] Ibid, paras.362 and 364.
  • [178] Ibid, para.363.
  • [179] Ibid, para.365.
  • [180] Ibid, para.366.
  • [181] Ibid, para.367.
  • [182] Ibid, paras.368 and 382.
  • [183] Ibid, para.368.
  • [184] Ibid, para.370.
  • [185] Ibid, para.372.
  • [186] Ibid, paras.373 and 376-378.
  • [187] Ibid, para.373.
  • [188] Ibid, paras.373 and382.
  • [189] Ibid, paras.373 and 379.
  • [190] Ibid, para.374.
  • [191] Ibid, para.375.
  • [192] Ibid, para.380.
  • [193] Ibid, para.384.
  • [194] Ibid, paras.384 et seqq.
  • [195] Ibid, para.385.
  • [196] Ibid, para.269.

Updated 3 February 2020

Philips v Wiko

OLG Karlsruhe
30 October 2019 - Case No. 6 U 183/16

A. Facts

The Claimant, Philips, holds 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), including SEPs reading on the UMTS and LTE standards. Philips committed towards ETSI to make its SEPs accessible to standard users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions.

The Defendant is the German subsidiary of the Wiko group of companies, which has its headquarters in France (Wiko). Wiko sells mobile phones implementing the LTE standard in Germany.

In October 2014, Philips informed the parent company of the Wiko group about its SEP portfolio, but did not receive a response. In July 2015, Philips shared a draft licensing agreement for its SEP portfolio as well as claim charts referring to several of its SEPs with the parent company of the Wiko group, which again did not react at all. In September 2015, Philips shared further technical details regarding its SEPs.

On 19 October 2015, Philips brought an infringement action against Wiko before the District Court of Mannheim based on one of its SEPs, requesting for injunctive relief, information and rendering of accounts, destruction and recall of infringing products from the market as well as a declaratory judgment confirming Wiko’s liability for damages on the merits.

On the next day, 20 October 2015, Wiko sent a letter to Philips, in which it declared its willingness to enter into negotiations with the latter for a licence covering ‘valuable’ patents. In August 2016, during the course of the pending infringement proceedings, Wiko made a counteroffer to Philips. Philips did not accept this offer. Subsequently, Wiko provided security to Philips for the use of its patents, calculated on basis of its counteroffer.

By judgment dated 25 November 2016 [197] , the District Court of Mannheim granted Philips’ claims almost to the full extent. Wiko appealed the District Court’s judgement. In addition, by way of a counterclaim, Wiko requested disclosure of existing licensing agreements signed by Philips with similarly situated licensees (comparable agreements).

With the present judgment [198] , the Higher District Court of Karlsruhe (Court) overturned the ruling of the District Court in part. In detail, the Court confirmed Philips’ claims for information and the rendering of accounts as well as Wiko’s liability for damages on the merits. The Court, however, rejected Philips’ claims for injunctive relief, destruction and recall of infringing products from the market.

Apart from that, the Court also rejected Wiko’s counterclaim regarding the production of comparable agreements in the proceedings.


B. Court’s reasoning

The Court confirmed that Wiko’s products infringe the patent in suit [199] .

Contrary to the view taken previously by the District Court, the Court found, however, that Article 102 of the Treaty for the Functioning of the EU (TFEU) prevents Philips from enforcing the claims for injunctive relief as well as the recall and destruction of infringing products asserted in the infringement proceedings for the time being [200] . In the Court’s eyes, Philips had failed to meet the conduct obligations established by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [201] (Huawei framework or obligations) [202] .

Huawei framework

The Court explained that SEP holder’s failure to meet its Huawei obligations will – as a rule – render an infringement action resulting in an exclusion of the implementer from a downstream market (action for injunctive relief and/or recall and destruction of products) abusive in terms of Article 102 TFEU [203] . This will, however, not be the case, when the implementer himself fails to fulfil its duties under the Huawei framework; if the implementer acts in bad faith as an ‘unwilling’ licensee, then SEP holder’s Huawei obligations are ‘suspended’ [203] . As a result, asserting the rights to injunctive relief and/or the destruction and recall of infringing products in court could then be considered as a justified reaction of the SEP holder to the implementer’s unwillingness to enter into a FRAND licence [203] .

Having said that, the Court expressed the view that the parties can remedy potential flaws in their conduct under the Huawei judgment and/or even fulfil their Huawei obligations for the first time during the course of pending infringement proceedings [204] . The Court noted that in Huawei v ZTE, the CJEU did not require that the parties fulfil all conduct obligations established prior to the initiation of court proceedings [205] . In the Court’s eyes, denying the parties such possibility is not compatible either with the general principle of proportionality known to European law, nor with the German civil procedural law, according to which courts need to consider all facts relevant for their decision-making raised in the proceedings until the end of the oral arguments [206] .

Accordingly, an infringement action that did not give rise to any antitrust concerns at the time it was filed, can be considered as abusive at a later point in time, if the situation significantly changed, e.g. the implementer fulfilled its Huawei obligations in the meantime [207] . Vice versa, an action of an abusive nature can later on be ‘corrected’, if the patent holder performs its duties under the Huawei framework during the course of the pending proceedings [207] .

In the Court’s view, a SEP holder seeking to remedy (or fulfil for the first time) obligations under the Huawei framework after the initiation of infringement proceedings must make sure that pressure-free licensing negotiations between the parties are enabled, as required by the CJEU in Huawei v ZTE [208] . For this, the patent holder must use procedural tools available under German law, particularly a motion for suspension of the trial [208] . The SEP holder can also propose a consensual stay of the proceedings, especially when a parallel nullity action against the patent in suit is pending before the Federal Patent Court [208] . In case such a motion is filed, the Court expects that a ‘willing’ implementer will consent to a suspension of the proceedings [208] .

On the other hand, the Court pointed out that fulfilment of Huawei obligations by the implementer after the beginning of infringement proceedings does not necessarily lead to a dismissal of the claims asserted by the SEP holder [209] . Indeed, if the implementer meets its Huawei duties at a very late point in time in the proceedings (e.g. shortly before the closing of the oral arguments), the Court could eventually neglect this fact in its decision [210] . This way, delays can be avoided. In this context, the Court also made clear that the implementer is not in a position to cause a unilateral suspension of the proceedings; in contrast to the opposite case (that is cases, in which a stay of the proceedings is suggested by the claimant), the SEP holder will usually not be required to agree to a suspension of the proceedings proposed by the implementer, in order to allow pressure-free negotiations to take place [210] . Insofar, the implementer bears the risk that the fulfilment of its obligations under the Huawei framework in the course of a pending infringement trial will have no impact [210] .

Notification of infringement

Looking at the specific conduct of the parties in the present case, the Court found that Philips had fulfilled its obligation to notify Wiko about the infringement of the SEP in suit prior to the commencement of the infringement proceedings.

The Court confirmed that a notification addressed to the parent company within a group of companies will usually be sufficient under the Huawei framework [211] . In terms of content, the Court was satisfied by the fact that Philips’ letter from July 2015 named the patent in suit as well as the relevant part of standard document implementing the technical teachings of this patent [212] . The Court explained that the notification does not have to contain (further) information required for a final assessment of the validity and essentiality of the patent in suit [212] . Accordingly, the SEP holder is not obliged to share claims charts customarily used in SEP licensing negotiations with the implementer along with the notification of infringement [212] .

Willingness to enter into a licence

The Court further found that Wiko had sufficiently met its obligation to express its willingness to negotiate a licence with Philips [213] .

The Court agreed with the assessment of the District Court that Wiko’s initial reaction to Philips’ notification in July 2015 by letter dated 20 October 2015 was belated. According to the Court, the time available to the implementer for expressing its willingness to enter into negotiations for a licence will – as a rule – not exceed two months [214] . This period of time will usually be sufficient: since by declaring its willingness to enter into negotiations the implementer does not waive any rights (especially the right to contest the validity and/or infringement of the patents in question), it shall not be given more time than the time needed for an ‘initial overview’ of the SEP holder’s claims [214] . Delaying tactics potentially applied by the implementer must be prevented [214] . Against this background, Wiko’s letter dated 20 October 2015 was sent to Philips too late.

Nevertheless, the Court found that Wiko had remedied the belated response after the beginning of the infringement proceedings. On the one hand, Wiko’s letter dated 20 October 2015 had reached Philips at a very early stage of the proceedings, namely just some days after the action was filed [215] . In addition, Wiko had confirmed its willingness to enter into negotiations with Philips expressed in said letter during the course of the proceedings, by making a counteroffer, rendering accounts and providing security to Philips [215] .

SEP holder’s offer

On the other hand, the Court held that Philips had failed to comply with its obligation to make a FRAND licensing offer to Wiko. In particular, the Court took the view that Philips did not provide sufficient information to Wiko with respect to its licensing offer dated July 2015 [216] .

The Court argued that the ‘fairness’ element of the FRAND commitment establishes an ‘information duty’ (‘Informationspflicht’) of the SEP holder with respect to the content of its licensing offer to the implementer [217] . This duty exists besides the patent holder’s duty to make a FRAND licensing offer to the implementer [218] .

In terms of scope, the Court found that the information duty is, basically, not limited to the calculation of the offered royalty but also covers (objective) facts showing that the ‘contractual compensation factors’ (‘vertragliche Vergütungsfaktoren’) are not discriminatory [219] . The extent of the information to be shared depends on the circumstances of the specific ‘licensing situation’ [219] .

In case that the patent holder has already granted licences to third parties, the information duty will extend also towards its ‘licensing practice’, including comparable agreements [220] .

If the SEP holder uses exclusively a standard licensing programme, then it will be sufficient to show that said programme has been accepted in the market and that the offer made to the implementer corresponds with the standard licensing agreement used [220] .

On the other hand, if the SEP holder has concluded individual licensing agreements with third licensees, then it would be obliged to disclose – at least – the content of the key contractual terms in a way that would allow the implementer to identify whether (respectively why) the offer it received is subject to dissimilar conditions [220] . The Court made, however, clear that – contrary to the approach adopted by the Duesseldorf courts – the SEP holder is not obliged in any case to disclose the full content of all existing comparable agreements [220] . In the eyes of the Court, the information duty serves only the purpose of facilitating good will licensing negotiations. A full disclosure of comparable agreement is, however, uncommon in practice [220] .

In this context, the Court pointed out that the patent holder will have to adequately substantiate the content of ‘justified confidentiality interests’ that might hinder the disclosure of comparable agreements [220] . Furthermore, the SEP holder would need to facilitate the conclusion of a Non-Disclosure Agreement which would allow sharing further information with the implementer [220] .

