Case Law post CJEU ruling Huawei v ZTE

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Updated 10 April 2019

Huawei v ZTE

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

A. Facts

The Claimant, Huawei Technologies Co. Ltd., holds a patent declared as essential to the practice of the LTE wireless telecommunication standard (Standard Essential Patent, or SEP) developed by the European Telecommunications Standards Institute (ETSI) [1] . In March 2009, the Claimant committed towards ETSI to make the patent in question accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [2] .

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

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

In April 2011, the Claimant brought an action against the Defendants before the District Court (Landgericht) of Düsseldorf (District Court), seeking for injunctive relief, the rendering of accounts for past uses, the recall of products and an award for damages for patent infringement [6] .

The District Court stayed its proceedings and submitted a reference for a preliminary ruling under Article 267 of the Treaty on the Functioning of the European Union (TFEU) to the Court of Justice of the European Union (CJEU). In brief, the District Court noted that the German Federal Court of Justice (Bundesgerichtshof) and the European Commission appeared to have adopted conflicting positions on the question under which conditions an action for a prohibitory injunction brought by a SEP holder against a SEP user constitutes an abuse of dominant position in violation of Article 102 TFEU [7] : In its Orange Book ruling, the German Federal Court of Justice held that, in infringement proceedings concerning SEPs, the defendant is entitled to raise a defence under Article 102 TFEU (and thus avoid an injunction), only and insofar as it submits an unconditional, fair offer to conclude a licence to the patent holder, accounts for past acts of use and also makes a deposit on the royalty payments resulting thereof [8] . The European Commission, on the other hand, in proceedings relating to enforcement actions taken by Samsung against Apple in a number of EU member states, took the view that an action for injunctive relief concerning a SEP may, in principle, infringe Article 102 TFEU to the extent to which the defendant has demonstrated his willingness to negotiate a licence on FRAND terms in accordance with the patent holder’s FRAND commitments [9] .

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

  • firstly, notified the user about the infringement of its patent ‘by designating that patent and specifying the way in which it has been infringed’, and
  • secondly, if the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, presented to that infringer a specific, written offer for a licence on such terms, specifying, in particular, the royalty and the way in which it is to be calculated[10] .

By contrast, the SEP user may invoke the abusive nature of a patent holder’s action for a prohibitory injunction and/or for the recall of products, only if it responds to SEP holder’s offer without delay [11] . In case that the patent user rejects that offer, it has to

  • submit ‘promptly and in writing, a specific counter-offer that corresponds to FRAND terms’ to the patent holder [12] and
  • if its counter-offer is rejected, provide appropriate security for the use of the patent(s), ‘for example by providing a bank guarantee or by placing the amounts necessary on deposit[13] .

The CJEU made clear that the above framework does not apply to SEP holders’ claims for damages and/or the rendering of accounts in relation to past acts of use; actions concerning these claims cannot infringe Article 102 TFEU, since they have no impact on whether standard compliant products can appear or remain on the market [14] .

B. Court’s Reasoning

The CJEU stressed the need to balance, on the one hand, the effective judicial protection of SEP holders’ fundamental intellectual property rights (IPRs) and, on the other hand, the public interest in free undistorted competition [15] .

Since the parties had not contested that the Claimant held a dominant market position, the Court’s analysis focused on the existence of an ‘abuse’ in terms of Article 102 TFEU [16] . According to the CJEU, the exercise of an IPR cannot ‘in itself’ be abusive, even if it is the act of an undertaking holding a dominant position [17] . Moreover, an action for the enforcement of an IPR can constitute an abuse of dominant position only in “exceptional circumstances[18] .

Cases, in which SEPs are involved, distinguish themselves from other IPR-related cases: First, the fact that the patent has obtained SEP status means that the patent holder can ‘prevent products manufactured by competitors from appearing or remaining on the market and, thereby, reserve to itself the manufacture of the products in question[19] . Besides that, by making a FRAND commitment, the patent holder has created ‘legitimate expectations’ to third parties implementing the standard that the SEP will be accessible on FRAND terms [19] . Having regard to the ‘legitimate expectations’ created, the patent user sued in infringement proceedings can, in principle, defend himself by invoking Article 102 TFEU, in case that the SEP holder refused to grant him a FRAND licence [20] .

