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Updated 10 April 2019

Huawei v ZTE

CJEU decisions
16 July 2015 - Case No. C-170/13

A. Facts

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

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

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

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

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

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

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

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

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

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

B. Court’s Reasoning

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

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

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

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

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

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

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

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


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

Updated 19 October 2020

Continental v Nokia

OLG Munich
12 December 2019 - Case No. 6 U 5042/19

A. Facts

Nokia holds a number of patents declared essential to the practice of 3G and 4G wireless telecommuni- cations standards (Standard Essential Patents, or SEPs). Daimler is one of the world’s largest motor car manufacturers. Continental, a worldwide group of companies with headquarters in Germany, is a supplier of Daimler.

In March 2019, Nokia filed ten patent infringement actions against Daimler before the District Courts of Munich, Duesseldorf and Mannheim in Germany based on several of its German SEPs (German infringement proceedings). Following third-party notices issued by Daimler, two companies of the Continental group joined the German infringement proceedings as interveners (the German subsidiary Continental Automotive GmbH and the Hungarian subsidiary Continental Automotive Hungary Kft.).

On 10 May 2019, a further subsidiary of the Continental group based in the United States, Continental Automotive Systems Inc. (Continental US), brought an action against Nokia and others before the US District Court for the Northern District of California (US Court), accusing Nokia of antitrust violations.

On 12 June 2019, Continental US also filed a motion for an anti-suit injunction, asking the US Court to enjoin Nokia from prosecuting the German infringement proceedings (US motion for anti-suit injunction). The US Court gave Nokia the possibility to respond to the motion for an anti-suit injunction within a deadline expiring on 24 July 2019.

On 9 July 2019, Nokia filed a motion for a preliminary injunction before the District Court of Munich (District Court). Nokia requested the District Court to order Continental US to withdraw the US motion for an anti-suit injunction and to refrain from applying for an anti-suit injunction or similar measures in the future. In addition, Nokia requested an order against the German parent company of the Continental group (Continental Germany), enjoining -among other things- the latter to ensure that Continental US will withdraw the US motion for anti-suit injunction.

On 11 July 2019, the District Court granted Nokia’s request for a preliminary injunction against Continental US [27] .

On 30 July 2019, the District Court issued also an injunction against Continental Germany, ordering the latter to make sure that its affiliate will withdraw the US motion for anti-suit injunction [28] . Continental Germany appealed this decision.

On 3 September 2019, Continental US withdrew the US motion for anti-suit injunction. On 8 October 2019, however, Continental US filed a motion for a Temporary Restraining Order (TRO) against Nokia before the US Court, asking the court to enjoin Nokia from asserting its patents in Germany against companies of the Continental group and their clients. This motion was rejected.

With the present judgment dated 12 December 2019 [29] (cited by https://www.gesetze-bayern.de/Content/Document/Y-300-Z-BECKRS-B-2019-N- 33196?hl=true&AspxAutoDetectCookieSupport=1)., the Higher District Court of Munich (Appeal Court), dismissed the appeal of Continental Germany and confirmed the injunction granted by the District Court on 30 July 2019.


B. Court’s reasoning

The Appeal Court found that Nokia was entitled to an injunction against Continental Germany, in order to prevent a direct unlawful threat to its property rights.

Under German law, an anti-suit injunction or a TRO granted by the US Court would unlawfully infringe Nokia’s property rights: Nokia would be deprived of its right to enforce the exclusivity arising from its patents against Daimler in the pending German infringement proceedings [30] .

The threat to Nokia’s property right emerging from such measures is still urgent, although Continental US had withdrawn the US motion for anti-suit injunction in the meantime. In the Appeal Court’s eyes, the new motion for a TRO filed by Continental US against Nokia indicated that the former had not abandoned the respective strategy yet [31] .

The fact that Continental US – and not Continental Germany – had initiated both motions, did not exclude an injunction against the latter [32] . The Appeal Court confirmed the District Court’s view that Continental Germany was to be considered as ‘co-perpetrator’ of the motions filed by its affiliate in the US, since it had not provided any evidence to counter Nokia’s pleadings suggesting that Continental US acted with the knowledge/consent of its German parent company [33] .

Furthermore, the Appeal Court made clear that the ‘anti-anti-suit injunction’ granted by the District Court in first instance was legally admissible [34] . Continental Germany had, basically, argued that the District Court’s injunction should not have been granted in Germany, since it had the same effect as the US anti- suit injunction, namely depriving Continental US from asserting its rights in court proceedings in the US.

Insofar, the Appeal Court disagreed with the District Court, which had ruled that a German anti-anti-suit injunction was admissible, because it concerned only an auxiliary motion filed by Continental US (motion for an anti-suit injunction) and, thus, had no effect on the main proceedings initiated against Nokia in the US [35] . The Appeal Court held that, as a rule, it is not justified to prevent a party from pursuing even auxiliary motions by court order [36] .

The Appeal Court took, however, the view that the German anti-anti-suit injunction was admissible, since it was -as Nokia had argued- the ‘only effective means of defence’ against an US anti-suit injunction [37] . Moreover, in the present case, it was justified to allow Nokia’s interest to defend itself against an unlawful legal measure to prevail over the interest of Continental US to preserve its freedom to act [38] .

Furthermore, the fact that Nokia was, in principle, in the position to participate in the US proceedings for an anti-suit injunction did not speak against granting an anti-anti-suit injunction to Nokia in Germany. Reason for that was, according to the Appeal Court, that the implications of an anti-suit injunction on Nokia’s right to proceed with the German infringement proceedings would not have been a factor considered by the US Court, when deciding on the motion for an anti-suit injunction filed by Continental US [39] . Nokia, would, therefore, not be able to sufficiently defend its rights in the proceedings before the US Court.

Equally irrelevant for the present case was the fact that the US anti-suit injunction would most likely not be enforceable in Germany [39] . The Appeal Court pointed out that the penalties which Nokia would be required to pay in the US in case of non-compliance with an anti-suit injunction would, in fact, force Nokia to stop asserting its patents in the German infringement proceedings [40] .

In addition, the Appeal Court found that the ‘anti-anti-suit injunction’ granted by the District Court in Germany did not violate international law, since it did not have any direct impact on the jurisdiction of the US courts and, accordingly, did not question US sovereignty [41] .

Finally, the Appeal Court highlighted that the decision of the District Court did neither violate European law. European law was not even applicable here, since the case involved the infringement of German patent rights by a domestic entity [42] .

  • [27] Nokia v Continental, District Court of Munich, Order dated 11 July 2019, Case-No. 21 O 3999/19.
  • [28] Nokia v Continental, District Court of Munich, Order dated 30 July 2019, Case-No. 21 O 9512/19.
  • [29] Nokia v Continental, Higher District Court of Munich, decision dated 12 December 2019, Case-No. 6 U 5042/19
  • [30] Ibid, para. 55.
  • [31] Ibid, para. 56.
  • [32] Ibid, paras. 76 et seqq.
  • [33] Ibid, paras. 81 et seqq.
  • [34] Ibid, paras. 58 et seqq.
  • [35] Ibid, paras. 59 et seqq.
  • [36]  Ibid, paras. 59 et seqq.
  • [37] Ibid, paras. 69 and 72.
  • [38] Ibid, para. 69.
  • [39]  Ibid, para. 70.
  • [40] Ibid, para. 71.
  • [41] Ibid, para. 73.
  • [42] Ibid, para. 74.

Updated 9 November 2020

Sharp v Daimler

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

A. Facts

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

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

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

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

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

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

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

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

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

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

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

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

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

With the present judgment [43] (cited by https://www.gesetze-bayern.de/Content/Document/Y-300-Z-BECKRS-B-2020-N-22577?hl=true), the Court granted an injunction against Daimler and also recognised Daimler's liability to pay damages on the merits. The Court further ordered Daimler to recall and destroy infringing products, render accounts and provide information necessary for the calculation of damages to Sharp.


B. Court's reasoning

The Court found that the patent-in-suit is essential to the practice of the 4G/LTE standard [44] and infringed [45] . For this reason, Sharp was entitled -among other claims- to injunctive relief [46] .

Daimler asserted a so-called 'FRAND-defence', basically, arguing that by filing an infringement action, Sharp abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) and should, therefore, be denied an injunction. Among other points, it was argued that Sharp had failed to comply with the conduct requirements established by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [47] (Huawei decision, or framework).

The Court dismissed the FRAND-defence raised by Daimler and also found that Daimler could not rely on a FRAND-defence derived from its suppliers [48] .

Abuse of market dominance

According to the Court, an abuse of market dominance by the enforcement of SEPs can occur, if the patent holder did not make 'sufficient efforts' to satisfy the 'particular responsibility' attached to its dominant position and facilitate the signing of an agreement with a licensee, which is 'in principle willing to take a licence' [49] . This requires, however, that the implementer, who already uses the protected technology without authorization by the right holder, is willing to take a licence on FRAND terms [50] . The Court explained that it cannot be requested by the SEP holder to 'impose' a licence to any standards user [50] .

Based on the above, the Court found that the initiation of the present proceedings by Sharp was not abusive in terms of Article 102 TFEU [51] . The Court did not establish whether Sharp had a dominant market position, but just assumed that this was the case [51] Nevertheless, an abuse of (assumed) dominance was not given, since Daimler had failed to adequately express willingness to obtain a licence for Sharp's SEP portfolio [52] .

Willingness

The Court explained that the implementer has to 'clearly' and 'unambiguously' declare that it is willing to sign a licence with the SEP holder 'on whatever terms are in fact FRAND' and, subsequently, engage in licensing negotiations in a 'target-oriented' manner (citing Federal Court of Justice, judgment dated 5 May 2020 – Sisvel v Haier, Case No. KZR 36/17 and High Court of Justice of England and Wales, judgment dated 5 April 2017, Case No. [2017] EWHC 711(Pat) – Unwired Planet v Huawei) [50] .

This means that the implementer should not delay licensing negotiations [53] . In the eyes of the Court, this is particularly important since implementers, which already use the patented standardized technology prior to negotiations, could have the -sole or predominant- interest to delay the signing of a licence until the expiration of the patent [53] .

Having said that, the Court found that Daimler did not behave as a 'willing' licensee [52] .