Based on the above considerations, the Court found that Philips had not fulfilled its information duty at any time [221] . In particular, the Court criticized that Philips did not adequately explain the reasons for choosing to agree on a lump sum payment (instead of a running royalty) in an existing agreement with a third licensee [222] . The fact that companies of different size were affected did not relieve Philips from its information duty; according to the Court, the mere fact that two competitors in a downstream market are of different size does not per se offer sufficient ground for different treatment [223] .

Since the Court assumed that Philips had failed to meet its information duties, it did not examine whether Philips’ licensing offer to Wiko was FRAND in terms of content [224] . In this respect, the Court seemed to agree, however, with the notion that FRAND is a range providing parties with a degree of flexibility [225] .

Implementer’s claim for disclosure of comparable agreements

Referring to the counterclaim for full disclosure of Philips’ comparable agreements raised by Wiko in the appeal proceedings, the Court clarified that a respective right of Wiko does not exist [226] .

Such a right does not arise either from German civil law (Articles 809 and 810 German Civil Code) [226] or Article 102 TFEU [227] . Furthermore, a right for disclosure of comparable agreement can neither be extracted by the SEP holder’s FRAND commitment to ETSI [228] . The Court saw no indication that French law (which is applicable to the ETSI FRAND undertaking) establishes such a right in favour of standards implementers [229] .

C. Other important issues

The Court pointed out that the claims for damages as well as information and rendering of accounts also asserted by Philips in the present proceedings are not subject to the Huawei framework [230] . Moreover, the Court explained that the non-fulfilment of the Huawei obligations by the patent holder poses no limitations on these rights in terms of content [231] . This is particularly true with respect to SEP holder’s claim to request information about expenses and profits from the implementer5 [232] .

  • [197] Philips v Wiko, District Court (Landgericht) of Mannheim, judgment dated 25 November 2016, Case No. 7 O 44/16.
  • [198] Philips v Wiko, Higher District Court of Mannheim, judgment dated 25 November 2016, Case No. 7 O 44/16, cited by http://lrbw.juris.de.
  • [199] Ibid, paras. 37-87.
  • [200] Ibid, para. 88.
  • [201] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C 170/13.
  • [202] Philips v Wiko, Higher District Court of Mannheim, judgment dated 25 November 2016, para. 108.
  • [203] Ibid, para. 107.
  • [204] Ibid, paras. 117 et seqq.
  • [205] Ibid, para. 119.
  • [206] Ibid, paras. 120 et seq.
  • [207] Ibid, para. 120.
  • [208] Ibid, para. 125.
  • [209] Ibid, para. 126.
  • [210] Ibid, para. 127.
  • [211] Ibid, para. 111.
  • [212] Ibid, para. 112.
  • [213] Ibid, paras. 115 and 117.
  • [214] Ibid, para. 115.
  • [215] Ibid, para. 129.
  • [216] Ibid, paras. 131 et seqq.
  • [217] Ibid, paras. 132 et seq.
  • [218] Ibid, para. 135.
  • [219] Ibid, para. 133.
  • [220] Ibid, para. 134.
  • [221] Ibid, paras. 136 et seqq.
  • [222] Ibid, para. 136.
  • [223] Ibid, para. 138.
  • [224] Ibid, para. 131.
  • [225] Ibid, para. 106.
  • [226] Ibid, paras. 157 et seqq.
  • [227] Ibid, paras. 162 et seqq.
  • [228] Ibid, paras. 160 et seq.
  • [229] Ibid, para. 161.
  • [230] Ibid, para. 143.
  • [231] Ibid, para. 144.
  • [232] Ibid, paras. 145 et seqq.

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 [233] . 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 [234] (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 [235] . 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 [236] .

On 5 May 2020, FCJ rendered a judgment in the parallel proceedings pending between the parties concerning the patent reading on the GPRS standard [237] . 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 [239] .

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) [240] .

Dominant market position

The Court held that Sisvel had a dominant market position within the meaning of Article 102 TFEU [241] .

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 [242] . 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. [242] 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 [243] . 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 [244] .

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 [245] . 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. [245] An abuse would be given, if the SEP holder insisted on such conditions also at the end of licensing negotiations with the imple­menter. [245]

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 [246] .

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 [247] .

Willingness

On the other hand, the Court found that Haier did not act as a licensee willing to obtain a FRAND licence from Sisvel [248] . 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 [249] . 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 [249] .

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. [250] 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. [251] The fact that a party fails to contribute in negotiations towards a FRAND agreement will regularly be considered to its detriment. [252] 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. [253]

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. [254] Otherwise, competition could be distorted, because the infringer would gain unfair advantages over implementers that have taken a licence in a timely manner. [254]

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. [255] 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. [256] Under special circumstances, however, stricter or less strict conduct duties of the parties could be justified. [256]

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. [256] 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. [257] 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. [258]

Accordingly, FCJ explained that willingness shall (still) be in place, also when the SEP holder makes a licensing offer. [259] 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. [260] 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. [261] The implementer has, therefore, a duty to examine the FRAND-conformity of the terms of the SEP holder's offer. [262] If the offer is 'obviously' not FRAND, it will be sufficient that the implementer explains the reasons why this is the case. [262]

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. [263] If one would require from the SEP holder to make a 'perfect' FRAND offer right away, licensing negotiations would be obsolete. [264] 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. [265] The Court reiterated that an non-FRAND licensing offer does not per se amount to an abuse of market dominance. [266]

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. [267] 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. [268] However, the longer the implementer waits with asserting such request, the higher the threshold for considering it as a willing licensee will be. [269] 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. [267]

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 [270] . 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 [270] . 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 [271] . 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. [272]

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 [273] . 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 [274] . 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 [275] .

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. [276] 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. [277] 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'. [277]

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. [278] The Court focused particularly on the fact that the licence would cover only the two affiliates of the Haier group sued in Germany. [279] 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'. [280]

In addition, the Court also criticised the proposed royalty regime. [281] 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. [282] 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. [283]

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. [284]

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 [285] . According to FCJ, this question is not relevant, when the implementer has not adequately expressed willingness to sign a FRAND licence. [286]

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. [287] 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. [287]

C. Other important issues

Patent ambush

The Court dismissed Haier's defence based on the 'patent ambush' argument. [288] 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. [289] 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). [289]

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. [290] 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. [291] Haier had, however, failed to do so. [291]

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. [292]

What is more, Sisvel's claim for damages was not limited to the amount of a FRAND licensing rate ('licensing analogy'). [293] 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. [292] 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. [292]

  • [233] 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).
  • [234] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [235] 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).
  • [236] Federal Court of Justice, judgment dated 28 April 2020, Case No. X ZR 35/18.
  • [237] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17.
  • [238] Sisvel v Haier, Federal Court of Justice, judgment dated 24 November 2020, Case No. KZR 35/17 (cited by ).
  • [239] Ibid, paras. 10-43.
  • [240] Ibid, para. 44.
  • [241] Ibid, paras. 48 et seqq.
  • [242] Ibid, para. 49.
  • [243] Ibid, para. 52.
  • [244] Ibid, para. 53.
  • [245] Ibid, para. 54.
  • [246] Ibid, para. 55.
  • [247] Ibid, para. 84.
  • [248] Ibid, paras. 86 et seqq.
  • [249] Ibid, para. 57.
  • [250] Ibid, para. 58.
  • [251] Ibid, para. 59.
  • [252] Ibid, para. 60.
  • [253] Ibid, para. 62.
  • [254] Ibid, para. 61.
  • [255] Ibid, para. 63.
  • [256] Ibid, para. 65.
  • [257] Ibid, para. 68.
  • [258] Ibid, paras. 66 and 68.
  • [259] Ibid, para. 69.
  • [260] Ibid, para. 69. See Nokia v Daimler, District Court of Duesseldorf, order dated 26 November 2020, Case No. 4c O 17/19.
  • [261] Ibid, paras. 70 and 71.
  • [262] Ibid, para. 71.
  • [263] Ibid, para. 72.
  • [264] Ibid, para. 73.
  • [265] Ibid, para. 74.
  • [266] Ibid, para. 76.
  • [267] Ibid, para. 77.
  • [268] Ibid, paras. 79 et seqq.
  • [269] Ibid, para. 83.
  • [270] Ibid, para. 87.
  • [271] Ibid, paras. 88 et seqq.
  • [272] Ibid, para. 89.
  • [273] Ibid, paras. 93 et seqq.
  • [274] Ibid, para. 95.
  • [275] Ibid, paras. 96-99.
  • [276] Ibid, paras. 102 et seqq.
  • [277] Ibid, para. 102.
  • [278] Ibid, paras. 108 et seqq.
  • [279] Ibid, para. 116.
  • [280] Ibid, para. 118.
  • [281] Ibid, paras. 124 et seqq.
  • [282] Ibid, para. 124.
  • [283] Ibid, para. 125.
  • [284] Ibid, para. 126.
  • [285] 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.
  • [286] Sisvel v Haier, Federal Court of Justice, judgment dated 24 November 2020, Case No. KZR 35/17, para. 107.
  • [287] Ibid, para. 56.
  • [288] Ibid, paras. 127 et seqq.
  • [289] Ibid, para. 130.
  • [290] Ibid, para. 131.
  • [291] Ibid, paras. 131 et seq.
  • [292] Ibid, para. 135.
  • [293] Ibid, paras. 134 et seqq.

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. [295] 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. [296]

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. [297] The court granted an injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 (the ‘final order’). [298] 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. [298]

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, [299] 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). [300] 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. [299] 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’). [301] 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. [301]

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. [302] Although the practical effect of a defendant’s undertaking and an injunction are similar, rights holders usually insist on an injunction. [303] One reason is that it involves a public vindication of the claimant’s rights. [303] As the claimant has been forced to come to court, an offer of undertaking after judgment is usually considered too late. [303] In this case, the defendant had maintained throughout the negotiations and the trial that it was under no obligation to accept a worldwide license. [304] 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. [305] 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). [305]

The parties also disagreed about the wording of the court declaration regarding the FRAND terms of the settled license. [306] 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’. [307] Further, the court rejected the defendant’s petition to make a declaration that the claimant had not abused its dominant market position. [308] 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). [309] The defendant argued the claimant had been clearly wrong regarding the applicable FRAND rate [310] 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. [311] The ensuing question was whether any deductions were appropriate. [312] The court held that neither party had offered terms that were essentially FRAND. [313] However, the rates offered by the claimant were significantly further away from the end result than the rates offered by the defendant. [313] 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); [314] second, the hard-edged non-discrimination point; [315] and third, the issue of injunctive relief and abuse of market dominance under the CJEU ruling Huawei v. ZTE. [316] 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). [317]

  • [294] Unwired Planet v. Huawei [2017] EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html
  • [295] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 2.
  • [296] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 8.
  • [297] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 1.
  • [298] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 70.
  • [299] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 22.
  • [300] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 19.
  • [301] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 20.
  • [302] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 25.
  • [303] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 26.
  • [304] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 29.
  • [305] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 33.
  • [306] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 34.
  • [307] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 36.
  • [308] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 38.
  • [309] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), paras 39-40.
  • [310] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 41.
  • [311] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 44.
  • [312] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 45.
  • [313] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 56.
  • [314] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 170 et seqq.
  • [315] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 177 and 481 et seqq.
  • [316] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 627 et seqq.
  • [317] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 537 et seqq.