Although the SEP holder cannot be deprived of its rights to have recourse to legal proceedings for the protection of its IPRs, the CJEU found that the FRAND undertaking justifies the imposition of an obligation on the SEP holder to comply with specific requirements, when seeking for injunctive relief [21] . In particular, in order to avoid a violation of Article 102 TFEU, the SEP holder should meet the following conditions: (a) prior to the filing of an action for a prohibitory injunction, it must notify the user about the infringement ‘by designating that SEP and specifying the way in which it has been infringed[22] , and (b) submit a specific written offer for a licence on FRAND terms to the user, particularly specifying ‘the royalty and the way in which it is to be calculated’, if the latter has expressed its willingness to enter into such a licence [23] . In this context, the CJEU observed that the SEP holder can be expected to make such an offer, since it is ‘better placed to check whether its offer complies with the condition of non-discrimination than is the alleged infringer’, because, as a rule, no public standard licensing agreement exists and the terms of existing agreements entered by the SEP holder with third parties are not made public [24] .

On the other hand, the (alleged) infringer must diligently respond to the SEP holder’s offer, ‘in accordance with recognised commercial practices in the field and in good faith’ [11] . Whether this is the case must be established on the basis of ‘objective factors’, which implies, in particular, that there are no ‘delaying tactics[11] .

In case that the infringer finds the proposed terms as falling short of the patent holder’s FRAND commitment and chooses to reject the SEP holder’s licensing offer, it must submit a specific written counter-offer on FRAND terms to the SEP holder [12] . If the counter-offer is rejected and the (alleged) infringer already used the SEP in question without a licence, it is obliged to provide ‘appropriate security, in accordance with recognised commercial practices in the field, for example by providing a bank guarantee or by placing the amounts necessary on deposit[13] . The calculation of that security must include, inter alia, ‘the number of the past acts of use of the SEP’, and the alleged infringer must be able to render accounts in respect of those acts of use [13] .

When no agreement is reached following the counter-offer by the (alleged) infringer, the CJEU pointed out that the parties have the option, to request ‘by common agreement’ that the amount of the royalty be determined ‘by an independent third party, by decision without delay[25] .

Finally, the CJEU made clear that the (alleged) infringer is allowed to challenge the validity and/or the essentiality and/or the actual use of SEP holder’s patents in parallel to the licensing negotiations, or to reserve the right to do so in the future [26] .


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

Updated 6 June 2019

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

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

A. Facts

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

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

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

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

In the Netherlands, Philips had brought an action against Asus before the District Court of The Hague (District Court), requesting inter alia for an injunction. The District Court dismissed Philips’s request for an injunction based on the EP 511 patent. [1] Philips appealed before the Court of Appeal of The Hague (Court of Appeal).

With the present judgment, the Court of Appeal upheld the validity and essentiality of the EP 511, rejected Asus’s FRAND defence based on Article 102 TFEU, and entered an injunction against Asus for its products infringing the patent in suit. [2]

B. Court’s Reasoning

The Court of Appeal dismissed Asus’s invalidity challenge, upholding the novelty and inventiveness of the EP 511 patent. [3] Moreover, the Court of Appeal found the patent essential and infringed. [4]

The Court of Appeal went on to examine the claims put forward by Asus, namely that Philips, in initiating infringement proceedings requesting injunctive relief, had violated its contractual FRAND obligations towards ETSI and infringed Article 102 TFEU, by failing to meet the requirements set forth in the decision of the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE (Huawei requirements) [5] . In particular, Asus argued that Philips (a) failed to properly and timely disclose the EP 511 in accordance with ETSI IPR Policy, and (b) that Philips failed to comply with the Huawei requirements, because it did not clarify why its proposed terms were FRAND.