Looking at Daimler's behaviour before the counteroffer to Sharp was made, the Court held that a 'clear' declaration of willingness is missing [54] . In its first response to Sharp dated 7 June 2019, Daimler did not express a commitment of any kind going beyond the general willingness to discuss a licence, if Sharp's patents were used [55] . Furthermore, Daimler's letter dated 23 July 2019 did neither contain an adequate declaration of willingness, particularly since Daimler referred Sharp -without specification- to its suppliers and insisted that Sharp is obliged to license the latter [56] . The same is true with respect to the statement dated 18 September 2019, in which Daimler again referred to its suppliers and refused to provide Sharp with information necessary for drawing up a licensing offer [57] . The Court noted that although no legal obligation to share the information requested by Sharp existed, Daimler's respective refusal made clear that it did not engage in the discussions in a 'target-oriented manner', but rather aimed at delaying the negotiations [58] . This is also confirmed by the fact that Daimler's response came almost six weeks after Sharp's respective request; the Court did not see any reason why Daimler's reaction took so long [58] .

In addition, the Court noted that the finding that Daimler acted as an 'unwilling' licensee was reinforced by Daimler's overall behaviour in the discussions with the Avanci platform [59] . The Court held that for the assessment of the 'willingness' of an implementer who raises a FRAND defence the entire conduct must be taken into account, not only facts occurring, in terms of time, directly after receipt of an infringement notification [60] . The standard for the assessment of willingness should not depend on the -rather random- fact of whether the implementer was first approached by the patent holder or took the initiative to seek a licence itself, instead [61] . Although the duties established in the Huawei judgment (one of which is to react to an infringement notification by expressing 'willingness' to obtain a licence) shall, as a rule, be followed as 'steps' in the order described by the CJEU, exceptions must be allowed on a case-by-case basis, if the parties' behaviour allows for that and a purely 'formalistic' view of the Huawei framework does not appear appropriate [62] . According to the Court this was the case here, since Daimler that had been in contact with Avanci since September 2016 and had not expressed the willingness to take a licence at any point in time [63] .

The Court further found that Daimler's counteroffer dated 17 December 2019, which was made only after the infringement action was filed, could not remedy the missing willingness [64] . In the view of the Court, the fact that the counteroffer was followed by a request towards Sharp to consent to a stay of the ongoing proceedings showed, in the present case, that Daimler only aimed at causing delay; the counteroffer could, therefore, not compensate the 'massive unwillingness' which Daimler had demonstrated up to that point in time [65] . In this respect, the Court noted that the possibility to remedy flaws during pending court proceedings (e.g. by making a counteroffer), is, in principle, given, however, under increasingly stricter conditions as the trial progresses [66] .

The Court also highlighted that, in terms of content, Daimler's counteroffer did not express a willingness to obtain a licence on 'whatever terms are in fact FRAND' [67] . By using a different 'reference point' for the royalty calculation, Daimler had counteroffered only a fraction of the fees offered by Sharp or collected by Avanci from its competitors, so that the rejection of the counteroffer was 'logically necessary' [68] .

In this context, the Court made clear that for the assessment of willingness only the behaviour of Daimler was relevant [69] . What is more, Daimler could not rely on the -alleged- willingness of the suppliers that joined the proceedings to obtain a licence from Sharp, in order to avoid an injunction [70] . Accordingly, the Court did not examine whether Daimler's suppliers had indeed acted as 'willing licensees' [70] .

Non-discrimination / licensing level

Apart from the above, the Court explained that Sharp did not act in an abusive or discriminatory manner by seeking to license only Daimler as the end device manufacturer [71] .

The Court took the view that Sharp was not obliged to license Daimler's suppliers [72] . The fact that in the (German) automotive sector it is common that suppliers take licences concerning components sold to car manufacturers, does not oblige Sharp to respect and accept this practice [73] . On the contrary, as far as its products increasingly use wireless telecommunications technologies, Daimler must accept the practices prevailing in this field which include licensing also to end device manufacturers [73] .

Irrespective of this, Sharp is under no legal duty to grant licences to component manufacturers; it is only obliged to grant 'access' to the standard, on which its SEPs read [74] . The patent holders' commitment towards ETSI creates an obligation to license SEPs to third parties [75] . The Court highlighted that this does not entail, however, an obligation to grant licences at all levels of the value chain [76] . Such an obligation does not arise either from competition nor from patent or contract law in conjunction with the FRAND undertaking towards ETSI [76] .

In particular, EU competition law does not establish an obligation to license SEPs at all levels of the value chain [77] . According to the Court, patent holders are, in principle, free to choose the level of the value chain for licensing [78] . In the Huawei judgment, the CJEU pointed out that the FRAND undertaking creates 'legitimate expectations' on the part of third parties to be licensed by the patent holder. The Court held, however, that by that no obligation to license all suppliers of an end-device manufacturer is created; access to the market does not necessarily require a licence, but just a 'possibility of legal use', which can be, for instance, given through a licence granted at the last level of the value chain, from which suppliers can draw 'have-made-rights' [78] .

The Court also explained that neither patent law dictates the level of the value chain, at which SEP licences must be granted [79] . Especially the fact that not all patents contained in a SEP portfolio are necessarily exhausted at all times at the level of component manufacturers speaks for licensing at the end-device level (in addition to the more efficient 'management' of the licensing fees which is possible in this scenario) [80] .

Finally, the Court pointed out that contract law in conjunction with the FRAND undertaking towards ETSI do not impose an obligation on the patent holder to license every interested third party [81] . Under the applicable French law, Section 6.1. ETSI IPR Policy is to be understood as establishing only an obligation to negotiate a FRAND agreement in good faith with a party seeking a licence [82] . However, by referring to 'equipment', this provision addresses only end-device manufacturers, since not all components necessarily implement the standard as a whole [83] . In the eyes of the Court, the views expressed by the European Commission in different occasions in the past do not lead to a different conclusion [84]

FRAND defence raised by suppliers

The Court further found that Daimler cannot profit from a FRAND defence raised by suppliers [85] . The defendant can rely on such defence only if the patent holder is under an obligation to license the suppliers; this does not apply, however, when the defendant is in a position to sign a licence with the SEP holder itself which sufficiently considers patent exhaustion within the relevant value chain [85] .

The Court considered that this was the case here. Daimler's suppliers did not have an own claim to be granted a licence against Sharp, but a claim for a 'legally secured access' to standardised technology which cannot be considered in favour of Daimler [86] .


C. Other issues

Furthermore, the Court ruled that there are no grounds for a limitation of Sharp's claim for injunctive relief based on proportionality considerations [87] . Daimler had argued that no injunction should be granted based on the patent in suit, since the vehicles it manufactures are 'complex' products integrating a large number of components and the telematic control unit, on which Sharp's SEPs read, is of minor importance for the car.

The Court made clear that, under German law, proportionality is a general principle of constitutional rank that is to be considered also with respect to injunctive relief, if a respective objection is raised by the defendant [88] . According to the jurisprudence of the Federal Court of Justice, an injunction might not be immediately enforceable in exceptional cases, in which the implementer would suffer hardships not justified by the patent holder's exclusionary right in violation of the principle of good faith [89] .

In the eyes of the Court, any limitation of the right to injunctive relief shall come into question 'in very few exceptional cases' and must, thus, be subject to strict conditions, not least for preserving the 'legal order' as well as 'legal certainty and predictability' [90] . A case-by-case assessment of all relevant facts must take place, whereas the overall substantive and procedural framework (including e.g. the need to provide security for the enforcement of first-instance injunctions) should be considered [90] . The Court explained that only hardships going beyond the usual consequences of an injunction can be taken into account [90] . It should be expected from the infringer to make efforts towards the signing of a licence as soon as possible and take precautions against a potential injunction after receipt of an infringement notification, at the latest [90] .

Against this background, the Court noted that even if only a single component of Daimler's vehicles might be affected in the present case, the dispute revolves around the licensing of a complex patent portfolio (either Sharp's or Avanci's portfolio) [91] . The Court was further not convinced that the features enabled by Sharp's patents were of minor importance to Daimler's vehicles, since a significant part of innovation referring to 'connected cars' relates from both technical and economic angle closely to mobile telecommunications technologies [92] . Finally, the Court also criticized the fact that Daimler did not make serious efforts for signing a licence with Sharp or Avanci [93] .

  • [43] Sharp v Daimler, District Court of Munich, judgment dated 10 September 2020, Case-No. 7 O 8818/19
  • [44] Ibid, paras. 68 et seqq
  • [45] Ibid, paras. 25 et seqq
  • [46] Ibid, para. 90
  • [47]  Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13
  • [48] Sharp v Daimler, District Court of Munich, judgment dated 10 September 2020, Case-No. 7 O 8818/19, para. 121
  • [49] Ibid, para. 124
  • [50] Ibid, para. 125
  • [51] Ibid, para. 128
  • [52] Ibid, paras. 130 et seqq
  • [53] Ibid, para. 126
  • [54] Ibid, paras. 132 et seqq
  • [55] Ibid, paras. 134 et seq
  • [56] Ibid, paras. 136 et seq
  • [57] Ibid, paras. 138 et seqq
  • [58] Ibid, para. 140
  • [59] Ibid, para. 141
  • [60] Ibid, paras. 142 et seq
  • [61] Ibid, paras. 143 et seq
  • [62] Ibid, para. 144
  • [63] Ibid, paras. 146-149
  • [64] Ibid, para. 150
  • [65] Ibid, paras. 151 and 153
  • [66] Ibid, para. 152
  • [67] Ibid, para. 154
  • [68] Ibid, paras. 154 et seqq
  • [69] Ibid, paras. 158 and 159
  • [70] Ibid, para. 158
  • [71] Ibid, paras. 161 et seqq
  • [72] Ibid, para. 162
  • [73] Ibid, para. 164
  • [74] Ibid, para. 165
  • [75] Ibid, para. 168
  • [76] Ibid, para. 169
  • [77] Ibid, paras. 170 et seqq
  • [78] Ibid, para. 171
  • [79] Ibid, paras. 173 et seq
  • [80] Ibid, para. 174
  • [81] Ibid, paras. 175 et seqq
  • [82] Ibid, paras. 177 et seqq
  • [83] Ibid, para. 178
  • [84] Ibid, paras. 180-183. The Court referred particularly to the decision of the European Commission, Case No. AT.39985 – Motorola; the Communication on the Guidelines on the applicability of Article 101 TFEU to horizontal co-operation agreements (2011/C 11/01); and the Communication on ICT Standardisation Priorities for the Digital Single Market, COM(2016) 176 final.
  • [85] Ibid, para. 167
  • [86] Ibid, para. 185
  • [87] Ibid, paras. 92-102
  • [88] Ibid, para. 93
  • [89] Ibid, para. 94
  • [90] Ibid, para. 95
  • [91] Ibid, paras. 97 et seq
  • [92] Ibid, paras. 100 et seq
  • [93] Ibid, para. 99

Updated 24 July 2020

Sisvel v Haier, Federal Court of Justice (Bundesgerichtshof)

Federal Court of Justice - BGH
5 May 2020 - Case No. KZR 36/17

A. Facts

The claimant, Sisvel, holds patents declared as (potentially) essential to the practice of several wireless telecommunications standards (Standard Essential Patents, or SEPs).