Updated 7 April 2021

Sisvel v Wiko

OLG Karlsruhe
9 December 2020 - Case No. 6 U 103/19

A. Facts

The claimant, Sisvel, holds patents declared as (potentially) essential to the practice of the UMTS and LTE wireless telecommunications standards, which are subject to a commitment to be made accessible to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions (standard-essential patents or SEPs). Sisvel also administrates a patent pool, comprising patents of several SEP holders, including Sisvel's own SEPs (patent pool).

The defendants are two companies that are part of the Wiko group (Wiko). [318] Wiko sells mobile phones complying with the LTE standard - among other markets- in Germany.

In June 2015, the patent pool informed Wiko for the first time about the need to obtain a licence. On 1 June 2016, Sisvel (as the patent pool's administrator) offered Wiko a portfolio licence, which also covered the patent in suit. Agreement was, however, not reached.

On 22 June 2016, Sisvel brought an action against Wiko before the District Court (Landgericht) of Mannheim in Germany (District Court) based on one patent reading on the LTE standard (infringement proceedings). Sisvel requested a declaratory judgment confirming Wiko's liability for damages on the merits, as well as information and rendering of accounts.

On 23 June 2016, Sisvel made an offer for a bilateral licence limited to its own SEP portfolio to the German subsidiary of Wiko. This offer was not accepted. Moreover, Wiko filed a nullity action against the SEP in suit before the German Federal Patent Court (nullity proceedings).

In October 2016, Sisvel extended the lawsuit. Claims for injunctive relief as well as the recall and destruction of infringing products were added to the other claims initially asserted.

On 11 November 2016, Wiko made a counteroffer to Sisvel. Some days prior to the oral hearing in the infringement proceedings, Wiko informed the Court that it had provided information to Sisvel and had also deposited a security amount for past uses.

On 8 November 2017, Sisvel made a new offer to Wiko with reduced royalty rates. Wiko did not immediately react to this offer.

On 22 December 2017, Sisvel asked the District Court to order a stay of the infringement proceedings, until the decision of the Federal Patent Court in the parallel nullity proceedings. Wiko agreed with Sisvel's motion. On 30 January 2018, the infringement proceedings were stayed.

On 9 February 2018, Sisvel sent a reminder to Wiko regarding the offer made on 8 November 2017. Wiko responded on 16 February 2018, requesting further claim charts and more time to examine the patents covered by the offer.

On 26 June 2018, during the stay of the infringement proceedings, Sisvel made another licensing offer to Wiko based on a new restructured licensing program (2018 offer). Along with the 2018 offer, Sisvel provided Wiko with claim charts regarding 20 selected patents and a list of existing licensees of both its new licensing program and two pre-existing programs. The list contained the date of the conclusion of each agreement as well as the agreed licence fees. The names of the licensees were, however, redacted.

Wiko did not react to the 2018 offer for more than three months. On 15 October 2018, following a respective reminder sent by Sisvel on 14 September 2018, Wiko replied, without, however, commenting the 2018 offer; it just referred back to its counteroffer dated 11 November 2016. Wiko also criticized the fact that Sisvel did not disclose the names of the existing licensees so far.

In response to that claim, Sisvel shared a draft Non-Disclosure Agreement (NDA) with Wiko on 22 October 2018, based on which it would be willing to disclose the names of the existing licensees. Wiko refused to sign the NDA proposed by Sisvel.

In October 2018, the Federal Patent Court upheld the SEP in suit in part. Subsequently, the District Court moved on with the infringement proceedings. After the end of the oral hearings in July 2019, Wiko made a new counteroffer to Sisvel and provided the latter with additional information. However, Wiko did not increase the amount of security deposited after its first counteroffer dated 11 November 2016.

In the beginning of September 2019, Sisvel set up an electronic data room containing redacted versions of Sisvel's existing licensing agreements with third parties and granted Wiko respective access rights. Wiko did not make use of this data room at any point in time.

On 4 September 2019, the District Court granted an injunction against Wiko and ordered the removal and destruction of infringing products from the market. It also confirmed Wiko's liability for damages on the merits and ordered Wiko to provide Sisvel with information required for the calculation of damages. Wiko appealed the decision of the District Court.

Shortly after the District Court rendered its decision, the term of the patent-in-suit expired. Sisvel, however, enforced the injunction granted by the District Court.

With the present judgment [319] (cited by http://lrbw.juris.de/cgi-bin/laender_rechtsprechung/list.py?Gericht=bw&GerichtAuswahl=Oberlandesgerichte&Art=en&sid=2b226ea73cc9637362d8e1af04a34d05), the Higher District Court (Oberlandesgericht) of Karlsruhe (Court) predominantly upheld the judgment of the District Court [320] .
 

B. Court's reasoning

The Court found that Wiko could not successfully raise a so-called 'FRAND-defence' based on an alleged abuse of market dominance (Article 102 TFEU) against the claims for injunctive relief and the recall and destruction of infringing products asserted by Sisvel. [321]

This question was still decisive in the present case, despite the fact that the patent-in-suit expired before the start of the appeal proceedings. The Court explained that the expiration of a patent affects only future acts of use (which, then, no longer constitute infringement): On the contrary, claims that had arisen prior to expiration based on acts of use during the lifetime of the patent are not impaired. [322] Whether claims were given before the expiration of the patent-in-suit is of particular importance, especially when the patent holder has enforced a (first-instance) judgment delivered in proceedings conducted within the term of protection of the patent, as it was the case here. [323]
 

Dominant market position

Having said that, the Court agreed with the finding of the District Court that Sisvel had a market dominant position in terms of Article 102 TFEU with respect to the patent-in-suit in the relevant time period prior to its expiration. [324]

The Court followed the District Court also insofar, as it confirmed that, by filing an infringement action, Sisvel had not abused its market dominance.
 

Notification of infringement

In the eyes of the Court, Sisvel had sufficiently notified Wiko about the infringement of the patent-in-suit prior to filing a court action. [325] The purpose of the notification of infringement is to draw the implementer's attention to the infringement and the necessity of taking a license on FRAND terms and conditions. [326] In terms of content, the notification must identify the patent infringed, the form of infringement and also designate the infringing embodiments. [326] Detailed technical or legal analysis of the infringement allegation is not required. [326] The production of so-called 'claim charts', which is common in practice, will, as a rule, suffice, but is not mandatory. [326] If the patent holder offers a portfolio licence, respective extended information duties occur. [326]

In the present case, it was not disputed that Sisvel had notified Wiko about the patent-in-suit prior to litigation. [327] As far as Wiko complained that no claim charts were presented before trial, the Court reiterated that no respective obligation of Sisvel existed. [328] What is more, the Court held that the court action initially filed by Sisvel, which did not include claims for injunctive relief and the recall and destruction of infringing products, could also be seen as an adequate notification of infringement. [327]
 

Willingness to obtain a licence

The Court then found that Wiko behaved as an unwilling (potential) licensee both prior and during the infringement proceedings [329] . The Court agreed with the assessment of the District Court that Wiko delayed the licensing negotiations between the parties with the goal to avoid taking a licence for as long as possible, in order to gain economic benefits. [330]

According to the Court, the 'expression of a general willingness to license' is not sufficient for assuming that an implementer is a 'willing licensee'. [331] Moreover, the implementer must 'clearly and unambiguously' declare willingness to conclude a license agreement on FRAND terms, 'whatever FRAND terms may actually look like" [331] . The respective declaration must be 'serious and unconditional'. [331]

The Court highlighted that for the assessment of willingness the overall facts and the particular conduct of the implementer shall be taken into account. [331] Willingness is not 'static': the finding that an implementer was willing (or unwilling) at a certain moment in time does not remain unchanged henceforth. [331]

The implementer must always be willing to obtain a licence and participate in negotiations in a 'target-oriented manner'; since implementers might be inclined to delay negotiations until the expiration of the patent-in-suit, there is a need to make sure that their behaviour in negotiations will not lead to delays. [332] Moreover, it should be expected that a willing implementer would seek a license as soon as possible, in order to shorten the period, in which it makes use of the patent-in-suit or the SEP holder's portfolio without authorisation and without paying licensing fees. [333] Accordingly, a willing licensee would not consider the 'negotiation obligations' of the SEP holder primarily as a means to defend itself against a court action, but as a means to utilize in order to reach a FRAND agreement, if needed. [333]

In the view of the Court, the above requirements are in line with the Huawei v ZTE judgment (Huawei judgment or Huawei) [334] of the Court of Justice of the EU (CJEU). [335] In Huawei, CJEU focused on the will of the infringer to conclude a license agreement on FRAND terms and emphasized that the latter must not pursue 'delaying tactics'. The Court explained that, although in Huawei the requirement to refrain from 'delaying tactics' is expressly mentioned only with respect to the duty of the implementer to react to a licensing offer of the SEP holder, it applies 'at all times' as long as the implementer uses the patents without a licence; otherwise, the suspension of SEP holder's right to the injunctive relief cannot be justified. [336]

In this context, the Court pointed out that not every 'reluctant involvement' of the implementer in licensing discussions will necessarily allow for the assumption of unwillingness. [337] Such behaviour could be justified in individual cases, especially when the SEP holder does not act in a 'target-oriented' manner itself. [337] Nevertheless, implementers must, as a rule, react timely even to a belated action of the SEP holder. [337] Furthermore, implementers must, in principle, inform the SEP holder of any objections at an early stage and should not wait to raise those much later in court proceedings. [337]

Looking at Wiko's conduct, the Court criticized especially the fact that it became active mostly as a reaction to new developments in the pending infringement proceedings. [338] A willing implementer would have, however, sought a licence independently of the initiation of legal steps and independently of the course of litigation. [339] As an example, the Court highlighted the fact that Wiko's counteroffer dated 11 November 2016 was made only shortly after Sisvel extended the infringement suit by adding a claim for injunctive relief. [340] Wiko also provided information on past acts of infringement only a few days prior to the first oral hearing in February 2017 (and refrained from constantly updating this information afterwards, as it would be expected by a willing licensee). [341]

The Court identified also further facts that indicate that Wiko engaged in delaying tactics. [342] Wiko reacted to Sisvel's licensing offers made during the course of the proceedings always belatedly and only after a reminder by Sisvel (for instance, it took Wiko more than three months to react to the 2018 offer) [343] . It also demanded further claim charts in February 2018, years after the action was filed. [344]

Wiko's refusal to sign the NDA offered by Sisvel -despite multiple reminders of the latter- without providing any reasons was also considered as a sign of unwillingness. [345] According to the Court, it should be expected by a willing licensee, who is not interested in delaying negotiations, to swiftly raise any criticisms regarding an NDA proposed by the SEP holder in writing or by e-mail, and not wait to raise any concerns several months later in the infringement proceedings, as Wiko had done here. [346] The Court also considered the fact that Wiko did not access the electronic data room set up by Sisvel containing redacted versions of Sisvel's third party agreements as an additional indication of unwillingness. [347]

Furthermore, the Court clarified that -contrary to Wiko's view- school holidays and/or staff shortages cannot provide sufficient justification for delays in negotiations. [348] Even if such circumstances occur, a willing implementer would have communicated any obstacles immediately. [348] Wiko failed to do so.
 