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

Starting with the general purpose underlying the ETSI disclosure obligation, the Court of Appeal found that it was not—as Asus maintained—to allow ETSI participants to choose the technical solutions with the lowest cost, since ETSI standards seek to incorporate the best available technologies. [6] Rather, the purpose of the declaration obligation was to reduce the risk of SEPs being ex post unavailable to users. [7]

Having said that, the Court of Appeal found that the general blanket declaration by Philips was sufficient to fulfil its obligations under the ETSI IPR Policy. In this regard, the Court of Appeal dismissed the argument raised by Asus that Philips’s late declaration of specific SEPs would result in over-declaration: on the contrary, the Court of Appeal held, early disclosure is more likely to include patents that are not in fact essential to ETSI standards. [8] Moreover, the Court of Appeal pointed out that Philips’s blanket declaration did not infringe Article 101 TFEU, as per the Horizontal Guidelines by the EU Commission, blanket declarations are also an acceptable form of declaration of SEPs for the purposes of EU competition law. [9]

Having dismissed Asus’s first ground for a FRAND defence, the Court of Appeal assessed the compliance of both parties with the Huawei requirements in their negotiations. The Court of Appeal noted, as a preliminary point, that the decision of the CJEU in Huawei did not develop a strict set of requirements such that patent holders that failed to abide by they would automatically infringe Article 102 TFEU. [10] For such a finding an overall assessment of the particular circumstances of the case and the parties’ conduct is necessary.

The Court of Appeal then examined Philips’s compliance with the first Huawei requirement, the proper notification to the infringer. According to the Court of Appeal, the case record showed that Philips had clearly discharged its burden to notify Asus, by submitting a list of patents that were allegedly infringed, the standards to which they were essential, and by declaring its willingness to offer a licence on FRAND terms. [11] Moreover, in further technical discussions, Philips provided more technical details on its portfolio and licensing program, including claim charts and its standard licensing royalty rate. [12] However, Asus failed to demonstrate its willingness to obtain a licence on FRAND terms. The Court of Appeal found that talks commenced always at Philips’s initiative, and that Asus was not represented in these talks by technical experts able to evaluate Philips’s portfolio. [13] The technical issues raised by Asus in negotiations were merely pretextual with a view to stall the process, or as the Court of Appeal put it a ‘behaviour also referred to as “hold-out.”’ [14]

Although the Court of Appeal held that at this point Asus was already in breach of its obligations under Huawei and thus Philips was entitled to seek an injunction, the Court went on to discuss compliance with the further steps in the Huawei framework. The Court of Appeal found that Philips’s proposal of its standard licensing agreement fully satisfied the CJEU requirements in that it was specific and explained how the how the proposed rate was calculated. [15] Moreover, the Court of Appeal held that the counteroffer submitted by Asus after the initiation of proceedings in Germany did not in itself alter the conclusion that Philips was compliant with Huawei, and thus entitled to seek an injunction. [16] Finally, the Court rejected the request on behalf of Asus to access comparable licences signed by Philips to assess the latter’s FRAND compliance. According the Court, neither the ETSI IPR Policy nor Article 102 TFEU and the Huawei framework provide a basis for such a request. [17]

  • [1] Koninklijke Philips N.V. v. Asustek Computers INC, District Court of the Hague, 2017, Case No. C 09 512839 /HA ZA 16-712.
  • [2] Koninklijke Philips N.V. v. Asustek Computers INC, Court of Appeal of The Hague, judgment 7 May 2019, dated Case No. 200.221.250/01.
  • [3] ibid, paras 4.63, 4.68, 4.75, 4.80, 4.82, 4.93, 4.100, and 4.117.
  • [4] ibid, paras 4.118 et seq.
  • [5] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case-No. C-170/13.
  • [6] Koninklijke Philips N.V. v. Asustek Computers INC, Court of Appeal of The Hague, judgment 7 May 2019, dated Case No. 200.221.250/01, paras 4.153 et seq.
  • [7] ibid, paras 4.155 and 4.157.
  • [8] ibid, para 4.159.
  • [9] ibid, para 4.164.
  • [10] ibid, para 4.171.
  • [11] ibid, para 4.172.
  • [12] ibid.
  • [13] ibid, paras 4.172-4.179.
  • [14] ibid, para 4.179.
  • [15] ibid, para 4.183.
  • [16] ibid, para 4.185.
  • [17] ibid, paras 4.202 et seq.