The defendants are a German and a French subsidiary of the Haier group (Haier) which has its headquarters in China. The Haier group produces and markets -among other things- electronic devices complying with the GPRS standard.

On 20 December 2012, Sisvel informed the parent company of the Haier group (Haier China) about the infringing use of Sisvel's SEPs. Sisvel provided a list of approx. 450 patents included in its portfolio and informed Haier that Sisvel offers licences for its SEPs.

On 10 April 2013, Sisvel made a commitment towards the European Telecommunications Standards Institute (ETSI) to make SEPs accessible to standards users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions.

In August and November 2013, Sisvel sent further letters with information about its licensing program to Haier China. Haier China replied to Sisvel only in December 2013. It expressed the hope to have 'a formal negotiation' with Sisvel and asked for information regarding potential discounts mentioned by Sisvel in previous communications.

In August 2014, Sisvel made a licensing offer to Haier, which was rejected in September 2014. Shortly after that, Sisvel filed an infringement action against Haier before the District Court of Duesseldorf (District Court) based on a SEP covering data transmission technology under the GPRS standard (patent in suit). As a reaction to this step, Haier filed a nullity action against the patent in suit before the German Federal Patent Court in March 2015.

On 3 November 2015, the District Court granted an injunction against Haier [94] . 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 [95] .

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 [96] . 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 [97] . 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 [98] . In March 2020, the Federal Court of Justice (FCJ or Court), basically, confirmed this decision in second instance [99] .

With the present judgment dated 5 May 2020 [100] (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 [101] .

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) [102] .

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 [103] .

The FCJ explained that a dominant market position does not arise alone from the exclusivity rights granted by a patent [104] . For this, several factors need to be considered [105] . 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 [106] .

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 [107] .

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 [108] . 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 [109] . 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 [110] . 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 [111] .

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 [112] . 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 [112] . 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 [112] .

Having said that, the Court pointed out that Sisvel's dominant market position ended, when the patent in suit expired [113] . An SEP holder is no longer dominant, if the legal power to exclude infringing products from entering a (downstream) market is no longer given [113] .

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 [114] .

The Court made clear that SEP holders are not per se prevented from enforcing the exclusivity rights arising from their patents [115] . 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 [115] . 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 [116] .

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) [117] ;

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 [118] .

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 [119] . 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 [121] . 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 [121] . 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 [122] .

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 [123] . In terms of content, the notification must name the patent(s) infringed and describe the specific infringing use and the attacked embodiments [124] . 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 [124] . As a rule, presenting claim charts, as it is often the case in practice, will be sufficient (but not mandatory) [124] .

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 [125] . This applies also to cases, in which a number of patents and standards are involved [125] .

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 [126] .

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 [127] . 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 [128] . 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 [128] . 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 [128] . 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 [129] . 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 [130] .

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) [131] . The implementer is, subsequently, obliged to engage in licensing negotiations in a 'target-oriented' manner [131] . 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 [131] .

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 [132] .

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 [133] . 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 [133] .

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 [134] .

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 [135] .

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 [136] . 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 [137] . Moreover, such an obligation would have arisen only after Haier had expressed its sincere willingness to sign an agreement with Sisvel [138] . 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 [139] . The SEP holder is not obliged to apply a ‘standard tariff’ and offer all licensees identical terms [139] . Such an obligation does not arise from the FRAND commitment towards the relevant standardisation body, which only aims at securing access to the standard [139] . 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 [139] . This is the reason why an implementer has to actively engage in licensing negotiations in a ‘target-oriented’ manner [139] .

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 [140] . 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 [140] .

In this context, the FCJ expressed the view that the SEP holder can be obliged to substantiate the FRAND conformity of its licensing request [141] . In principle, implementers bear the weight to demonstrate (both in negotiations and in court proceedings) that a licensing request is discriminatory [141] . On the other hand, patent holders have to establish that there is a justification behind an unequal treatment of licensees [141] . 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 [141] . This is particularly the case, when a portfolio licence is offered [142] . 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 [143] . The respective requirements will, however, usually not go beyond the information that should be shared with a notification of infringement [134] .

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 [144] . 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 [145] . 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 [145] .

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 [145] . 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 [146] .

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) [147] . Apart from that, the Court found, however, that Sisvel’s claim for damages against Haier was not subject to any limitations [148] .

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 [149] . 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 [149] . 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 [149] .

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 [150] . 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 [150] . 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 [150] . 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 [148] .

  • [94] Sisvel v Haier, District Court of Duesseldorf, judgment dated 3 November 2015, Case No. 4a O 93/14.
  • [95] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 13 January 2016, Case No. I-15 U 66/15.
  • [96] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [97] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 30 March 2017, Case No. I-15 U 66/15.
  • [98] Federal Patent Court, judgment dated 6 October 2017, Case No. 6 Ni 10/15 (EP).
  • [99] Federal Court of Justice, judgment dated 10 March 2020, Case No. X ZR 44/18.
  • [100] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17.
  • [101] Ibid, paras. 9 et seqq. and 59.
  • [102] Ibid, para. 52.
  • [103] Ibid, para. 54.
  • [104] Ibid, para. 56.
  • [105] Ibid, paras. 57 et seqq.
  • [106] Ibid, para. 58.
  • [107] Ibid, paras. 59 et seq.
  • [108] Ibid, para. 61.
  • [109] Ibid, para. 63.
  • [110] Ibid, para. 62.
  • [111] 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.
  • [112] Ibid, para. 64.
  • [113] Ibid, para. 65.
  • [114] Ibid, paras. 67 et seqq.
  • [115] Ibid, para. 69.
  • [116] Ibid, para. 70.
  • [117] Ibid, para. 71.
  • [118] Ibid, para. 72.
  • [119] Ibid, paras. 73 et seqq.
  • [120] 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.
  • [121] Ibid, para. 74.
  • [122] Ibid, para. 74 and 85.
  • [123] Ibid, para. 89.
  • [124] Ibid, para. 85.
  • [125] Ibid, para. 87.
  • [126] Ibid, paras. 86 et seqq.
  • [127] Ibid, paras. 91 et seqq.
  • [128] Ibid, para. 92.
  • [129] Ibid, paras. 93 et seq.
  • [130] Ibid, para. 94.
  • [131] Ibid, para. 83.
  • [132] Ibid, para. 95.
  • [133] Ibid, para. 96.
  • [134] Ibid, para. 98.
  • [135] Ibid, para. 97.
  • [136] Ibid, paras. 90 and 101.
  • [137] Ibid, para. 90.
  • [138] Ibid, para. 99.
  • [139] Ibid, para. 81.
  • [140] Ibid, para. 78.
  • [141] Ibid, para. 76.
  • [142] Ibid, para. 77.
  • [143] Ibid, para. 79.
  • [144] Ibid, paras. 101 et seq.
  • [145] Ibid, para. 102.
  • [146] Ibid, para. 105.
  • [147] Ibid, para. 108.
  • [148] Ibid, para. 112.
  • [149] Ibid, para. 109.
  • [150] 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 [151] , 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 [152] . 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.) [153] .
 

1. Competition law defence
Dominant market position

The Court held that Conversant had a dominant market position within the meaning of Article 102 TFEU [154] .

The exclusivity rights arising from a patent do not establish a dominant market position by themselves. [155] 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 [156] . In the Court's eyes, this applied to the patent in suit. [157]

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. [158] Furthermore, the additional option to get a license from the patent in suit from Avanci did not limit Conversant's market dominant position. [159]
 

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. [160] In this context, not only private interests, but also the public interest must be taken into account. [161] 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. [162]

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) [163] - 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. [164] 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. [165]

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. [166] 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. [167] 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. [168]
 

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. [169] 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. [170]
 

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'. [171]

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. [172] 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. [172]

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. [173] 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. [173]

In addition, the Court highlighted that timing in negotiations is a factor, which must be considered in the assessment of willingness as well. [174] Otherwise, implementers would lack motivation to seriously engage in negotiations in a timely manner. [175] Rigid deadlines cannot be set, a case-by-case assessment is needed. [176] 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. [176]

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. [177] A counteroffer made after the initiation of infringement proceedings will, as a rule, not be acceptable. [178] 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. [175] 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. [179]

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. [180] 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. [181]

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 [182] - Daimler had chosen to apply delaying tactics [183] .

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. [184] 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. [184]

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. [185] 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. [186]

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. [187] The Court particularly objected Daimler's choice to define the 'unwillingness' of its suppliers as a condition for signing an own licence with Conversant. [188]

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. [189]

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. [190]
 

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. [191] Moreover, it rather served as an 'alibi'. [182]

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. [191] 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. [192] 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. [193]

Besides that, the Court found that Daimler's counteroffer was, in terms of content, 'evidently not FRAND'. [194] Based on a summary analysis, the licensing fees offered by Daimler were considered to be evidently too low. [195]

The Court noted that FRAND is a range and that there are several methods for calculating FRAND royalties. [195] The Court relied on the so-called 'top-down'-approach (which both Conversant and Daimler had used). [196] 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. [197] 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. [197]

In addition, the Court pointed out that the average purchase price of the TCU is no adequate royalty base under FRAND principles. [198] The value of a SEP is reflected by a royalty, which is adequately in proportion to the value of the service provided. [199] 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. [199] As a consequence, relevant is the value, which Daimler's customers attach to the LTE-based features in a car. [199] The purchase price of TCUs paid by Daimler to its suppliers does not mirror this value. [199]
 

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. [200]

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. [201] 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). [202] 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. [203] 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. [203]

In line with the above, the Court confirmed that by seeking to license Daimler, Conversant did not act in an abusive or discriminatory way. [204]

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. [205] 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. [205] 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. [206]

The Court added that the SEP holder is free to decide against which infringer within a supply chain court proceedings will be initiated. [207] 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. [208]

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. [209] Respective agreements between end-device manufacturers and suppliers have only bilateral (contractual) effects and cannot impair the legal position of third parties. [209] In particular, they cannot limit the SEP holder's right to choose the level of the value chain for the assertion of its patents. [210] 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. [210]

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. [211] 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. [212] 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. [213]