SEP holder's offer

Since Wiko was found to have been an unwilling licensee, the Court explained that the question whether Sisvel fulfilled its duty to make and adequately elaborate a FRAND licensing offer, was no longer decisive. [349] In fact, no such duty had arisen in the present case, due to Wiko's unwillingness to obtain a licence. [349] Notwithstanding the above, the Court provided guidance on the content and extend of the respective obligation of the SEP holder.

The Court first explained that FRAND is a 'range', which leaves room for flexibility. [350] As a rule, FRAND is determined in bilateral good faith negotiations between SEP holders and implementers, taking into account the specific circumstances of each individual case [350] ; indeed, parties are best situated to determine the exact content of FRAND in a specific setting. [350]

In order to meet its obligation, an SEP holder must present an offer to a willing licensee, which 'in general' complies with FRAND requirements and is fair, reasonable and not discriminatory with respect to the 'average licensee'. [351] The SEP holder shall further explain its offer in a way that permits the licensee to understand the assumptions, on which the offered rate and further conditions are based. [352] The rationale behind this obligation is to create a sufficient basis of information for the implementer for assessing the offer and eventually formulating a counteroffer. [353]

In this context, the Court made clear that implementers should not expect that the SEP holder individually adapts its (first) offer to the specific circumstances of each particular case. [354] The SEP holder's FRAND commitment does not give rise to such obligation. [354] The (first) offer is intended to launch the negotiations and provide an adequate information basis to the implementer, who will then be in a position to suggest necessary amendments by means of a counteroffer. [354] Accordingly, it will regularly be acceptable that the SEP holder's offer is 'not clearly and evidently' non-FRAND and sufficient information was provided to the implementer. [355]

The Court dismissed the notion that the implementer is obliged to negotiate (and eventually) make a counteroffer, only when the SEP holder's offer was fully FRAND-compliant. [355] This would bring the negotiations to a stand-still and, therefore, conflict with the spirit of the Huawei judgment, which is to encourage the parties to reach agreement on the licensing terms. [356] Moreover, the Court explained that –irrespective of whether the offer triggers an obligation of the implementer to submit a counter-offer– the latter will be regularly required, at least, to analyse the SEP holder's offer in due course and express any objections and queries without delay. [357]

Against this background, the Court found that none of the offers made to Wiko during the infringement proceedings was 'clearly and evidently' non-FRAND. [358] The fact that the offers did not define the start of the contract or the amount of royalties payable for past uses was not considered problematic. [359] The Court also found that the royalty rates offered were not 'evidently non-FRAND', since they were sufficiently substantiated by reference to existing licensing agreements and calculated on basis of a 'top-down' method. [360] A need to calculate royalties on grounds of the costs that incurred for the creation of the patented invention (cost-based approach) was not given, since this factor was not relevant for establishing value. [361]

In addition, the Court did not raise any concerns against the fact that Sisvel's offer concerned a worldwide portfolio licence: On the one hand, agreements with such scope are common in the telecommunications industry. [362] On the other hand, Wiko had worldwide activities, so that a licence with a limited scope would not provide sufficient coverage. [362]

The fact that some of the patents included in Sisvel's portfolio were -allegedly- not standard-essential did not render the offers 'un-FRAND'. [363] The Court stressed that, for the purpose of licensing negotiations and the conclusion of a licence, it is not necessary to conclusively clarify whether each portfolio patent is standard-essential. [364] Implementers can reserve the right to challenge the validity and essentiality of affected patents even after the conclusion of a licensing agreement. [364]

Similarly, the Court had no objections against a clause placing the burden of proof with regard to the exhaustion of licenced patents on Wiko. [365] This rule corresponds with the common allocation of the burden of proof under German law and does not place unreasonable weight on the licensee, since it will be better situated to trace the licensing chain by engaging with its suppliers. [366]

The question whether an adjustment clause is necessary for an offer to be considered FRAND was left unanswered by the Court. [367] Such clause would allow the implementer to adapt the agreed royalties, in case that patents fall out of the scope of the licence (e.g. due to expiration or invalidation). The Court saw no need for a respective contractual provision, since the licences offered by Sisvel would expire and, therefore, be re-negotiated after five years. [367] The Court did not express any concerns against the term of the offered licence or the termination clauses contained therein, either. [368]

Furthermore, the Court made clear that Sisvel had adequately elaborated the licensing rates offered to Wiko. [369] In the infringement proceedings, Sisvel responded to the 'top-down' calculation of Wiko in detail and made relevant clarifications. [370] According to the Court, Sisvel was under no circumstances obliged to elaborate on a cost-based calculation of royalties, as requested by Wiko; such demand was considered just another means to delay negotiations. [371]
 

Implementers' counteroffer

The Court also found that the counteroffers made by Wiko during the course of the first instance infringement proceedings were not FRAND. [372]

The Court highlighted that the obligation of the implementer to submit a FRAND counteroffer to the SEP holder is already triggered, when the previous licensing offer of the latter is not 'clearly and evidently' non-FRAND and sufficient information was provided, enabling the implementer to formulate its counteroffer. [373]

Having said that, the Court took the view that the royalty rates which Wiko offered were very low and, thus, not FRAND-compliant. [374] The Court criticized especially the fact that the rates were significantly lower than the rates which were considered to be adequate in previous court decisions. [375] Notwithstanding the above, the Court explained that, even if Wiko's counteroffer had been FRAND, this would not change the conclusion that Wiko had acted as an unwilling licensee. [376] According to the Court, a willing licensee would not have submitted a counteroffer around one year after receipt of the SEP holder's offer, as Wiko did. [377]
 

C. Other important issues

The Court stressed that for generating pressure-free licensing negotiations during pending infringement proceedings, it will, as a rule, be sufficient, if the proceedings are stayed with a view to parallel nullity proceedings concerning the patent-in-suit. [378] This is particularly true, when the SEP holder takes the respective initiative, as it was the case here. [378] Nevertheless, even if a pressure-free negotiation situation is not given, the infringers is not released from the obligation to act in good faith and engage in licensing negotiations, for instance by analysing a licensing offer of the SEP holder. [378] The refusal of the infringer to act accordingly could, in the eyes of the Court, allow the conclusion that it is an unwilling licensee. [378]

Apart from that, the Court confirmed that Wiko had no legal ground for requesting full disclosure of Sisvel's third party agreements [379] . Even if one would recognize a duty of the SEP holder to share information about the core content of existing licensing agreements (that are still in force), it is questionable whether this duty would also extend to agreements signed by previous patent holders. [380] The Court expressed particular doubts that this applies in cases in which a portfolio was assembled from patents acquired from different patent holders, since the relevance of bilateral or pool licensing agreements of the former patent holder can be limited in this case. [381]

Furthermore, the Court expressed the view that under German law a so-called 'covenant not to sue' does not have the effect of a (royalty-free) licence: such agreements will, as a rule, have only a procedural effect in terms of a pactum de non petendo, excluding only the initiation of court proceedings. [382]

Finally, the Court denied Wiko's motion to order a stay in the appeal proceedings due to the recent referral of several questions regarding the interpretation of the Huawei framework to the CJEU by the District Court of Düsseldorf in the matter Nokia v Daimler [383] . [384] According to the Court, it appears unlikely that the CJEU will establish criteria, by which SEP-based court actions against implementers engaging in delaying tactics would amount to an abuse of market dominance. [385]
 

  • [318] The action was extended to a third defendant, an individual person, who had served as a managing director for both aforementioned companies.
  • [319] Sisvel v Wiko, Higher Regional Court Karlsruhe, judgment dated 9 December 2020, Case-No. 6 U 103/19
  • [320] The claims for injunctive relief, rendering of accounts and damages asserted against the former managing director of the two Wiko companies were limited to the period of time until the end of its tenure; ibid, paras. 265-288.
  • [321] Ibid, para. 289.
  • [322] Ibid, paras. 284 et seqq.
  • [323] Ibid, para. 287.
  • [324] Ibid, paras. 290 et seq. Insofar, the Court made clear that a market dominant position ceases to exist after the expiration of the relevant patent.
  • [325] Ibid, paras. 292 et seqq.
  • [326] Ibid, para. 293.
  • [327] Ibid, para. 297.
  • [328] Ibid, paras. 297 et seq.
  • [329] Ibid, para. 299.
  • [330] Ibid, para. 299 and paras. 320 et seqq.
  • [331] Ibid, para. 301.
  • [332] Ibid, para. 302.
  • [333] Ibid, para. 303.
  • [334] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case-No. C-170/13.
  • [335] Sisvel v Wiko, Higher Regional Court of Karlsruhe, judgment dated 9 December 2020, para. 304.
  • [336] Ibid, para. 304.
  • [337] Ibid, para. 305.
  • [338] Ibid, paras. 321 et seqq.
  • [339] Ibid, para. 321.
  • [340] Ibid, para. 322.
  • [341] Ibid, paras. 323 et seq.
  • [342] In addition, the Court found that Wiko’s lack of willingness to obtain a license is also manifested in the fact that it (i) attempted to impede the enforcement of the first instance ruling of the District Court by questionable means (para. 335) and (ii) did not accept the offer of the District Court of The Hague, in which proceedings between the parties were pending in parallel, to engage in settlement negotiations (para. 336).
  • [343] Ibid, paras. 325, 328 and 331.
  • [344] Ibid, para. 327.
  • [345] Ibid, paras. 333 et seqq.
  • [346] Ibid, paras. 334 and 338.
  • [347] Ibid, paras. 337 and 341 et seqq.
  • [348] Ibid, para. 330.
  • [349] Ibid, para. 342.
  • [350] Ibid, para. 307.
  • [351] Ibid, para. 308.
  • [352] Ibid, paras. 308 and 310.
  • [353] Ibid, para. 309.
  • [354] Ibid, para. 310.
  • [355] Ibid, paras. 311 et seqq.
  • [356] Ibid, paras. 311 and 313 et seqq.
  • [357] Ibid, paras. 316 et seqq.
  • [358] Ibid, para. 352.
  • [359] Ibid, para. 353.
  • [360] Ibid, paras. 354 et seqq.
  • [361] Ibid, para. 358.
  • [362] Ibid, para. 359.
  • [363] Ibid, para. 360.
  • [364] Ibid, para. 361.
  • [365] Ibid, para. 362.
  • [366] Ibid, para. 363.
  • [367] Ibid, paras. 365 et seqq.
  • [368] Ibid, paras. 367 et seqq.
  • [369] Ibid, para. 366.
  • [370] Ibid, para. 344.
  • [371] Ibid, para. 346.
  • [372] Ibid, paras. 379 et seqq.
  • [373] Ibid, para. 311.
  • [374] Ibid, paras. 379 et seqq.
  • [375] Ibid, para. 380.
  • [376] Ibid, para. 378.
  • [377] Ibid, para. 384.
  • [378] Ibid, para. 348.
  • [379] Ibid, para. 389.
  • [380] Ibid, paras. 389 et seq.
  • [381] Ibid, para. 391.
  • [382] Ibid, paras. 260 et seqq.
  • [383] Nokia v Daimler, District Court of Düsseldorf, order dated 26 November 2020, Case No. 4c O 17/19.
  • [384] Sisvel v Wiko, Higher Regional Court of Karlsruhe, judgment dated 9 December 2020, para. 395.
  • [385] Ibid, para. 395.