Updated 2 August 2019

Philips v Wiko, Court of Appeal of The Hague

Dutch court decisions
2 July 2019 - Case No. C/09/511922/HA ZA 16-623

A. Facts

By letter dated 13 October 2013, the Claimant, Koninklijke Philips N.V. (“Philips”), informed the Defendant, Wiko SAS (“Wiko”), that it holds patents declared essential to the UMTS and LTE mobile telecommunication standards (Standard Essential Patents or “SEPs”) towards the European Telecommunications Standards Institute (“ETSI”). The letter included a list of some of Wiko’s products and invited Wiko to discuss a FRAND licensing agreement [1] . Wiko did not react to the letter [2] .

On 28 July 2015, Philips sent Wiko claim charts and a licensing agreement [3] . The communication remained unanswered by Wiko [2] .

On 19 October 2015, Philips started the present proceedings against Wiko [4] . On 25 August 2016, Wiko made a counteroffer [5] . Since 2016, it has also provided information about worldwide units sold and blocked an amount of EUR 895.000 into an escrow account [2] .

After the present proceedings were filed, Philips brought a further action against Wiko before the District Court of Mannheim (Mannheim Court), Germany (German proceedings). On 2 March 2018, the Mannheim Court honoured Wiko’s FRAND defence and dismissed Philips’ action.

In an interlocutory decision dated 16 April 2019, the Court of Appeal of The Hague (Court) held that the patent in suit EP1 623 511 (EP 511) is valid and that Wiko is infringing this patent [6] . Wiko claimed that, as this patent is a SEP and Philips has not complied with its contractual duties, Philips is abusing its dominant position by initiating infringement proceedings against Wiko [2] .

With the present judgment, the Court granted Philips’ request for injunctive relief [7] , destruction [8] and the recall of products [9] , but partly invalidated EP 511, insofar it goes beyond the claims of the second auxiliary request [10] .

B. Court’s reasoning

German Proceedings and Lis Pendens

Since the Court of Manheim in Germany had honoured its FRAND defence, Wiko argued that Articles 29 and 30 of Brussels Regulation 1215/2012 on jurisdiction and enforcement of judgements (Brussels Regulation) are applicable and that the Court is not competent for the present case [11] .

The Court rejected this argument, underlying that each national proceedings are based on a national counterpart of a European patent. For each national counterpart, the concerned national jurisdiction is exclusively competent [12] .

The fact the same FRAND defence has been raised in the German proceedings does not prevent the Court from moving on with its proceedings. The application of Articles 29 and 30 of the Brussels Regulation on cases with same object requires that the filed claims, not the raised defences, are identical [11] .

The Court concluded that recognition of the Mannheim decision would not affect the pending proceedings, as the patents at stake were not the same [13] .

Patent essentiality and infringement

Philips had declared EP 511 as essential to HSUPA (part of UMTS standard) towards ETSI on 26 November 2009 [14] . The fact that EP 511 is essential to HSUPA was not challenged by Wiko [15] .

Moreover, the interlocutory decision of the Court dated 16 April 2019 confirmed that claims 1, 9 and 12 of EP 511 are implemented in the UMTS standard [2] .

FRAND negotiations and application of the Huawei steps

The Court considers that the Huawei decision [16] does not set up strict rules, but rather guidelines for FRAND negotiations in good faith between the parties [17] .

Regarding the first step of the Huawei decision, that is the SEP-holder’s obligation to notify the implementer of the patents at stake and the infringement [18] , the Court underlines that this approach is different than what had been previously decided in a Dutch case prior to the Huawei decision, Philips v. SK Kassetten [19] .