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. [214] In the present case, the Court did not see sufficient grounds for such abuse. [214] It was not convinced that -absent an own bilateral licence- suppliers are left without rights or face legal uncertainty. [215] 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. [216] 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). [216]

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. [217] 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). [217]
 

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. [218] 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. [219] 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. [220] 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. [220] 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. [220] 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. [220]
 

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. [221] 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. [221] 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). [221] In the eyes of the Court, Daimler had, however, not pleaded any relevant facts in the present proceedings. [221]

  • [151] Conversant v Daimler, District Court of Munich I, 30 October 2020, Case-No. 21 O 11384/19 (cited by juris).
  • [152] Ibid, paras.122-265.
  • [153] Ibid, para. 285.
  • [154] Ibid, para.286.
  • [155] Ibid, para.288.
  • [156] Ibid, paras.287 et seqq.
  • [157] Ibid, paras.291 et seqq.
  • [158] Ibid, para.295.
  • [159] Ibid, para.296.
  • [160]  Ibid, para. 299.
  • [161] Ibid, para. 300.
  • [162] Ibid, para.300.
  • [163] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [164] Conversant v Daimler, District Court of Munich I, 30 October 2020, Case-No. 21 O 11384/19, para.301.
  • [165] Ibid, para.301.
  • [166] Ibid, para.307.
  • [167] Ibid, para.308.
  • [168] Ibid, paras.302 and 308.
  • [169] Ibid, paras. 323 et seqq.
  • [170] 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.
  • [171] Ibid, para. 309.
  • [172] Ibid, para. 310.
  • [173] Ibid, para. 316.
  • [174]  Ibid, para. 311.
  • [175] Ibid, para. 312.
  • [176] Ibid, para. 320.
  • [177] Ibid, para. 311.
  • [178] Ibid, paras. 312 and 316.
  • [179] Ibid, para. 315.
  • [180] Ibid, paras.317 et seqq.
  • [181] Ibid, para. 321.
  • [182] Ibid, para.357.
  • [183] Ibid, paras.322 and 358.
  • [184] Ibid, para.328.
  • [185] Ibid, paras.331 and 336.
  • [186] Ibid, para.332.
  • [187] Ibid, paras.334 and 336.
  • [188] Ibid, para.335.
  • [189] Ibid, para.337.
  • [190] Ibid, para.338.
  • [191] Ibid, para.339.
  • [192] Ibid, para.340.
  • [193] Ibid, paras.355 et seq.
  • [194] Ibid, paras.341 and 354.
  • [195] Ibid, para.341.
  • [196] Ibid, paras.341 and 348.
  • [197] Ibid, para.352.
  • [198] Ibid, para.353.
  • [199] Ibid, para.353
  • [200] Ibid, para.360.
  • [201] Ibid, para.362.
  • [202] Ibid, paras.362 and 364.
  • [203] Ibid, para.363.
  • [204] Ibid, para.365.
  • [205] Ibid, para.366.
  • [206] Ibid, para.367.
  • [207] Ibid, paras.368 and 382.
  • [208] Ibid, para.368.
  • [209] Ibid, para.370.
  • [210] Ibid, para.372.
  • [211] Ibid, paras.373 and 376-378.
  • [212] Ibid, para.373.
  • [213] Ibid, paras.373 and382.
  • [214] Ibid, paras.373 and 379.
  • [215] Ibid, para.374.
  • [216] Ibid, para.375.
  • [217] Ibid, para.380.
  • [218] Ibid, para.384.
  • [219] Ibid, paras.384 et seqq.
  • [220] Ibid, para.385.
  • [221] 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 [222] , 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 [223] , 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 [224] .

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 [225] . 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 [226] (Huawei framework or obligations) [227] .

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 [228] . 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’ [228] . 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 [228] .

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 [229] . 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 [230] . 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 [231] .

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 [232] . 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 [232] .

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 [233] . For this, the patent holder must use procedural tools available under German law, particularly a motion for suspension of the trial [233] . 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 [233] . In case such a motion is filed, the Court expects that a ‘willing’ implementer will consent to a suspension of the proceedings [233] .

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 [234] . 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 [235] . 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 [235] . 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 [235] .

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 [236] . 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 [237] . 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 [237] . 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 [237] .

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 [238] .

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 [239] . 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 [239] . Delaying tactics potentially applied by the implementer must be prevented [239] . 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 [240] . 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 [240] .

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 [241] .

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 [242] . This duty exists besides the patent holder’s duty to make a FRAND licensing offer to the implementer [243] .

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 [244] . The extent of the information to be shared depends on the circumstances of the specific ‘licensing situation’ [244] .

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 [245] .

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 [245] .

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 [245] . 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 [245] . 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 [245] .

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 [245] . Furthermore, the SEP holder would need to facilitate the conclusion of a Non-Disclosure Agreement which would allow sharing further information with the implementer [245] .

Based on the above considerations, the Court found that Philips had not fulfilled its information duty at any time [246] . 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 [247] . 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 [248] .

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 [249] . In this respect, the Court seemed to agree, however, with the notion that FRAND is a range providing parties with a degree of flexibility [250] .

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 [251] .

Such a right does not arise either from German civil law (Articles 809 and 810 German Civil Code) [251] or Article 102 TFEU [252] . Furthermore, a right for disclosure of comparable agreement can neither be extracted by the SEP holder’s FRAND commitment to ETSI [253] . 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 [254] .

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 [255] . 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 [256] . This is particularly true with respect to SEP holder’s claim to request information about expenses and profits from the implementer5 [257] .

  • [222] Philips v Wiko, District Court (Landgericht) of Mannheim, judgment dated 25 November 2016, Case No. 7 O 44/16.
  • [223] 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.
  • [224] Ibid, paras. 37-87.
  • [225] Ibid, para. 88.
  • [226] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C 170/13.
  • [227] Philips v Wiko, Higher District Court of Mannheim, judgment dated 25 November 2016, para. 108.
  • [228] Ibid, para. 107.
  • [229] Ibid, paras. 117 et seqq.
  • [230] Ibid, para. 119.
  • [231] Ibid, paras. 120 et seq.
  • [232] Ibid, para. 120.
  • [233] Ibid, para. 125.
  • [234] Ibid, para. 126.
  • [235] Ibid, para. 127.
  • [236] Ibid, para. 111.
  • [237] Ibid, para. 112.
  • [238] Ibid, paras. 115 and 117.
  • [239] Ibid, para. 115.
  • [240] Ibid, para. 129.
  • [241] Ibid, paras. 131 et seqq.
  • [242] Ibid, paras. 132 et seq.
  • [243] Ibid, para. 135.
  • [244] Ibid, para. 133.
  • [245] Ibid, para. 134.
  • [246] Ibid, paras. 136 et seqq.
  • [247] Ibid, para. 136.
  • [248] Ibid, para. 138.
  • [249] Ibid, para. 131.
  • [250] Ibid, para. 106.
  • [251] Ibid, paras. 157 et seqq.
  • [252] Ibid, paras. 162 et seqq.
  • [253] Ibid, paras. 160 et seq.
  • [254] Ibid, para. 161.
  • [255] Ibid, para. 143.
  • [256] Ibid, para. 144.
  • [257] 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 [258] . 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 [259] (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 [260] . 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 [261] .

On 5 May 2020, FCJ rendered a judgment in the parallel proceedings pending between the parties concerning the patent reading on the GPRS standard [262] . 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 [264] .

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) [265] .

Dominant market position

The Court held that Sisvel had a dominant market position within the meaning of Article 102 TFEU [266] .

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 [267] . 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. [267] 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 [268] . 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 [269] .

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 [270] . 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. [270] An abuse would be given, if the SEP holder insisted on such conditions also at the end of licensing negotiations with the imple­menter. [270]

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 [271] .

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 [272] .

Willingness

On the other hand, the Court found that Haier did not act as a licensee willing to obtain a FRAND licence from Sisvel [273] . 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 [274] . 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 [274] .

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. [275] 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. [276] The fact that a party fails to contribute in negotiations towards a FRAND agreement will regularly be considered to its detriment. [277] 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. [278]

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. [279] Otherwise, competition could be distorted, because the infringer would gain unfair advantages over implementers that have taken a licence in a timely manner. [279]

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. [280] 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. [281] Under special circumstances, however, stricter or less strict conduct duties of the parties could be justified. [281]

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. [281] 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. [282] 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. [283]

Accordingly, FCJ explained that willingness shall (still) be in place, also when the SEP holder makes a licensing offer. [284] 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. [285] 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. [286] The implementer has, therefore, a duty to examine the FRAND-conformity of the terms of the SEP holder's offer. [287] If the offer is 'obviously' not FRAND, it will be sufficient that the implementer explains the reasons why this is the case. [287]

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. [288] If one would require from the SEP holder to make a 'perfect' FRAND offer right away, licensing negotiations would be obsolete. [289] 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. [290] The Court reiterated that an non-FRAND licensing offer does not per se amount to an abuse of market dominance. [291]

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. [292] 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. [293] However, the longer the implementer waits with asserting such request, the higher the threshold for considering it as a willing licensee will be. [294] 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. [292]

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 [295] . 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 [295] . 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 [296] . 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. [297]

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 [298] . 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 [299] . 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 [300] .