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 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) [386] . 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 [387] .

The Defendant offers communication services in Germany to retail and wholesale clients, including DSL connections using the standards ADSL2+ and VDSL2 [388] .

The Intervener supplies the Defendant with equipment (especially DSL transceivers and DSL Boards), allowing network services based on the above standards [388] .

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) [389] . 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 [390] . 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 [391] . Taking the ongoing liability proceedings in Germany into account, the Dublin High Court stayed its proceedings [391] .

In September 2017, the Claimant brought a second action against the Defendant before the District Court of Düsseldorf, requesting for injunctive relief (injunction proceedings) [392] . In February 2018, the Claimant made another licensing offer to the Defendant in the pending injunction proceedings [390] .

With the present judgment, the Court dismissed Claimant’s action in the injunction proceedings [393] .


B. Court’s reasoning

Although the Court held that the services offered by the Defendant infringe the SEP in suit [394] , it found that the Claimant cannot enforce its patent rights for the time being [395] , 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) [393] .

1. Dominant market position

The Court found that the Claimant holds a dominant market position in terms of Article 102 TFEU [397] .

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 [398] . Each SEP outlines an own relevant (licensing) market, unless – from the SEP users’ perspective – equivalent alternative technologies for the same technical problem exist [399] . 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 [400] , it defined the relevant market as the market for products and services allowing for internet connections through DSL technology [401] .

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 [402] . 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 [402] . 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 [402] .

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 [402] . 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) [402] . 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 [402] .

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 [403] .

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 [404] . 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 [405] .

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 [406] .

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 [407] . 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 [407] .

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 [408] . 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 [408] . 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 [408] .

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) [409] . 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) [409] . 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 [409] .

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 [410] .

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 [411] .

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 [412] . Given the circumstances of the specific case, even an implicit behaviour can suffice [412] .

In terms of timeliness, the Court held that a strict deadline, within which the SEP user ought to make its declaration, cannot be set [413] . The respective time frame must be determined on a case-by-case basis under consideration of the circumstances of each case [413] . 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 [413] . 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 [413] .

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 [414] . 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 [415] .

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 [416] .

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 [417] . 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 [390] .

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 [418] . 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 [419] .

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 [420] . 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 [420] . 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 [420] . In this context, the Court explained that failure to meet the Huawei obligations does not permanently impair SEP holder’s rights [421] . 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 [422] .

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 [392] . Nevertheless, the Court left this question open, because, in its eyes, the Claimant’s offer was not FRAND in terms of content [423] .

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 [424] . In the Court’s view, Claimant’s offer was anyway both not fair and discriminatory [425] .

Fair and reasonable terms

The Court held that the licensing terms offered by the Claimant to the Defendant were not fair and reasonable [426] .

First, the terms did not adequately consider the effects of patent exhaustion [427] . As a rule, FRAND requires licensing offers to contain respective provisions [428] . 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 [429] .

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 [430] . The Defendant would be obliged to pay royalties for past uses, although it is not clear whether the Claimant is entitled to such payments [431] .

Third, the Court found that the exclusion of the Defendant’s wholesale business from Claimant’s licensing offer was also not fair [432] . According to the principle of contractual autonomy, patent holders are free to choose to which stage of the distribution chain they offer licences [433] . 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 [433] .

Non-discrimination

Besides from the above, the Court ruled that the Claimant’s offer was discriminatory [434] .

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 [424] . 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) [435] .

Furthermore, the Court explained that the non-discriminatory element of FRAND does not oblige the SEP holder to treat all users uniformly [436] . The respective obligation applies only to similarly situated users, whereas exceptions are allowed, provided that a different treatment is justified [436] . 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 [437] .

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 [438] . 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 [439] .

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 [440] . 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 [441] . 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 [442] .

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 [443] . 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 [443] . 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) [443] . 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 [443] . 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 [444] .

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 [445] . 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 [446] . 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 [447] .

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 [448] .


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 [449] .

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

Updated 20 October 2020

Sisvel v Wiko

LG Mannheim
4 September 2019 - Case No. 7 O 115/16

A. Facts

The Claimant, Sisvel, holds patents declared as (potentially) essential to the practice of the UMTS and LTE wireless telecommunications standards under a commitment to be made accessible to standard users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions (Standard Essential Patents or SEPs). Sisvel administrates a patent pool comprising patents of several SEP holders, including Sisvel’s own SEPs (patent pool).

The Defendants are the French parent company and the German subsidiary of the Wiko group (Wiko). Wiko sells mobile phones implementing the LTE standard –among other markets– also in Germany.

In June 2015, Sisvel informed Wiko about the patent pool and the need to obtain a licence. The parties entered into licensing discussions. Sisvel provided Wiko with information about the SEPs included in the patent pool, including claim charts illustrating the standard-essentiality of a number of these patents. On 1 June 2016, Sisvel made an offer for a licence covering the patent pool to Wiko. Agreement was, however, not reached.

On 22 June 2016, Sisvel brought an action against Wiko before the District Court (Landgericht) of Mannheim in Germany (Court) based on one patent reading on the LTE standard (infringement proceedings). Sisvel requested a declaratory judgment confirming Wiko’s liability for damages on the merits, as well as information and rendering of accounts.

On 23 June 2016, Sisvel made an offer for a bilateral licence covering only its own SEPs to the German subsidiary of Wiko. This offer was not accepted. Moreover, Wiko filed a nullity action against the SEP in suit before the German Federal Patent Court (nullity proceedings).

On 4 October 2016, Sisvel amended its claims in the infringement proceedings. It raised, additionally, claims for injunctive relief as well as the removal and subsequent destruction of infringing products from the market.

On 11 November 2016, Wiko made a counteroffer to Sisvel. Subsequently, Wiko provided security as well as information to Sisvel in accordance with its counteroffer.

During the course of the proceedings, Sisvel made a new offer for a pool licence to Wiko which contained reduced royalty rates. Wiko rejected this offer as well. On 22 December 2017, Sisvel asked the Court to order a stay of the infringement proceedings, until the German Federal Patent Court rendered its decision on the validity of the SEP in suit in the parallel nullity proceedings. Wiko agreed with Sisvel’s motion. On 30 January 2018, the infringement proceedings were stayed by order of the Court.

On 26 June 2018, during the stay of the infringement proceedings, Sisvel made another licensing offer to Wiko based on a new restructured licensing programme designed by Sisvel in the meantime (2018 offer).

Along with the 2018 offer, Sisvel provided Wiko –among other information– with claim charts regarding twenty selected patents as well as a list of existing licensees of both its new licensing programme and two pre-existing programmes. The list contained the date of the conclusion of each agreement as well as the agreed licence fees. The names of the licensees were, however, redacted.

Wiko did not react to the 2018 offer for more than three months. On 15 October 2018, Wiko replied to Sisvel, without, however, providing any feedback on the content of the 2018 offer; it just referred back to its counteroffer dated 11 November 2016, instead. Wiko also criticized the fact that Sisvel did not disclose the names of the existing licensees in the list that it had shared along with the 2018 offer.

In response to that claim, Sisvel sent a draft Non-Disclosure Agreement (NDA) to Wiko on 22 October 2018. Sisvel was willing to disclose the names of the existing licensees upon signing of the NDA by Wiko. Wiko refused, however, to sign the NDA proposed by Sisvel.

In October 2018, the German Federal Patent Court upheld the SEP in suit in part. Subsequently, the Court moved on with the infringement proceedings, discussing in particular the FRAND-related issues.

After the end of the oral hearings in July 2019, Wiko made a new counteroffer to Sisvel and provided the latter with additional information. However, Wiko did not increase the amount of security deposited after its first counteroffer dated 11 November 2016.

With the present judgment [450] , the Court granted an injunction against Wiko and ordered the removal and subsequent destruction of infringing products from the market. The Court also confirmed Wiko’s liability for damages on the merits and ordered Wiko to provide Sisvel with information required for the calculation of damages.


B. Court’s reasoning

The Court found that Wiko’s products infringe the patent in suit [451] . The essentiality of the patent in suit was not in dispute between the parties [452] .

The Court further held that Article 102 of the Treaty for the Functioning of the EU (TFEU) does not prevent Sisvel from enforcing the claims for injunctive relief as well as the recall and destruction of infringing products asserted in the infringement proceedings. Wiko had argued that by filing the present lawsuit, Sisvel had abused its dominant market position in violation of Article 102 TFEU.

In the Court’s eyes, this was not the case, since Sisvel had fulfilled the conduct obligations stipulated by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [453] (Huawei framework or obligations). Wiko, on the other hand, had, according to the Court, failed to comply with the Huawei framework.

Huawei framework

In deviation from its earlier case-law, the Court expressed the view that the Huawei obligations can be remedied by the parties during the course of infringement proceedings [454] . This requires, however, that pressure-free negotiations between the parties are enabled, as requested by the CJEU. For this, the parties have to use available procedural instruments for a temporary suspension of the proceedings, such as a motion for suspension of the trial [455] or a consensual stay of the proceedings until the decision of the Federal Patent Court on a parallel nullity action [456] .