Moving on to the next step, the Court found that Wiko had not fulfilled its duty as it did not react to Philips’ notification [20] . The Court, therefore, held that Philips was not obliged to make a licensing offer to Wiko, before starting proceedings against Wiko [2] .

FRAND offer

Nevertheless, Philips had made an offer to Wiko on 28 July 2015 [21] . This offer was for a worldwide licence under Philips’ UMTS and LTE SEPs [22] .

Philips’ expert explained that the offered rate amounting to USD 1,0 per product (non-compliant rate) and USD 0,75 per product (compliant rate) was justified in view of all UMTS and LTE SEPs [2] .

However, Wiko argued that Philips’ offer is not FRAND for the following reasons: Philips did not specify that its offer was FRAND compliant and did not explain how the offer was FRAND [23] .

Contrary to German courts, the Court held that the Huawei steps do not imply a substantiation duty [24] , but solely the duty to specify the amount of the rate and the way it is calculated [25] . It bases this reasoning on the fact that the Huawei decision has to be read in light of a previous German decision, the Orange Book Standard decision, where the German Supreme Court decided it was up to the implementer to make a first FRAND offer [2] . The Court interprets the Huawei decision as requiring the SEP-holder, as it is in a better position to do so, to make a first FRAND offer after the implementer has demonstrated itself to be a “willing licensee” [2] . But it does not require the SEP-holder to substantiate its FRAND offer and give insights on why he believes the offer is FRAND. The Court also considers there is no duty for the SEP-holder to justify its rate in view of what other licensees are paying [26] .

Wiko also challenged specific terms of the license, i.e. the suggested duration (until expiry of the last patent), the coupling of UMTS and LTE SEPs, as well as the requested fixed licence fees [27] . The Court held, however, that Wiko did not provide any evidence to support its position that Philips’ offer is not FRAND [2] . Additionally, the Court attached importance to the fact that Philips had expressed its willingness to discuss the offer and specific circumstances with Wiko [28] . Philips had even asked Wiko to make a counteroffer, which the latter did not [29] .

The Court further pointed out that the fact that there are different terms and conditions with other parties does not necessarily imply that the offer made to Wiko is discriminatory [30] . It stressed that “non-discriminatory” does not mean that every licensee must be offered the same structure and rate; the “non-discriminatory” nature of an offer depends on the facts and circumstances of the specific case [2] .

Wiko’s counteroffer

Wiko GmbH, an entity legally independent from other Wiko entities, had made a counteroffer to Philips [31] . However, the Court did not consider this counteroffer as a counteroffer made by the Defendant of the present proceedings to Philips [2] .

Besides that, the Defendant had also made a counteroffer to Philips after the start of the present proceedings [32] . This offer was based on the following estimates: the total number of UMTS and LTE SEPs was 12.000, out of which Wiko estimated that Philips holds 97 families, and the aggregated royalty rate for all SEPs amounted to 12% [33] . Wiko derived a rate of 0.001% per SEP family and made the following counteroffer to Philips [2] :

- 0.042% for the compliant rate (EUR 0.027)

- 0.066% for the non-compliant rate (EUR 0.043)

- 0.0315% for past sales (EUR 0.020).

Subsequently, Wiko made a further offer to Philips of 0.084 (which, in Philips‘ eyes, referred to a percentage) [2] .

The Court held that Wiko’s counteroffers were not FRAND. It found that the counteroffer included too many patents into the total SEPs pool, because it included base station and infrastructure patents, while Philips portfolio was focused on cellphone patents [34] . Consequently, the Court concluded that Philips held a higher percent of SEPs than estimated by Wiko [2] . It also highlighted that Wiko did not provide any explanation with respect to a proposed discount of the initially estimated rate of 0.097% and the aggregated royalty rate [34] . The Court also noticed that, while Wiko stated Philips’ rate should account for the technical and economic value of Philips’ SEPs, this analysis was missing from Wiko’s counteroffer [35] . It added that Wiko’s counteroffer did not account for the value of Philips’ SEPs in view of other SEPs for the same standard [36] .