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. [301] 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. [302] 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'. [302]

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. [303] The Court focused particularly on the fact that the licence would cover only the two affiliates of the Haier group sued in Germany. [304] 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'. [305]

In addition, the Court also criticised the proposed royalty regime. [306] 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. [307] 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. [308]

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. [309]

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 [310] . According to FCJ, this question is not relevant, when the implementer has not adequately expressed willingness to sign a FRAND licence. [311]

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. [312] 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. [312]

C. Other important issues

Patent ambush

The Court dismissed Haier's defence based on the 'patent ambush' argument. [313] 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. [314] 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). [314]

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. [315] 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. [316] Haier had, however, failed to do so. [316]

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. [317]

What is more, Sisvel's claim for damages was not limited to the amount of a FRAND licensing rate ('licensing analogy'). [318] 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. [317] 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. [317]

  • [258] 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).
  • [259] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [260] 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).
  • [261] Federal Court of Justice, judgment dated 28 April 2020, Case No. X ZR 35/18.
  • [262] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17.
  • [263] Sisvel v Haier, Federal Court of Justice, judgment dated 24 November 2020, Case No. KZR 35/17 (cited by ).
  • [264] Ibid, paras. 10-43.
  • [265] Ibid, para. 44.
  • [266] Ibid, paras. 48 et seqq.
  • [267] Ibid, para. 49.
  • [268] Ibid, para. 52.
  • [269] Ibid, para. 53.
  • [270] Ibid, para. 54.
  • [271] Ibid, para. 55.
  • [272] Ibid, para. 84.
  • [273] Ibid, paras. 86 et seqq.
  • [274] Ibid, para. 57.
  • [275] Ibid, para. 58.
  • [276] Ibid, para. 59.
  • [277] Ibid, para. 60.
  • [278] Ibid, para. 62.
  • [279] Ibid, para. 61.
  • [280] Ibid, para. 63.
  • [281] Ibid, para. 65.
  • [282] Ibid, para. 68.
  • [283] Ibid, paras. 66 and 68.
  • [284] Ibid, para. 69.
  • [285] Ibid, para. 69. See Nokia v Daimler, District Court of Duesseldorf, order dated 26 November 2020, Case No. 4c O 17/19.
  • [286] Ibid, paras. 70 and 71.
  • [287] Ibid, para. 71.
  • [288] Ibid, para. 72.
  • [289] Ibid, para. 73.
  • [290] Ibid, para. 74.
  • [291] Ibid, para. 76.
  • [292] Ibid, para. 77.
  • [293] Ibid, paras. 79 et seqq.
  • [294] Ibid, para. 83.
  • [295] Ibid, para. 87.
  • [296] Ibid, paras. 88 et seqq.
  • [297] Ibid, para. 89.
  • [298] Ibid, paras. 93 et seqq.
  • [299] Ibid, para. 95.
  • [300] Ibid, paras. 96-99.
  • [301] Ibid, paras. 102 et seqq.
  • [302] Ibid, para. 102.
  • [303] Ibid, paras. 108 et seqq.
  • [304] Ibid, para. 116.
  • [305] Ibid, para. 118.
  • [306] Ibid, paras. 124 et seqq.
  • [307] Ibid, para. 124.
  • [308] Ibid, para. 125.
  • [309] Ibid, para. 126.
  • [310] 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.
  • [311] Sisvel v Haier, Federal Court of Justice, judgment dated 24 November 2020, Case No. KZR 35/17, para. 107.
  • [312] Ibid, para. 56.
  • [313] Ibid, paras. 127 et seqq.
  • [314] Ibid, para. 130.
  • [315] Ibid, para. 131.
  • [316] Ibid, paras. 131 et seq.
  • [317] Ibid, para. 135.
  • [318] Ibid, paras. 134 et seqq.

Updated 25 June 2020

IPCom v Lenovo, Court of Paris

French court decisions
20 January 2020 - Case No. RG 19/60318

A. Facts

In 2014, Lenovo acquired Motorola [319] . Both companies have a French subsidiary [320] .

Digital River Ireland Limited sells Lenovo products on Lenovo’s French website [321] . Modelabs Mobile S.A. (Modelabs) imports Motorola devices in France alongside Lenovo [320] .

IPCom GmbH & Co. KG (IPCom) acquired over 160 patent families from Robert Bosch in 2017 [319] . IPCom’s Patents cover the 2G, 3G and 4G wireless telecommunications standards [320] . One of the acquired patents is EP 1 841 268 B1 (EP 268) [320] , which is essential to the 3G standard [322] . EP 268 expires on 15 February 2020 [323] . IPCom made a FRAND commitment for its essential patents towards ETSI [324] .

In 2018, IPCom contacted Lenovo for a licence under its patents, including EP 268 [322] . There were some discussions between the parties [320] . On 1st March 2019 [320] , IPCom renewed its offer to license Lenovo and requested Lenovo to respond to this offer by 15 March 2019 [321] .

Absent a reply from Lenovo by this date, IPCom stated that it would initiate proceedings against Lenovo for patent infringement [320] .

On 14 March 2019, US subsidiaries of Lenovo and Motorola filed a claim against IPCom before the District Court for the Northern District of California (US District Court) in the US [320] . The requested the US District Court to set the terms for a worldwide FRAND licence for IPCom’s portfolio [320] .

On 4 July 2019, IPCom filed a complaint against the UK subsidiaries of Lenovo and Motorola before the High Court for England and Wales for patent infringement of the UK counterpart of EP 268 [325] .

On 18 September 2019, Lenovo’s and Motorola’s US subsidiaries filed a motion for an anti-suit injunction with the US District Court to prevent IPCom from continuing the infringement proceedings initiated in the UK as well as from filing any further infringement actions in any foreign jurisdiction, as long as there was no final decision on the US complaint [321] .

On 8 November 2019, the Court of Paris required Lenovo and Motorola to withdraw their anti-suit request with respect to EP 268 by 14 November 2019 the latest [325] . The anti-anti-suit injunction granted by the Court of Paris also applied to any subsequent request to the same end that would be introduced by Motorola and Lenovo. Lenovo and Motorola’s US counterparts partially withdrew the motion for an anti-suit injunction brought before the US District Court [320] .

On 14 November 2019, IPCom filed infringement proceedings against Lenovo and Motorola before the Court of Paris [326] . Before that, on 30 October 2019, IPCom had also sought temporary measures until the patent expiration day, i.e. a preliminary injunction, as well as an order for the recall of all 3G products and the confiscation and sequestration of 3G compliant products [327] .

With the present judgment, the Court rejected IPCom’s request for a preliminary injunction, holding that it was not proportionate and that it could provide an unjustified advantage to IPCom that could lead the company to negotiate licensing terms and conditions that would not be FRAND [328] .

B. Court’s reasoning

With respect to the request for a preliminary injunction, the Court applied Article L615-3 of the French Intellectual Property Code. This provision allows courts to order urgent measures to prevent an irreparable damage to be caused to the right-holder [329] . For this, it is required that patent infringement is likely and the damages potentially suffered cannot be compensated by monetary payments [330] .

The Court also took recourse to the EU Directive 2004/48, which provides that preliminary measures should be proportionate considering the specificity of a dispute on a case by case basis [331] .

The Court concluded that there was no irreparable harm to IPCom that could not be compensated by damages, if a preliminary injunction would be denied. [332] IPCom had claimed that the absence of an injunction would put existing licensees at a disadvantage and that a request for interim measures could not be considered as abusive, given the fact that the absence of a preliminary injunction would reduce the value of its patent portfolio [333] . The Court was not convinced that this would be the case. Moreover, the Court placed weight on the fact that IPCom did not practise the patents itself and, therefore, did not face a risk to lose market shares by competing products infringing IPCom’s rights [334] .

On the other hand, the Court found that an injunction, even of a temporary nature (until the patent expiration date, i.e. 15 February 2020), affecting almost all Lenovo and Motorola products, would heavily impact these companies. In addition, such an abrupt withdrawal of most of the products from the market would harm the reputation of the defendants and impair the distribution operations of Digital River [334] .

Lenovo and Motorola had argued that IPCom’s request was disproportionate [322] . They highlighted that the injunction request applied to most of their cellphones and tablets, what would lead to a serious financial harm [320] . In their view, IPCom’s behaviour was not FRAND, because IPCom did not wait for the end of the negotiations between the parties on the first offer to submit a second offer that was not negotiable [320] . And IPCom filed infringement procedures in the UK and France, instead of negotiating a FRAND license under the US proceedings [320] . Apart from that, Lenovo and Motorola claimed that the patent was not essential to a mandatory, but only to an optional portion of the standard [320] . They also added that the patent was close to expiration and IPCom did not exploit the patent itself [320] . Therefore, there was no harm that could not be compensated by financial damages [320] .

The injunction would impact Lenovo and Motorola market share, including on the new 5G market, and affect their reputation towards main telecom operators [324] .

C. Other issues

Translation of documents

Modelabs argued that IPCom had breached a French law dated 1539Ordonnance de Villers-Cotterêts by providing documents that were in their majority drafted in English instead of French. This behaviour violated Modelabs’ right to an equitable process [336] . The Court pointed out that, since Modelabs imports and commercialises electronic products in France, it had to understand English [320] . Additionally, IPCom had provided documents in French [320] . Therefore, the Court found that Modelabs’ right to an equitable process was not violated [320] .

Patent ownership / Transfer of patents

The defendants challenged IPCom’s ownership of the patent in suit [337] . They claimed that the patent had not been assigned to IPCom. Would the assignment from Robert Bosch to IPCom, nonetheless, have taken place, there had been a second assignment, since IPCom had merged with another company and as a result of the merger, a new company was created, IPCom GmbH & Co [320] .

The Court highlighted that neither Robert Bosch nor the inventors had made any claim under the patent [338] . Additionally, IPCom published the assignment and justified the transfer [339] . The merger came with a transfer of all IPCom assets to IPCom GmbH & Co [338] . The merger and the change of name were notified to the French Patent Office on 13 September 2019 and was published before the notification of the writ of summons to the defendants [322] .

  • [319] Court of Paris, judgement dated 20 January 2020, page 2.
  • [320] Ibidem
  • [321] Court of Paris, judgement dated 20 January 2020, page 3.
  • [322] Court of Paris, judgement dated 20 January 2020, page 13.
  • [323] Court of Paris, judgement dated 20 January 2020, page 8.
  • [324] Court of Paris, judgement dated 20 January 2020, page 14.
  • [325] Court of Paris, judgement dated 20 January 2020, page 4.
  • [326] Court of Paris, judgement dated 20 January 2020, page 5.
  • [327] Court of Paris, judgement dated 20 January 2020, pages 4-7.
  • [328] Court of Paris, judgement dated 20 January 2020, page 17.
  • [329] Court of Paris, judgement dated 20 January 2020, pages 10- 11.
  • [330] Court of Paris, judgement dated 20 January 2020, page 10.
  • [331] Court of Paris, judgement dated 20 January 2020, pages 11, 14-16.
  • [332] Court of Paris, judgement dated 20 January 2020, page17.
  • [333] Court of Paris, judgement dated 20 January 2020, page 15.
  • [334] Court of Paris, judgement dated 20 January 2020, page 16.
  • [335] Ordonnance de Villers-Cotterêts
  • [336] Court of Paris, judgement dated 20 January 2020, page 9.
  • [337] Court of Paris, judgement dated 20 January 2020, page 11.
  • [338] Court of Paris, judgement dated 20 January 2020, page 12.
  • [339] Court of Paris, judgement dated 20 January 2020, page 12-13.

Updated 26 July 2021

Nokia v Daimler

OLG Karlsruhe
12 February 2021 - Case No. 6 U 130/20

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.

In June 2016, Nokia informed Daimler about its SEP portfolio. In November 2016, Nokia made a first licensing offer to Daimler. In December 2016, Daimler replied that it would be more efficient to license suppliers manufacturing the so-called 'Telematics Control Units' (TCUs), which are built into Daimler's cars. From January 2017 until February 2019, Daimler did not engage in further negotiations with Nokia.