Against this background, the Court requested from a SEP holder, who seeks to remedy information obligations under the Huawei framework after the initiation of infringement proceedings, to file a motion for suspension of the trial [456] . In case such a motion is filed, the Court expects that a ‘willing’ implementer will consent to a suspension of the proceedings [456] .

The Court observed that granting the parties the opportunity to remedy shortcomings concerning the Huawei obligations in the course of pending infringement proceedings is in line with the ‘safe harbour’ approach adopted by both the Court of Appeal of England and Wales in Unwired Planet v Huawei [457] and the Court of Appeal of The Hague in Philips v Asus [458] . These courts do not consider the Huawei framework as a mandatory formalistic procedure that needs to be executed strictly; accordingly, deviations from the negotiation framework established by the CJEU do not necessarily amount to abusive behaviour, barring the patent holder from asserting claims for injunctive relief [459] . Moreover, whether this is the case, needs to be assessed on a case by case basis [460] .


Notification of infringement

Having said that, the Court found that Sisvel had fulfilled its Huawei obligation to notify Wiko about the infringement of the SEP in suit prior to the commencement of the infringement proceedings.

Regarding the content of SEP holder’s respective notification, the Court, basically, applied the same requirements set forth in previous decisions. The Court found that such notification must (1) name the patent in suit, including the patent number, (2) inform that the patent has been declared standard- essential towards the relevant standardisation body, (3) indicate for which standard the patent is essential and (4) explain which technical functionality of the user’s products or services implements the standard [461] . The appropriate level of detail should be determined on a case by case basis [461] . The Court confirmed that the patent holder will, as a rule, meet its notification duty by making claims charts customarily used in SEP licensing negotiations available to the implementer [461] . The Court further affirmed that a notification addressed to the parent company within a group of companies will usually be sufficient under the Huawei framework [461] .


SEP holder’s offer

The Court found that Sisvel had also complied with its Huawei obligation to make a written and specific FRAND licensing offer to Wiko. For the respective assessment, the Court considered only the 2018 offer, the last offer made by Sisvel to Wiko during the stay of the infringement proceedings [462] .

To begin with, the Court reiterated its position that infringement courts are not obliged to determine which concrete licensing fees and further contractual terms and conditions are ‘under objective aspects’ FRAND [463] . Contrary to the view previously taken by the superior Higher District Court of Karlsruhe, the Court maintained that the CJEU did not intend to ‘burden’ the proceedings concerning injunctive relief and the recall of products with the ‘precise mathematical determination’ of FRAND conditions [464] . Moreover, since there is a ‘range’ of potential FRAND conform terms and conditions, a request for injunctive relief could conflict with Article 102 TFEU only in case, in which – under consideration of the specific bargaining situation and market conditions – the SEP holder’s offer would amount to an ‘exploitative abuse’ [463] . Insofar, the Court shared a similar understanding with the Court of Appeal of England and Wales in Unwired Planet v Huawei [457] .

Notwithstanding the above, the Court made clear that infringement courts should go beyond a just ‘superficial’ assessment of the FRAND conformity of SEP holder’s licensing offer. Infringement courts should examine, whether the overall structure of the concrete offer would require from an implementer acting in good faith to respond to that offer, irrespective of the – typical – initial divergence of the bargaining position of the parties [465] . As a rule, such a duty will emerge, when the SEP holder explains the royalty calculation in a way that demonstrates the reasons for which it considers that its offer is FRAND [466] . In case that a pool licensing programme or a standard licensing programme exists, it will usually be enough to demonstrate the acceptance of the respective programme in the market. If a sufficient number of licences has been granted by the pool, the patent holder will just have to outline the composition of the pool by presenting an adequate number of claim charts referring to patents included in the pool [467] .

In this context, the Court pointed out that any allegations raised by the implementer with respect to the FRAND conformity of the patent holder’s offer cannot, in principle, be based on the (alleged) unlawfulness of individual contractual clauses. Moreover, the FRAND compliance of an offer must be assessed based on a general overview of the overall agreement [468] . An exception only applies, when a specific clause has an ‚unacceptable effect’ [468] . In the present case, the Court found that none of the clauses contained in the 2018 offer had such effect [468] .

In particular, the Court held that a clause placing the burden of proof with regard to the exhaustion of patents covered by the offered licence on the licensee (here: Wiko) is acceptable [469] . Contrary to the view taken by the District Court of Duesseldorf in a similar case, the Court argued that it is appropriate to request the licensee to establish the relevant facts, since it will be better situated to trace the licensing chain by engaging with its suppliers [469] .

Furthermore, the Court did not consider that a clause limiting the term of the offered licence to five years had an ‘unacceptable effect’ from an antitrust perspective. The Court found that a term of five years is in line with the prevailing practice in the wireless telecommunications industry, in which rapid technological developments are typical [470] .

The Court further pointed out that a clause establishing a right for the extraordinary termination of the licensing agreement in case of violation of reporting duties by the licensee or a delay of payments exceeding 30 days did not have an ‘unacceptable effect’ in the above sense [470] .

The Court did not raise any objections against the fact that the 2018 offer did not contain a clause stipulating an adjustment of the agreed royalty rates in case of changes in the number of covered patents during the term of the agreement. According to its view, including such a clause in a FRAND licence is not per se required [470] . An exception should be made, however, in cases, in which the pool predominantly consists of patents that will expire soon after the signing of the licence agreement [470] . In general, the absence of an ‘adjustment’ clause will not be problematic, especially when the licensing offer does not limit or exclude the statutory right of the parties to request an adjustment of the licence due to frustration of the contractual base (Sec. 313 para. 1 German Civil Code) [470] .


Non-discrimination / confidentiality

Referring to the non-discriminatory element of a FRAND licensing offer, the Court expressed the view that Art. 102 TFEU establishes a (secondary) duty of the patent holder to show in pending infringement proceedings that its offer to the defendant does not discriminate the latter in relation to similarly situated competitors [467] .

The Court made, nevertheless, clear that this duty does not legally entail ‘full transparency’ in every given case [467] . The antitrust obligations of the SEP holder do not always outweigh confidentiality interests of the latter that are worthy of legal protection; moreover, the special circumstances of the individual case can require protection of confidentiality [467] .

Looking particularly at information contained in existing licensing agreements of the SEP holder with third similarly situated licensees (comparable agreements), the Court took the view that the extent of the patent holder’s obligation to disclose such agreements shall be determined by the infringement court on a case by case basis under consideration of both parties’ pleadings in the proceedings [467] .

According to the Court, the patent holder will have to establish the existence of confidentiality interests worthy of protection; the mere fact that comparable agreements are subject to confidentiality clauses does not per se justify limitations regarding to the extent of patent holder’s disclosure obligations [471] . On the other hand, the defendant will need to explain to the court why the information requested is required for assessing the FRAND conformity of the patent holder’s licensing offer [471] . The defendant will have to establish concrete facts, indicating a potentially discriminatory conduct of the SEP holder [472] .

With this in mind, the Court disagreed with the view expressed by the Duesseldorf courts, according to which the SEP holder is in any case obliged to produce all existing comparable agreements in infringement proceedings [473] . Especially in cases, in which the patent holder has concluded only standard licensing agreements with implementers, the terms and conditions of which are publicly accessible, the Court saw no reason for obliging the patent holder to produce a (large) number of identical contracts in the proceedings. Insofar, it will be sufficient to disclose how many (standard) licensing agreements have been concluded so far [473] .

Accordingly, the Court found that the list of existing licensees produced by Sisvel to Wiko along with the 2018 offer was sufficient for establishing the FRAND conformity of this offer, even though the names of the licensees were redacted. In the Court’s eyes, Wiko had failed to explain the reasons why the identity of the existing licensees was needed to assess the FRAND conformity of the 2018 offer [474] . In addition, the Court also took into account the fact that Wiko had refused to sign the NDA offered by Sisvel during the stay of the proceedings for the purpose of disclosing the identities of the existing licensees [475] . Since it had no objections against the FRAND conformity of the 2018 offer, the Court did not rule on the question whether Wiko’s refusal to enter into an NDA could be considered as a sign of unwillingness to comply with the Huawei framework or not. The Court agreed, however, with the view taken by the Duesseldorf courts in this respect, according to which the implementer’s refusal to sign an adequate NDA is, in principle, a factor that should be considered in connection with the assessment of the SEP holder’s offer [475] .

Besides that, the Court also considered the possibility of facilitating the use of comparable agreements in infringement proceedings through document production orders issued by the competent court pursuant to Sec. 142 of the German Code of Civil Procedure (Zivilprozessordnung, ZPO) [472] . This option should particularly be taken into account by infringement courts in individual cases, in which confidentiality clauses contained in comparable agreements allow for a disclosure of the agreement only upon court order. According to the Court, such confidentiality clauses do not per se violate antitrust law and should, therefore, be respected, unless the patent holder cannot establish a confidentiality interest worthy of protection in the proceedings [472] . If the patent holder, who is bound to a confidentiality clause, is willing to produce comparable agreements in trial, then the infringement court could – based on the concrete circumstances of each case– issue a document production order according to Sec. 142 ZPO [472] . In case that the patent holder refuses to comply with such order, the court could consider the respective behaviour as a signal of bad faith in its overall assessment of the parties’ conduct under the Huawei framework [472] . The same will apply also when the implementer does not agree with a stay of the proceedings, after it was granted access to comparable agreements based on a court order issued pursuant to Sec. 142 ZPO [472] .

Implementer’s counteroffer

The Court found that Wiko had failed to meet its Huawei obligation to make a FRAND counteroffer to Sisvel in due course. For the respective assessment, the Court focused on Wiko’s reaction to the 2018 offer [476] .

The Court made clear that an implementer has a duty to react to a licensing offer of the SEP holder, which is based on concrete facts, irrespective of whether it considers this offer to be FRAND, or not (which will usually be the case) [472] . Furthermore, the implementer must react as soon as possible, considering the facts of each case, the industry practice in the specific sector as well as the principle of good faith [456] .

Taking into account that Wiko did not react at all to the 2018 offer for more than three months, the Court held that it violated the above obligations [452] . In the Court’s eyes, Wiko engaged in delaying tactics [452] . The Court did not accept that French school holidays and/or the fact that – according to Wiko’s own statement– only two employees covered licensing-related matters can provide sufficient justification for the delay in Wiko’s reaction [476] . As a company engaging in international business, Wiko should ensure that it has sufficient staff resources to deal with respective issues in due course [476] .