Abuse of a dominant position

The Court held that the Huawei case requires that the facts and circumstances of a case have to be assessed to determine if there is an abuse of a dominant position [17] . Furthermore, the Court also referred to the decision of the UK High Court of Justice in Unwired Planet v. Huawei to note that the fact that the circumstances of a case diverge from the Huawei scheme does not automatically lead to the conclusion of an abuse of a dominant position, if the SEP-holder, nonetheless, files an action against an implementer [2] .

The Court expressly pointed out that if starting proceedings is considered as an abuse of a dominant position, then implementers have no incentives to comply with the Huawei steps and can just delay the negotiations [37] .

With respect to the asserted claims for injunction and recall of products, the Court found that the facts and circumstances of this case were different from the German proceedings, where the Mannheim Court viewed Wiko as a “willing licensee” [38] .

Wiko did not demonstrate itself to be a “willing licensee”, as it did not react to Philips’ notification, and did not comply with the required Huawei steps. Therefore, the Court rejected Wiko’s FRAND defence and granted Philips’ request for an injunction and recall of products.

  • [1] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.1
  • [2] Ibidem
  • [3] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.2
  • [4] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.3
  • [5] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.4
  • [6] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 3.1
  • [7] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.1
  • [8] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.4
  • [9] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.3
  • [10] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.8
  • [11] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.1
  • [12] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.2
  • [13] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.3
  • [14] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraphs 4.5 and 4.6
  • [15] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.5
  • [16] Huawei v ZTE, Court of Justice of the EU, judgement dated 16 July 2015, Case No. C-170/13.
  • [17] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.14
  • [18] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.10
  • [19] Case reference: Court of The Hague, Philips v. SK Kassetten, 17 March 2019, referred to in Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.10.
  • [20] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.15
  • [21] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.16
  • [22] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.27
  • [23] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.17
  • [24] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.18 and 4.19
  • [25] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.18
  • [26] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.19
  • [27] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.31
  • [28] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraphs 4.26, 4.31, 4.32, 4.36
  • [29] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.36
  • [30] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.34
  • [31] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.20
  • [32] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.4
  • [33] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.38
  • [34] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.40
  • [35] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.39
  • [36] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.41
  • [37] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.21
  • [38] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.22

Updated 7 May 2019

TQ Delta v Zyxel Communications, UK High Court of Justice

English court decisions
18 March 2019 - Case No. HP-2017-000045 - [2019] EWHC 745 (Pat)

A. Facts

The Claimant, TQ Delta LLC, holds patents which have been declared as essential to the practice of certain xDSL standards under the ITU Recommendations (Standard Essential Patents, or SEPs). The ITU Recommendations require from the SEP holder to make its patents accessible to users on Reasonable and Non-Discriminatory (RAND) terms and conditions.

The Defendants, Zyxel Communications Ltd. and Zyxel Communications A/S, manufacture and sell various types of equipment complying with the DSL standard.

In 2013, the Claimant approached the Defendants, seeking to license its SEPs. Since it failed to reach agreement, the Claimant issued infringement proceedings against the Defendants in the United States. Subsequently, the Claimant brought an infringement action against the Defendants before the UK High Court of Justice (Court) based on two SEPs it holds, asking inter alia for injunctive relief. These proceedings involved, on the one hand, technical issues concerning the validity, essentiality and infringement of the patents in suit (technical trial) and, on the other hand, the licensing of these patents on RAND terms (RAND trial).

The Defendants did not make any payments to the Claimant [200] . During the course of the proceedings, the Defendants also refused to confirm that they would take a (global or UK) licence on whatever terms the Court determined to be RAND [201] .