In February 2019, Nokia made a second licensing offer to Daimler which was also rejected.

In March 2019, Nokia filed infringement actions against Daimler before the District Court of Mannheim (District Court). Further cases were filed before the District Courts of Munich and Duesseldorf.

On 9 May 2019, shortly after the infringement proceedings were initiated, Daimler made a counteroffer to Nokia (first counteroffer) which was rejected. On 10 June 2020, Daimler made a further counteroffer that did not include specific royalty rates (second counteroffer). Nokia would be granted the right to unilaterally determine the royalties payable under the licence, whereas Daimler would have the option to contest Nokia's royalty determination before court. An agreement on these terms was not signed.

On 18 August 2020, the District Court granted an injunction against Daimler and further recognised Daimler's liability to pay damages on the merits. [340] The Court also ordered Daimler to render accounts and provide information necessary for the calculation of damages to Nokia.

Daimler appealed the decision of the District Court. It also filed a request for a stay of the enforcement of the injunction granted until the conclusion of the appeal proceedings.

With the present judgment [341] (cited by http://lrbw.juris.de), the Higher District Court of Karlsruhe (Appeal Court) found in favour of Daimler, ordering a stay of the enforcement of the injunction.
 

B. Court's reasoning

The Appeal Court placed particular focus on the reasoning, on which the District Court relied upon for dismissing the so-called 'FRAND-defence' raised by Daimler against Nokia's claim for injunctive relief. Daimler had argued 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 and should, therefore, be denied an injunction. The District Court held that Daimler could not invoke this argument, since it had failed to sufficiently express willingness to obtain a FRAND licence from Nokia in accordance with the requirements established by the European Court of Justice (CJEU) in the matter Huawei v ZTE [342] (Huawei decision, or framework).
 

Willingness

The Appeal Court did not contest the standard applied by the District Court for the assessment of willingness: the implementer is expected 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. [343] The Appeal Court also agreed with the view expressed by the District Court that the declaration of willingness cannot be made subject to conditions. [344] Furthermore, it reasoned that willingness is not a 'one-off event', meaning that the implementer is required to constantly engage in negotiations in a 'serious and target-oriented' manner and to avoid 'delaying tactics'. [344]
 

Implementer's counteroffer

The Appeal Court also confirmed that the implementer's counteroffer is a factor that can be considered for the assessment of willingness [345] . On the one hand, a FRAND-compliant counteroffer could, in principle, 'heal' the initial 'unwillingness' of the implementer. [346] On the other hand, a counteroffer that is not FRAND can reinforce the finding of missing willingness. [346] Having said that, the Appeal Court held that the District Court erred as far as it assumed that Daimler's second counteroffer was not sufficient to 'heal' the unwilling behaviour displayed by Daimler up to the point in time, in which this counteroffer was made. [347] The Appeal Court pointed out that – contrary to the District Court's view – a counteroffer which does not specify concrete licensing fees but instead grants the patent holder the right to unilaterally determine the royalties and – at the same time – allows the implementer to challenge such determination before court in subsequent proceedings (Sec. 315 of the German Civil Code), should regularly be considered as a sufficient declaration of willingness to sign a licence 'on whatever terms are in fact FRAND'. [348] According to the Appeal Court, the fact that by such counteroffer the implementer does not back down from the own perception of how FRAND terms should look like and will, therefore, most likely contest the royalties unilaterally determined by the SEP holder is, as a rule, not harmful: the SEP holder will in any case receive either the royalties it determined or the royalties deemed to be reasonable by the court which will be called upon by the implementer to examine the royalty determination undertaken by the patent holder. [349]

In the eyes of the Appeal Court, the fact that in the above scenario the (final) determination of FRAND royalties is postponed to subsequent proceedings following the patent infringement trial does not per se suffice to question the willingness of the implementer. [350] The Appeal Court rather highlighted that it would regularly serve the interests of the SEP holder to 'unburden' the infringement trial from the FRAND determination, which would lead to a quicker judgment on the infringement issues. [350]

Furthermore, the Appeal Court disagreed with the view previously taken by the District Court, according to which a counteroffer without specific royalty calculation could be (mis-)used by implementers as a means for delaying the signing of an agreement until after the expiration of the patent in suit, in order to secure a more favourable position in negotiations absent the threat of an injunction. [351] The Appeal Court pointed out that, if a licence stipulating a unilateral royalty determination right in favour of the SEP holder is concluded, the latter will receive royalties for the use of its patents; in the court proceedings following the infringement trial only the actual amount of the royalties payable will be determined. [351]

Notwithstanding the above, the Appeal Court made, however, clear that a counteroffer containing no specific royalties can, nevertheless, be an indication of unwillingness in individual cases, especially when it is belated. [352] This could be true, when the counteroffer is made only after infringement proceedings have been initiated by the patent holder. Although it is, in principle, thinkable to remedy flaws during pending infringement proceedings, a counteroffer made after the trial has begun would be unacceptable, if it is part of delaying tactics on the side of the implementer. [353] The Appeal Court found that this approach is in line with the Huawei judgment. [354]

In this context, the Appeal Court pointed out that a counteroffer without specific royalty calculation, which could be sufficient for establishing willingness, does not necessarily also suffice for complying with the further going obligation of the implementer under the Huawei framework to make an own offer on FRAND terms to the SEP holder, if it chooses to reject the licensing offer of the latter. [355] In the present case, the Appeal Court did not take a closer look at this question, since the District Court had not examined whether Daimler had been obliged to make a FRAND counteroffer after rejecting Nokia's licensing offers. [355]

  • [340] Nokia v Daimler, District Court (Landgericht) of Mannheim, judgment dated 18 August 2020, Case-No. 2 O 34/19.
  • [341] Nokia v Daimler, Higher District Court (Oberlandesgericht) of Karlsruhe, judgment dated 12 February 2021, Case-No.6 U 130/20.
  • [342] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [343] Nokia v Daimler, Higher District Court of Karlsruhe (footnote No. 2), para.43.
  • [344] Ibid, para. 43.
  • [345] Ibid, paras. 45 et seq.
  • [346] Ibid, paras. 46.
  • [347] Ibid, para. 47.
  • [348] Ibid, para. 51.
  • [349] Ibid, para. 52.
  • [350] Ibid, para. 53.
  • [351] Ibid, para. 54.
  • [352] Ibid, para. 55.
  • [353] Ibid, para. 56.
  • [354] Ibid, para. 57.
  • [355] Ibid, para. 61.

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. [356] 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. [357]

B. Court’s Reasoning

The Court of Appeal dismissed Asus’s invalidity challenge, upholding the novelty and inventiveness of the EP 511 patent. [358] Moreover, the Court of Appeal found the patent essential and infringed. [359]

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) [360] . 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. [361] Rather, the purpose of the declaration obligation was to reduce the risk of SEPs being ex post unavailable to users. [362]

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. [363] 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. [364]

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. [365] 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. [366] 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. [367] 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. [368] 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.”’ [369]

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. [370] 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. [371] 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. [372]

  • [356] Koninklijke Philips N.V. v. Asustek Computers INC, District Court of the Hague, 2017, Case No. C 09 512839 /HA ZA 16-712.
  • [357] 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.
  • [358] ibid, paras 4.63, 4.68, 4.75, 4.80, 4.82, 4.93, 4.100, and 4.117.
  • [359] ibid, paras 4.118 et seq.
  • [360] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case-No. C-170/13.
  • [361] 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.
  • [362] ibid, paras 4.155 and 4.157.
  • [363] ibid, para 4.159.
  • [364] ibid, para 4.164.
  • [365] ibid, para 4.171.
  • [366] ibid, para 4.172.
  • [367] ibid.
  • [368] ibid, paras 4.172-4.179.
  • [369] ibid, para 4.179.
  • [370] ibid, para 4.183.
  • [371] ibid, para 4.185.
  • [372] 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 [373] . Wiko did not react to the letter [374] .

On 28 July 2015, Philips sent Wiko claim charts and a licensing agreement [375] . The communication remained unanswered by Wiko [374] .

On 19 October 2015, Philips started the present proceedings against Wiko [376] . On 25 August 2016, Wiko made a counteroffer [377] . Since 2016, it has also provided information about worldwide units sold and blocked an amount of EUR 895.000 into an escrow account [374] .

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 [378] . 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 [374] .

With the present judgment, the Court granted Philips’ request for injunctive relief [379] , destruction [380] and the recall of products [381] , but partly invalidated EP 511, insofar it goes beyond the claims of the second auxiliary request [382] .

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 [383] .

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 [384] .

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 [383] .

The Court concluded that recognition of the Mannheim decision would not affect the pending proceedings, as the patents at stake were not the same [385] .

Patent essentiality and infringement

Philips had declared EP 511 as essential to HSUPA (part of UMTS standard) towards ETSI on 26 November 2009 [386] . The fact that EP 511 is essential to HSUPA was not challenged by Wiko [387] .

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 [374] .

FRAND negotiations and application of the Huawei steps

The Court considers that the Huawei decision [388] does not set up strict rules, but rather guidelines for FRAND negotiations in good faith between the parties [389] .

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 [390] , 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 [391] .

Moving on to the next step, the Court found that Wiko had not fulfilled its duty as it did not react to Philips’ notification [392] . The Court, therefore, held that Philips was not obliged to make a licensing offer to Wiko, before starting proceedings against Wiko [374] .

FRAND offer

Nevertheless, Philips had made an offer to Wiko on 28 July 2015 [393] . This offer was for a worldwide licence under Philips’ UMTS and LTE SEPs [394] .

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 [374] .

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 [395] .

Contrary to German courts, the Court held that the Huawei steps do not imply a substantiation duty [396] , but solely the duty to specify the amount of the rate and the way it is calculated [397] . 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 [374] . 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” [374] . 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 [398] .

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 [399] . The Court held, however, that Wiko did not provide any evidence to support its position that Philips’ offer is not FRAND [374] . Additionally, the Court attached importance to the fact that Philips had expressed its willingness to discuss the offer and specific circumstances with Wiko [400] . Philips had even asked Wiko to make a counteroffer, which the latter did not [401] .

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 [402] . 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 [374] .

Wiko’s counteroffer

Wiko GmbH, an entity legally independent from other Wiko entities, had made a counteroffer to Philips [403] . However, the Court did not consider this counteroffer as a counteroffer made by the Defendant of the present proceedings to Philips [374] .