C. Other important issues

Apart from Sisvel’s claims for injunctive relief and the removal and destruction of infringing products from the market, the Court also rendered a declaratory judgment, recognising Wiko’s liability for damages on the merits [477] .

The Court found that Wiko had culpably infringed the patent in suit. In particular, Wiko had acted, at least, negligently [477] . Wiko had argued that the high complexity of standardised technologies (especially the significant number of patents incorporated into a standard), made it difficult to assess the status regarding intellectual property rights (and, therefore, excluded negligence). The Court made, however, clear that a higher degree of complexity of the underlying technologies generates enhanced due diligence requirements on the implementers’ side [478] .

  • [450] Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16.
  • [451] Ibid, pages 17-31.
  • [452] Ibid, page 46.
  • [453] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case-No. C-170/13.
  • [454] Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16, page 42.
  • [455] Ibid, page 43 and page 51 et seq.
  • [456] Ibid, page 42.
  • [457] Unwired Planet v Huawei, Court of Appeal of England and Wales, judgment dated 23 October 2018, [2018] EWCA Civ 2344, para 282.
  • [458] Philips v Asus, Court of Appeal of The Hague, 7 May 2019, Case-No. 200.221 .250/01.
  • [459] Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16, page 44.
  • [460] Ibid, page 44.
  • [461] Ibid, page 37.
  • [462] Ibid, pages 47 and 53.
  • [463] Ibid, page 38.
  • [464] Ibid, pages 37 et seq.
  • [465] Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16, page 39.
  • [466] Ibid, page 39.
  • [467] Ibid, page 40.
  • [468] Ibid, page 53.
  • [469] Ibid, page 54.
  • [470] Ibid, page 55.
  • [471] Ibid, page 40 and 49.
  • [472] Ibid, page 41.
  • [473] Ibid, page 49.
  • [474] Ibid, page 50.
  • [475] Ibid, page 51.
  • [476] Ibid, page 47.
  • [477] Ibid, page 35.
  • [478] Ibid, page 35 et seq.

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 [479] . Most were part of a large patent portfolio that the claimant had acquired from a major telecommunications company in 2013. [480] 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. [481]
    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. [482] 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. [483] Between August and October 2016 the parties exchanged further offers without reaching an agreement. [484]
    The Patents Court (Birrs J) held that the claimant was in a dominant position, but did not abuse this position. [485] 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. [486]
  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. [487] European case law indicated that owning an SEP could be a rebuttable presumption for the existence of a dominant position. [488] 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. [489]
    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. [490] 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, [491] 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. [492] 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. [492]
        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. [493] 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. [494] This approach also means that the SEP proprietor is under an obligation to make a FRAND offer and to enter into FRAND license agreements. [495]
      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’). [496] This eliminates the so-called Vringo-problem, [497] 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. [498]
        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. [499] 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). [500] Since Art. 102 TFEU condemns excessive pricing, [501] 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. [501]
      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. [502] 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. [503] 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. [504]
        Second, the ‘hard-edged’ non-discrimination obligation, which takes into account the nature of the potential licensee, [503] 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. [505] 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. [504]
      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. [506] 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. [506] This was illustrated by the fact that the vast majority of licenses introduced in the trial were worldwide licenses. [507] 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. [508] 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. [509]
  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. [510] Other freely-negotiated license agreements might be used as comparables. [511] This may be compared with a top down approach [512] 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. [513] 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. [510] License agreements must meet certain criteria to be comparable. [514] 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. [514] 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%). [515]
    2. Principles derived from Huawei v. ZTE
      The court also provided a compiled overview of its interpretation of the Huawei v. ZTE ruling. [516] 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.
  • [479] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 2
  • [480] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 54 et seqq.
  • [481] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 3
  • [482] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 5
  • [483] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 7-8
  • [484] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 11-14
  • [485] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 807
  • [486] Unwired Planet v Huawei, EWHC 1304 (Pat)
  • [487] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 631
  • [488] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 634
  • [489] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 636-646
  • [490] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 656
  • [491] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 108-145
  • [492] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 146
  • [493] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 162
  • [494] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 163
  • [495] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 159
  • [496] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 164
  • [497] See Vringo v ZTE [2013] EWHC 1591 (Pat) and [2015] EWHC 214 (Pat)
  • [498] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 158
  • [499] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 152
  • [500] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154
  • [501] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153
  • [502] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 176
  • [503] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 177
  • [504] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 503
  • [505] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 501
  • [506] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 544
  • [507] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 534
  • [508] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 546
  • [509] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 572
  • [510] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 171
  • [511] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 170
  • [512] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 178
  • [513] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 806 (10)
  • [514] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 175
  • [515] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 476
  • [516] Unwired Planet v. Huawei [2017] EWHC 711(Pat), 744

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 [517] (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 [518] . For this reason, Nokia was entitled -among other claims- to injunctive relief [519] .

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 [520] (Huawei decision, or framework).

The Court dismissed the FRAND-defences raised by Daimler and its suppliers as unfounded [521] .

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 [523] . 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 [524] . 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 [524] . 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 [525] .

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 [526] . 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 [526] . As a rule, presenting claim charts will be sufficient (but not mandatory) [526] . 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 [528] .

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 [529] . 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 [530] .

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 [531] . Since Daimler purchases and uses these components in its products, no information deficit could occur [531] .

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) [533] . 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 [534] . 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 [533] .

The Court further pointed out that making the declaration of willingness subject to conditions was not acceptable [533] . 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 [533] .

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 [535] . 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 [536] .

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 [537] . 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 [538] .

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 [540] . Moreover, what can be considered as FRAND may differ from industry sector to industry sector as well as in time [540] .

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' [541] . 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 [541] . 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 [542] . The Court noted that there are several instruments available to make sure that this will not occur [542] .

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 [542] . The effects of patent exhaustion would prevent the SEP holder from participating in the value created at the final stage of the value chain [542] . 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 [542] .

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 [543] . 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 [543] .

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 [544] . The selling price of TCUs corresponds only to Daimler's respective costs [545] . Connectivity, on the other hand, allows Daimler to generate income from additional services offered to its clients, save costs and optimise R&D expenses [546] . Connectivity secures the chance to create this value [547] . 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 [548] .


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 [550] . The same is true with respect to patent holders with a dominant market position, since competition law does not per se limit this possibility [550] . What is more, a dominant patent holder is not obliged to offer all potential licensees a 'standard-rate' [550] . 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 [551] .

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 [552] . 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 [553] . 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 [554] . 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 [555] .

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 [557] . 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 [557] . The scope and level of detail of the respective duty shall be determined on a case-by-case basis [557] .

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 [558] . 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 [559] . 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 [559] .

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) [561] . This had not been the case in the present proceedings [562] .

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 [563] . 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 [563] .


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 [565]

  • [517] Nokia v Daimler, District Court of Mannheim, judgment dated 18 August 2020, Case-No. 2 O 34/19
  • [518] Ibid, paras. 49-136
  • [519] Ibid, para. 138
  • [520] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13
  • [521] Nokia v Daimler, District Court of Mannheim, judgment dated 18 August 2020, Case-No. 2 O 34/19, para. 144
  • [522] Ibid, para. 146
  • [523] Ibid, para. 147
  • [524] Ibid, para. 148
  • [525] Ibid, para. 149
  • [526] Ibid, para. 152
  • [527] Ibid, paras. 151-156
  • [528] Ibid, para. 248
  • [529] Ibid, paras. 153 et seq
  • [530] Ibid, para. 154
  • [531] Ibid, para. 155
  • [532] Ibid, paras. 157-231
  • [533] Ibid, para. 158
  • [534] Ibid, para. 159
  • [535] Ibid, para. 161
  • [536] Ibid, para. 197-199
  • [537] Ibid, paras. 157, 160 and 162-164
  • [538] Ibid, paras. 160 and 165-168
  • [539] Ibid, para. 169
  • [540] Ibid, para. 170
  • [541] Ibid, para. 171
  • [542] Ibid, para. 172
  • [543] Ibid, para. 173
  • [544] Ibid, paras. 174 et seqq
  • [545] Ibid, paras. 174
  • [546] Ibid, paras. 177
  • [547] Ibid, para. 180
  • [548] Ibid, paras. 187 et seqq
  • [549] Ibid, paras. 201-212
  • [550] Ibid, para. 202
  • [551] Ibid, para. 203
  • [552] Ibid, para. 205
  • [553] Ibid, para. 210
  • [554] Ibid, para. 213
  • [555] Ibid, para. 215
  • [556] Ibid, paras. 216 et seqq
  • [557] Ibid, para. 217
  • [558] Ibid, para. 218
  • [559] Ibid, para. 230
  • [560] Ibid, paras. 232 et seqq
  • [561] Ibid, paras. 234 and 236 et seqq
  • [562] Ibid, paras. 240 et seqq
  • [563] Ibid, para. 239
  • [564]  Ibid, paras. 253 and 291
  • [565] Ibid, para. 291.

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. [566] 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). [566] 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. [566] 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. [567] The Intervener does not join the proceedings as a party, but merely in support of one of the parties. [568] 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. [569]

    Notwithstanding the above, under reference to the “Umweltengel für Tragetaschen” judgement of the German Federal Supreme Court (Bundesgerichtshof) [570] 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. [571] 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. [571]

    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.
  • [566] Judgement dated 14th December 2016, para. 1
  • [567] Judgement dated 14th December 2016, para. 2
  • [568] Judgement dated 14th December 2016, para. 2
  • [569] Judgement dated 14th December 2016, para. 3
  • [570] Bundesgerichtshof, Decision dated 19th February 2014, Case No. I ZR 230/12
  • [571] Judgement dated 14th December 2016, para. 5

Updated 15 October 2021

LG v TCL

LG Mannheim
2 March 2021 - Case No. 2 O 131/19

A. Facts

LG is a global electronics company headquartered in South Korea, holding a portfolio of patents declared as (potentially) essential to the practice of wireless telecommunications standards (standard essential patents, or SEPs), including 4G/LTE developed by the European Telecommunications Standards Institute (ETSI). ETSI requires from patent holders to commit to make SEPs accessible to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions.

TCL is a Chinese manufacturer of electronic devices which imports and sells – among other things – mobile phones complying with 4G/LTE in Germany.

In March 2016, LG sent a letter to the parent company of the TCL group with information about its SEP portfolio. Until August 2018, LG sent in total seven similar letters to different companies within the TCL group. TCL did not react to these letters. In March 2018, LG also shared a licensing offer with TCL, which provided for running royalty payments. Again, TCL did not respond.