The Court proceeded in both the technical and RAND trial in parallel [202] . On 11 March 2019, the Court delivered its judgement in the technical trial: it found that one of the patents in suit was valid, essential and infringed, whereas the other patent in suit was invalid but would have been essential and infringed had it been valid [203] . The patent that was found valid, essential and infringed expires on 25 June 2019 [204] . The RAND trial is listed for September 2019.

On 18 March 2019, the Court considered the form of order arising from the technical trial [205] . The Court granted an immediate injunction against the Defendants. It refused to stay the injunction or order a carve-out of the injunction allowing the Defendants to process certain existing clients’ orders referring to infringing products. Finally, the Court also refused to grant the Defendants permission to appeal in this case [206] .


B. Court’s reasoning

When considering whether an injunction should be granted in the present case, the Court placed particular emphasis on the Defendants’ conduct. The Court held that there were no grounds to deny an injunction, since the Defendants engaged in ‘hold-out’: they have been infringing one of the two patents in suit for many years without paying any royalties to the Claimant and have also refused to submit to the outcome of an appropriate RAND determination by the Court [207] .

In the Court’s eyes, denying an injunction in these circumstances would be ‘unjust’ [208] , because it ‘would enable ZyXEL [the Defendants] to benefit from their strategy of hold-out’, since they ‘would avoid an injunction, and if the terms of a [F]RAND licence are not as they wish, could refuse to enter into a licence on the terms deemed appropriate by the Court’ [208] . Moreover, depriving the Claimant of injunctive relief would, ‘in effect, amount to a compulsory licence by the court’ which according to the Court would be ‘wrong in principle’ [209] . Against this background, the Court rejected the Defendants’ submission that the grant of an injunction would be disproportionate due to the fact that the patent in suit would expire a few months after the Court’s decision.

Besides that, the Court found that there were no grounds either for staying the injunction for one month, as the Defendants requested, or for granting a carve-out of the injunction to allow the Defendants to fulfil certain existing clients’ orders [210] . The Defendants had not produced sufficient evidence allowing an assessment of any disadvantages potentially arising from the immediate enforcement of the injunction [211] .

Furthermore, the Court refused to grant the Defendants permission to appeal from the grant of an injunction. The Court considered that it would be ‘wrong’ to grant permission, since the Court of Appeal had already set forth the correct general principles in its recent decision in the matter Unwired Planet v Huawei [212] . What is more, in the Court’s view, an appeal would not have any prospects of success; the decision to grant an injunction is an exercise of discretion, from which it is, in general, difficult to appeal. In addition, the Court’s decision was well founded, since refusing an injunction ‘would amount to a compulsory licence of the patentee's exclusive rights and deprive it of meaningful protection in circumstances where the Defendants have elected not to enforce the [F]RAND undertaking’ [213] .

  • [200] TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 18 March 2019, para. 6.
  • [201] Ibid, para. 10.
  • [202] See TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 21 November 2017, [2017] EWHC 3305 (Pat). Summary available at www.4ipcouncil.com.
  • [203] See TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 11 March 2019, [2019] EWHC 562 (ChD).
  • [204] TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 18 March 2019, para. 2.
  • [205] During the course of the RAND trial, the Court had rendered interim rulings concerning particularly the treatment of potentially confidential information in the proceedings; see TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 13 June 2018, [2018] EWHC 1515 (Ch); judgement dated 28 September 2018, [2018] EWHC 2577 (Pat) and judgment dated 11 October 2018, [2018] EWHC 2677 (Pat). Summaries of the above judgments are available at www.4ipcouncil.com.
  • [206] TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 18 March 2019, para. 19.
  • [207] Ibid, para. 12.
  • [208] Ibid, para. 13.
  • [209] Ibid, para. 14.
  • [210] Ibid, para. 15.
  • [211] Ibid, paras. 16 et seqq.
  • [212] Unwired Planet v Huawei, UK Court of Appeal, judgement dated 23 October 2018, Case No. A3/2017/1784, [2018] EWCA Civ 2244, paras. 53 and 54. Summary available at www.4ipcouncil.com.
  • [213] TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 18 March 2019, para. 22.