Besides that, the Defendant had also made a counteroffer to Philips after the start of the present proceedings [404] . 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% [405] . Wiko derived a rate of 0.001% per SEP family and made the following counteroffer to Philips [374] :

- 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) [374] .

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 [406] . Consequently, the Court concluded that Philips held a higher percent of SEPs than estimated by Wiko [374] . 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 [406] . 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 [407] . It added that Wiko’s counteroffer did not account for the value of Philips’ SEPs in view of other SEPs for the same standard [408] .

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 [389] . 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 [374] .

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 [409] .

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” [410] .

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.

  • [373] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.1
  • [374] Ibidem
  • [375] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.2
  • [376] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.3
  • [377] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.4
  • [378] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 3.1
  • [379] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.1
  • [380] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.4
  • [381] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.3
  • [382] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.8
  • [383] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.1
  • [384] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.2
  • [385] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.3
  • [386] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraphs 4.5 and 4.6
  • [387] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.5
  • [388] Huawei v ZTE, Court of Justice of the EU, judgement dated 16 July 2015, Case No. C-170/13.
  • [389] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.14
  • [390] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.10
  • [391] 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.
  • [392] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.15
  • [393] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.16
  • [394] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.27
  • [395] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.17
  • [396] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.18 and 4.19
  • [397] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.18
  • [398] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.19
  • [399] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.31
  • [400] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraphs 4.26, 4.31, 4.32, 4.36
  • [401] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.36
  • [402] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.34
  • [403] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.20
  • [404] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.4
  • [405] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.38
  • [406] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.40
  • [407] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.39
  • [408] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.41
  • [409] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.21
  • [410] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.22

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 [411] (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 [412] . For this reason, Nokia was entitled -among other claims- to injunctive relief [413] .

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 [414] (Huawei decision, or framework).

The Court dismissed the FRAND-defences raised by Daimler and its suppliers as unfounded [415] .

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 [417] . 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 [418] . 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 [418] . 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 [419] .

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 [420] . 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 [420] . As a rule, presenting claim charts will be sufficient (but not mandatory) [420] . 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 [422] .

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 [423] . 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 [424] .

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 [425] . Since Daimler purchases and uses these components in its products, no information deficit could occur [425] .

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) [427] . 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 [428] . 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 [427] .

The Court further pointed out that making the declaration of willingness subject to conditions was not acceptable [427] . 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 [427] .

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 [429] . 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 [430] .

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 [431] . 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 [432] .

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 [434] . Moreover, what can be considered as FRAND may differ from industry sector to industry sector as well as in time [434] .

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' [435] . 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 [435] . 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 [436] . The Court noted that there are several instruments available to make sure that this will not occur [436] .

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 [436] . The effects of patent exhaustion would prevent the SEP holder from participating in the value created at the final stage of the value chain [436] . 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 [436] .

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 [437] . 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 [437] .

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 [438] . The selling price of TCUs corresponds only to Daimler's respective costs [439] . Connectivity, on the other hand, allows Daimler to generate income from additional services offered to its clients, save costs and optimise R&D expenses [440] . Connectivity secures the chance to create this value [441] . 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 [442] .


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 [444] . The same is true with respect to patent holders with a dominant market position, since competition law does not per se limit this possibility [444] . What is more, a dominant patent holder is not obliged to offer all potential licensees a 'standard-rate' [444] . 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 [445] .

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 [446] . 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 [447] . 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 [448] . 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 [449] .

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 [451] . 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 [451] . The scope and level of detail of the respective duty shall be determined on a case-by-case basis [451] .

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 [452] . 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 [453] . 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 [453] .

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) [455] . This had not been the case in the present proceedings [456] .

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 [457] . 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 [457] .


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 [459]

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

Updated 2 October 2019

Sisvel v Xiaomi, Court of The Hague

Dutch court decisions
1 August 2019 - Case No. C/09/573969/ KG ZA 19-462

A. Facts

In 2012, the Claimant, Sisvel International (Sisvel), acquired from Nokia patents EP 1 129 536 B1 (EP 536) and EP 1 119 997 B1 (EP 997) [460] . EP 536 and EP 997 that have been declared standard essential patents (SEPs). EP 536 relates to the EGPRS/EDGE functionality of the GSM standard, while EP 997 has been declared essential to the LTE standard [461] .

On 10 April 2013, Sisvel made a FRAND commitment to the ETSI with a list of patents declared as essential, including EP 536 and EP 997 [462] .

Sisvel contacted the Defendant, Xiaomi, on 15 October 2013 for a license under the Sisvel Wireless Patents [463] , under which patents EP 536 and EP 997 are licensed.

Sisvel sent a further letter dated 16 July 2014 and followed up by emails on 3 December 2014, 4 December 2014 and 5 March 2015 inviting Xiaomi to contact Sisvel to negotiate a FRAND license [464] .

On 21 November 2018, Belsimpel (a Dutch online retailer) announced on its website that Xiaomi had selected Belsimpel as its official partner in the Netherlands [465] .

On 29 March 2019, Xiaomi prepared to enter the Dutch market by opening physical stores and online shops [466] .

On 23 April 2019, Sisvel filed proceedings against Xiaomi in London, seeking a declaration that the terms and conditions of the MCP Pool License (under which EP 536 and EP 997 are licensed) are FRAND or, in the alternative, the determination of a FRAND rate, and that three of the MCP patents (including EP 536 and EP 997) are valid and infringed [467] .

In the current proceedings before the Court of The Hague (the Court), launched on 29 May 2019, Sisvel sought a preliminary injunction against Xiaomi; a preliminary injunction to be imposed until Xiaomi agrees on Sisvel’s offer to go to arbitration, or alternatively the removal of the EGPRS/EDGE and LTE functionalities in Xiaomi’s products [461] . The Court rejected Sisvel’s injunction request, considering the urgency requirement was not fulfilled [468] and concluded that the removal of standardised functionalities or standard-compliant products from the market would be too damaging to Xiaomi [469] .

B. Court’s reasoning

Urgency

Xiaomi challenged the adequacy of a preliminary ruling for this case in view of the complexity of the matter and the balance of parties’ interests [468] . The Court accepted this argument and referred to the circumstances of the case to reject the preliminary injunction [470] .

The Court stated that FRAND licensing disputes are not well suited to preliminary rulings. As the SEP-holder has committed to license its SEPs on FRAND terms and conditions, the damages it suffers from the infringement is the absence of a FRAND license and related compensation [471] . The Court further added that in compliance with the CJEU ruling in Huawei v. ZTE, [472] a SEP-holder is not prevented from seeking an injunction against an infringer [471] . However, the urgency requirement for an injunction on SEPs is higher than for a common patent infringement cases [470] .

When assessing each party’s interests, the Court considered that the damage to Xiaomi, active in the Netherlands since March 2019, would be high: Xiaomi would either have to remove the EGPRS/EDGE and LTE functionality from its phones or stop selling the relevant phones on the Dutch market [473] . On Sisvel’s side, the Court found a lack of urgency in view of the circumstances of the case: Sisvel was looking for an international FRAND license and negotiations had lasted for 6 years, that the Court considered as a counterindication of urgency [470] . The Court declared, however, that the fact EP 997 was due to expire soon was irrelevant for the assessment of urgency, as Sisvel holds other SEPs in its portfolio that will last for longer term [470] .

Another factor that the Court found important, in balancing the interests of each side, was that Sisvel had, in parallel to the Dutch proceedings, also asked the High Court in London to declare that Sisvel’s FRAND rate was indeed FRAND or, in the alternative, to set an international FRAND rate for Sisvel’s portfolio. Sisvel had committed to comply with the rate the High Court would set, even in the Dutch proceedings [474] .

The Court concluded that Sisvel was seeking an injunction which could simply be avoided through the payment of a FRAND rate [470] . And if the Court determined a FRAND rate in a preliminary ruling which turned out to be higher than a FRAND rate determined in a full trial on merits in the High Court in London or the Netherlands, then legal uncertainty would follow [470] . The Court also stated that Sisvel’s sole interest was to receive FRAND compensation. It thus considered the preliminary injunction proceedings to be more a means for Sisvel to force Xiaomi to the negotiations table and to pay a compensation that may not necessarily be FRAND [475] . The Court therefore refused to grant Sisvel injunctive relief.

  • [460] Court of The Hague, judgement dated 1 August 2019, par. 2.2.
  • [461] Court of The Hague, judgement dated 1 August 2019, par. 3.1.
  • [462] Court of The Hague, judgement dated 1 August 2019, par. 2.9.
  • [463] Court of The Hague, judgement dated 1 August 2019, par. 2.11.
  • [464] Court of The Hague, judgement dated 1 August 2019, par. 2.12.
  • [465] Court of The Hague, judgement dated 1 August 2019, par. 2.14.
  • [466] Court of The Hague, judgement dated 1 August 2019, par. 2.15.
  • [467] Court of The Hague, judgement dated 1 August 2019, par. 2.16.
  • [468] Court of The Hague, judgement dated 1 August 2019, par. 4.2 and following.
  • [469] Court of The Hague, judgement dated 1 August 2019, par. 4.4
  • [470] Ibidem
  • [471] Court of The Hague, judgement dated 1 August 2019, par. 4.3.
  • [472] Court of Justice of the European Union, Huawei v ZTE, judgment dated 6 July 2015.
  • [473] Court of The Hague, judgement dated 1 August 2019, par. 4.4.
  • [474] Court of The Hague, judgement dated 1 August 2019, par. 4.5.
  • [475] Court of The Hague, judgement dated 1 August 2019, par. 4.6.

Updated 6 April 2020

Sisvel v Sun Cupid, District Court of The Hague

Dutch court decisions
2 March 2020 - Case No. C/09/582418 HA ZA 19-1123

This case law summary was also published by The IPKat.

A. Facts

Sisvel International S.A. (Sisvel) licenses patent EP 2 139 272 B1 (EP 272) as part of its LTE/LTE-A Patent Pool [476] . The LTE/LTE-A Patent Pool is a subsection of Sisvel’s MCP licensing program [477] . EP272 has been declared as essential to the 4G-LTE standard [478] .

Sun Cupid Technology (HK) Ltd. develops and sells, through exports from China and imports in European countries, smartphones that implement the LTE technology [479] . On 22 May 2015, Sisvel notified Sun Cupid Technology (HK) Ltd about its licensing program [476] . Sun Cupid did not want to execute a license under the LTE/LTE-A Patent Pool [477] .