In November 2019, LG filed an infringement action against TCL before the District Court of Mannheim (Court). In January 2020, after the suit was filed, TCL contacted LG for the first time. In the following, the parties negotiated a Non-Disclosure Agreement (NDA), which was signed only in May 2020. Apart from that, several meetings and communications took place, in which LG provided information about its SEP portfolio as well as about existing licensing agreements to TCL. On the other hand, TCL shared information about past sales volumes. In June 2020, TCL brought up a licensing agreement between LG and Qualcomm that had expired in December 2018 (Qualcomm licence) in the negotiations. Qualcomm supplied TCL with chipsets. TCL argued that with respect to chipsets supplied by Qualcomm and covered by the Qualcomm licence LG's patent rights were exhausted.

In July 2020, LG made a modified licensing offer to TCL that provided for a lump sum payment (instead of the running royalty payments initially offered). TCL did not accept this offer.

In November 2020, TCL made a counteroffer to LG. The counteroffer was based on a running royalty regime. With a view to the Qualcomm licence, TCL requested to include a clause in the agreement, which would allow TCL to exclude phones with chipsets acquired by suppliers already licenced by LG from the royalty calculation.

Shortly afterwards, LG made another offer to TCL that corresponded to a large extent to TCL's counteroffer. LG proposed certain amendments with respect to the royalty calculation (e.g. the addition of caps and floors) and also removed the aforementioned clause, which would have allowed TCL to exclude a number of devices sold from royalty payments.

In December 2020, TCL indicated that it would prefer a lump sum payment. Subsequently, LG made minor modifications to its previous offer. However, the parties did not reach agreement.

In January 2021, TCL placed a security payment covering sales in Germany since 2016 (including devices with Qualcomm chipsets) and rendered accounts for past sales as well.

With the present judgment [572] , the Court found in favour of LG and -among other claims- granted an injunction against TCL.
 

B. Court's reasoning

The Court found that the patent in suit is valid and infringed. [573]

The Court further held that the claim for injunctive relief asserted by LG was enforceable. [574] LG had met the obligation to adequately notify TCL about the infringement of its SEPs prior to filing the present action and had also provided TCL with a FRAND-compliant offer. [575] On the contrary, TCL had failed to adequately express willingness to obtain a FRAND licence from LG. [576]
 

Notification of infringement

The Court took the view that by the first letter dated March 2016 (or, ultimately, by the licensing offer presented in March 2018), LG had sufficiently notified TCL about the infringement of the SEP in suit prior to initiating court proceedings. [577]

The fact that the letter of March 2016 was addressed to the parent company of the TCL group (and not the individual affiliates sued in the present proceedings) was not harmful [578] . According to the Court, addressing such type of letter to the parent company corresponds to the common practice in FRAND negotiations. [578]

Furthermore, the Court did not express concerns against the fact that the letter dated March 2016 did not indicate the number of the patent in suit, but instead contained only the underlying patent application number. [579] The Court noted that by making a search in the respective database of the European Patent Office, TCL could have been able to identify that the patent in suit had been granted and published. [579] Considering this, the Court highlighted that SEP holders are under no obligation to regularly update lists displaying the individual patents included in their portfolio. [579]
 

Willingness

According to the Court, TCL failed to sufficiently express willingness to obtain a FRAND licence. [580] An implementer is required to declare 'clearly and unambiguously' as well as 'seriously and unconditionally' that it is willing to conclude a licence agreement with the SEP holder on FRAND terms and, subsequently, engage in negotiations in a 'target-oriented' manner. [581] By contrast, it is not sufficient in response to the 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. [581]

For the assessment of willingness, all circumstances should be taken into account, especially the behaviour of the implementer. [582] In particular, courts must examine whether the implementer's conduct 'reasonably promotes negotiations.' [583]

In the Court's eyes, timing in negotiations is an important factor: The implementer is regularly required to react in due course; did it refrain from expressing interest in a FRAND licence over a longer period of time, then the implementer must make 'additional efforts'. [584] In exceptional cases, a 'reluctant involvement' of the implementer in negotiations could be justified, for instance when the SEP holder itself does not engage in a target-oriented manner in the discussion (e.g. by not sharing information about its licensing practice). [585] In case that the SEP holder has made a licensing offer, the implementer should raise any concerns swiftly and not hold back potential objections for use in subsequent court proceedings. [583]

Furthermore, the implementer's counteroffer shall also be considered in the assessment of willingness. According to the Court, an implementer who – after having received a licensing offer as well as sufficient information from the SEP holder – makes a non-FRAND counteroffer indicates, as a rule, that it has no intention to reach a FRAND solution. [583] The same can apply, when the implementer insists on its counteroffer and refuses any improvements. [583]

Against this backdrop, the Court found that, in overall terms, TCL did not adequately promote the negotiations with LG. [586] The Court noted that TCL made no efforts to clarify whether, respectively to what extent the Qualcomm licence led to a (partial) exhaustion of LG's patent rights [587] . The Qualcomm licence was mentioned by TCL for the first time in June 2020 (approx. 4 years after the first contact in March 2016) and was brought up again only during the pending trial in November 2020. TCL then rejected several offers of LG to elaborate further on this issue. In the view of the Court, TCL should have tried to address this issue much earlier and in a more transparent way, particularly since the wording of the Qualcomm agreement hardly supports TCL's exhaustion argument.Ibid, para. 147. The Court found that the Qualcomm licence did not lead to the exhaustion of LG's patent rights in the present case, see paras. 95-104.

The Court also saw an indication of delaying tactics in the fact that TCL had changed opinions (especially with respect to the preferred royalty regime) in several occasions, without having processed information shared by LG on the merits. [589] A further indication of delaying tactics was the fact that TCL, as a rule, aligned its behaviour in the negotiations with developments in the pending infringement trial (e.g. TCL contacted LG for the first time only after the action was served and made its counteroffer shortly before an oral hearing in the proceedings). [590] The Court noted as well that it took TCL almost four months to sign the NDA with LG, although it should have undertaken additional efforts to promote negotiations, given that at that point in time TCL had already delayed the beginning of the negotiations with LG for several years. [591]

In addition, the Court considered the fact that TCL had made a non-FRAND counteroffer to LG as a further indication that TCL had not sufficiently engaged in the licensing negotiations. [592] According to the Court, TCL's counteroffer was not FRAND, because the 'commercially significant' question whether the Qualcomm licence caused a (partial) exhaustion of LG's patent rights was left aside to be addressed in subsequent negotiations or court proceedings between the parties. [593]

The Court highlighted that FRAND is, in principle, a range; FRAND can differ from sector to sector and over time and shall be determined based on the individual circumstances of each case in good faith bilateral negotiations between the parties. [594]

In the view of the Court, a counteroffer that leaves a controversial question with 'significant impact' on the amount of the royalties payable unanswered is, regularly, not appropriate. [595] By signing a licensing agreement on that basis, the implementer would legitimize the use of the patents (and, consequently, no longer face the risk of an injunction), while, at the same time, preserve the right to withhold part of the royalty payments until the disputed question has been answered in future negotiations or court proceedings. [595] Such a counteroffer would resemble an offer pursuant to Section 315 of the German Civil Code, which – according to the Court – is also not sufficient for establishing implementer's willingness to enter into a FRAND licence. [596] Insofar, the Court pointed out that in Huawei v ZTE [597] the Court of Justice of the EU required from the implementer to make a 'specific counteroffer', which implies that the royalties must either be defined in the counteroffer itself or can be determined in due course. [598]

In the present case, TCL had preserved the right to exclude mobile phones with Qualcomm chipsets sold until the expiration of the Qualcomm licence from the calculation of the release payment covering past sales. From LG's perspective, this left the key question open whether TCL was prepared to pay royalties calculated under consideration of the respective mobile phones or not. This question was significant, since – according to the Court – the exclusion of mobile phones with Qualcomm chipsets could lead to a significant reduction of the amount of the release payment, given that such handsets accounted for a substantial share of the overall TCL sales. [599]
 

SEP holder's offer

The Court further found that LG could not be held responsible for TCL's missing willingness to obtain a FRAND licence; on the contrary, LG had met all its conduct obligations. [600] In particular, the Court pointed out that LG had made several FRAND-compliant licensing offers to TCL and had also been prepared to adapt its offers for the benefit of TCL. [600]

The Court held that the royalties suggested by LG (especially in its final offer) led to a total royalty burden within the frame generally accepted within the wireless telecommunications sector. [601] Furthermore, the fact that LG had concluded two licensing agreements with other implementers on the terms offered to TCL was considered by the Court as an indication that said terms are not 'evidently non-FRAND', even though LG had not formed a standard licensing programme established in the market yet. [602]
 

Provision of security

Having found that TCL had acted as an unwilling licensee, the Court did neither examine whether the amount of the security payment provided by TCL (that covered past sales only in Germany) was sufficient nor whether this payment was belated or not. [603]

  • [572] LG v TCL, District Court of Mannheim, 2 March 2021, Case-No. 2 O 131/19 (cited by GRUR-RS 2021, 6244).
  • [573] Ibid, paras. 49-104
  • [574] Ibid, paras. 111 et seqq.
  • [575] Ibid, paras. 117 and 158 et seqq.
  • [576] Ibid, para. 117.
  • [577] Ibid, para. 118.
  • [578] Ibid, para. 121.
  • [579] Ibid, para. 122.
  • [580] Ibid, para. 123. et seqq
  • [581] Ibid, para. 124.
  • [582] Ibid, para. 125.
  • [583] Ibid, para. 126.
  • [584] Ibid, para. 127.
  • [585] Ibid, para. 128.
  • [586] Ibid, paras. 129-130 and 142 et seqq.
  • [587] Ibid, paras. 144 et seqq.
  • [588] Ibid, para. 147. The Court found that the Qualcomm licence did not lead to the exhaustion of LG's patent rights in the present case, see paras. 95-104.
  • [589] Ibid, paras. 152 et seq.
  • [590] Ibid, para. 154.
  • [591] Ibid, para. 155.
  • [592] Ibid, paras. 129 et seq.
  • [593] Ibid, para. 130.
  • [594] Ibid, para. 132.
  • [595] Ibid, para. 133.
  • [596] Ibid, para. 134. Under Section 315 of the German Civil Code the patent holder can be granted the right to unilaterally determine the royalties payable under the licence. The implementer preserves, however, the right to challenge such determination before court. The final amount of the royalty payable will, ultimately, be decided by the court in trials following the conclusion of the licensing agreement.
  • [597] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [598] LG v TCL, District Court of Mannheim, 2 March 2021, Case-No. 2 O 131/19, para. 133.
  • [599] Ibid, paras. 136 et seq.
  • [600] Ibid, para. 157.
  • [601] Ibid, para. 160.
  • [602] Ibid, para. 161.
  • [603] Ibid, para. 156.