Sisvel filed proceedings against Sun Cupid Technology (HK) Ltd., the parent company [480] , and its subsidiaries, Sun Cupid (Shen Zhen) Electronic Ltd., Nuu Limited, Nuu Mobile (HK) Limited , Neotic Inc., Nuu Mobile UK Limited, and Pyramid Ltd. Before the District Court of the Hague (Court). Sisvel sought an injunction against Sun Cupid and its subsidiaries for infringement of EP 272 [481] , as well as the interdiction for Sun Cupid and its subsidiaries to directly or indirectly infringe the patent EP 272 [482] , act unlawfully against Sisvel through direct or indirect infringement [483] , the notification of infringement to resellers [484] , market participants and professional users, the recall and destruction of products [485] , the removal of infringing products from the websites [486] , a notification in Dutch newspapers [487] and on relevant websites [488] , a compensation for damages [489] and the provision of the list of resellers and models as well as their price [490] .

The Court granted Sisvel’s claims (apart on incident and market participants and customers), subject to the following limitation explained below.

B. Court’s reasoning

Injunction and recall of products

To avoid execution issues, the Court determined that infringing products are products that infringe the Dutch part of EP 272 and support or implement the LTE standard [491] . The Court granted the injunction to Sisvel [492] .

But it rejected Sisvel’s claims based on unlawful handling for lack of interest [493] : Sisvel did not demonstrate that those claims would lead to broader measures or interdictions than those based on direct or indirect infringement [477] .

With respect to the notification and recall of products requested by Sisvel, the Court limited it to resellers [494] : Sisvel did not sufficiently indicated who were the market participants who should be notified about the infringement and required to return the products [495] . The Court also highlighted that the recall of products was mostly focused on resellers and measures against customers would not be taken into account [477] .

Compensation for damages, penalty fee and process costs.

Regarding damages, the Court used Sisvel’s notification to Sun Cupid Technology (HK) Ltd. dated 22 May 2015 as the starting point to calculate the compensation for damages [480] . As all defendants cooperate for the commercialisation of infringing products and Sun Cupid Technology (HK) Ltd is the parent company of all other defendants, the Court considered that this date applies to all defendants as starting point for damages calculation [477] . Sisvel’s request to have an independent accountant to calculate the profits made by Sun Cupid was rejected by the Court because it could lead to execution problems, as accountants have to comply with rules that prevent them from drawing conclusions that can confirm the accuracy of their task [496] . Therefore, the Court ordered Sun Cupid to provide Sisvel with the profits on infringing products since 22 May 2015 [497] and either compensate Sisvel for the damages occurred or the profits made on the infringing products, at Sisvel’s choice [498] .

Sisvel asked for a penalty payment of either €10,000 per day where the defendants do not comply with the decision or €1,000 per product, at its choice [499] . The Court decided that the penalty fee per product would be applicable only when the violation of the decision occurs per product and would be capped to the process costs amounts [493] .

Sun Cupid has to pay for the process costs [500] .

Jurisdiction

The Court assessed its competence for Sisvel’s principal claim against defendants not based in the Netherlands [501] on Article 7.2 and 6.1 [502] of the Brussels I Regulation [503] . The competence is limited to the Netherlands [502] .

  • [476] Court of The Hague, judgement dated 2 March 2020, par. 2.4.2
  • [477] Ibidem
  • [478] Court of The Hague, judgement dated 2 March 2020, par. 2.4.1
  • [479] Court of The Hague, judgement dated 2 March 2020, par. 2.4.3
  • [480] Court of The Hague, judgement dated 2 March 2020, par. 5.7
  • [481] Court of The Hague, judgement dated 2 March 2020, par. 2.1 (I) and 2.2. (i)
  • [482] Court of The Hague, judgement dated 2 March 2020, par. 2.2. (ii)
  • [483] Court of The Hague, judgement dated 2 March 2020, par. 2.1 (II) and 2.2. (ii)
  • [484] Court of The Hague, judgement dated 2 March 2020, par. 2.2 (iii)
  • [485] Court of The Hague, judgement dated 2 March 2020, par. 2.2 (iv) and (v)
  • [486] Court of The Hague, judgement dated 2 March 2020, par. 2.2 (vi)
  • [487] Court of The Hague, judgement dated 2 March 2020, par. 2.2 (vii)(a)
  • [488] Court of The Hague, judgement dated 2 March 2020, par. 2.2 (vii)(b) and ( c)
  • [489] Court of The Hague, judgement dated 2 March 2020, par. 2.1 (III) and 2.2 (xiv)
  • [490] Court of The Hague, judgement dated 2 March 2020, par. 2.2 (xv) and (xvi)
  • [491] Court of The Hague, judgement dated 2 March 2020, par. 5.4
  • [492] Court of The Hague, judgement dated 2 March 2020, par. 6.3
  • [493] Court of The Hague, judgement dated 2 March 2020, par. 5.5
  • [494] Court of The Hague, judgement dated 2 March 2020, par. 6.4
  • [495] Court of The Hague, judgement dated 2 March 2020, par. 5.6
  • [496] Court of The Hague, judgement dated 2 March 2020, par. 5.8
  • [497] Court of The Hague, judgement dated 2 March 2020, par. 6.9
  • [498] Court of The Hague, judgement dated 2 March 2020, par. 6.8
  • [499] Court of The Hague, judgement dated 2 March 2020, par. 2.1 (III) and 2.2 (xvii)
  • [500] Court of The Hague, judgement dated 2 March 2020, par. 5.11
  • [501] Court of The Hague, judgement dated 2 March 2020, par. 5.3
  • [502] Court of The Hague, judgement dated 2 March 2020, par. 3.1
  • [503] Regulation (EU)No. 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters

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 [504] . 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 [505] .

The Court proceeded in both the technical and RAND trial in parallel [506] . 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 [507] . The patent that was found valid, essential and infringed expires on 25 June 2019 [508] . The RAND trial is listed for September 2019.

On 18 March 2019, the Court considered the form of order arising from the technical trial [509] . 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 [510] .


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 [511] .

In the Court’s eyes, denying an injunction in these circumstances would be ‘unjust’ [512] , 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’ [512] . 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’ [513] . 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 [514] . The Defendants had not produced sufficient evidence allowing an assessment of any disadvantages potentially arising from the immediate enforcement of the injunction [515] .

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 [516] . 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’ [517] .

  • [504] TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 18 March 2019, para. 6.
  • [505] Ibid, para. 10.
  • [506] 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.
  • [507] See TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 11 March 2019, [2019] EWHC 562 (ChD).
  • [508] TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 18 March 2019, para. 2.
  • [509] 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.
  • [510] TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 18 March 2019, para. 19.
  • [511] Ibid, para. 12.
  • [512] Ibid, para. 13.
  • [513] Ibid, para. 14.
  • [514] Ibid, para. 15.
  • [515] Ibid, paras. 16 et seqq.
  • [516] 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.
  • [517] TQ Delta v Zyxel Communications, UK High Court of Justice, judgment dated 18 March 2019, para. 22.

Updated 6 October 2020

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

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

A. Facts

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

Unwired Planet v Huawei

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

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

On 5 April 2017, the High Court granted an injunction against Huawei, until such time as it entered into a worldwide licensing agreement with Unwired Planet on the specific terms, which the court determined to be FRAND [518] . Huawei appealed this decision. Pending appeal, the High Court stayed the enforcement of the injunction.

On 23 October 2018, the UK Court of Appeal (Court of Appeal) dismissed Huawei's appeal against the decision of the High Court [519] . Subsequently, Huawei appealed before the Supreme Court for the United Kingdom (Supreme Court or Court).

Conversant v Huawei and ZTE

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

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

On 16 April 2018, the High Court confirmed its jurisdiction over the dispute, including its competence to determine the terms for a global portfolio licence [520] . Huawei and ZTE appealed the decision of the High Court.

On 30 January 2019, the Court of Appeal dismissed the appeal and affirmed the jurisdiction of UK courts to determine FRAND terms for a global licence on the basis of infringement of UK patents [521] . Huawei and ZTE appealed before the Supreme Court.

With the present judgment [522] , the Supreme Court unanimously dismissed the appeals in both cases.


B. Court's reasoning

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

1. Jurisdiction

The Supreme Court confirmed that UK courts have jurisdiction to determine the terms of a global FRAND licence for a multinational SEP portfolio and, accordingly, grant an injunction based on UK SEPs, in case a standards implementer refuses to enter into such licence [523] .

The Court held that under the ETSI IPR Policy SEP holders are not prohibited from seeking an injunction by national courts [524] . On the contrary, the possibility to stop infringement by means of an injunction granted by a national court was considered to be 'a necessary component of the balance which the IPR Policy seeks to strike', by ensuring that implementers are incentivised to negotiate a FRAND licence [524] .

Apart from granting an injunction based on UK patents, English courts can also set the terms of a global FRAND licence. In the view of the Supreme Court, the 'contractual arrangement' established by the ETSI IPR Policy gives UK courts the jurisdiction to exercise the respective power [525] .

According to the Court, the ETSI IPR Policy is 'intended to have an international effect', as it attempts to 'mirror commercial practice in the telecommunications industry' [526] . In the telecommunications industry, it is common practice to sign global licences for a portfolio of patents, 'without knowing precisely how many of the licenced patents are valid or infringed' [527] . On the one hand, the patent holder cannot know at the time of the declaration of a patent as (potentially) essential whether it will be valid and infringed by the still developing standard [527] . The implementer, on the other hand, does not know which patents are valid and infringed when using the standard [527] .

This 'unavoidable uncertainty' is dealt with by the conclusion of portfolio licences covering all declared SEPs of the patent holder worldwide, at a price which 'ought to reflect the untested nature of many patents in the portfolio' [527] . By taking such a licence, the implementer 'buys access' to the standard and 'certainty' that it has authorisation to use all technology needed to comply with the standard [527] .

Since, according to the commercial practice, FRAND licences include 'untested' patents, the Supreme Court took the view that the determination of the terms and conditions of a global licence does not imply an assessment of the validity of all patents covered. Therefore, when setting the terms of a worldwide portfolio licence, English courts do not rule on the validity and infringement of foreign patents, which is, indeed, a question subject to the exclusive jurisdiction of the national courts of the state that granted each patent [528] . Accordingly, it will, as a rule, be 'fair and reasonable' for the implementer to 'reserve the right to challenge those patents or a sample of those patents in the relevant foreign court and to require that the licence provide a mechanism to alter the royalty rates as a result' [529] .

In this context, the Supreme Court highlighted that the above approach is not unique to UK jurisprudence, but is in line with case law delivered in other jurisdictions, particularly in the United States, Germany, China and Japan [530] .


2. Suitable forum (forum conveniens)

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

The Supreme Court found that UK Courts were not obliged to decline jurisdiction in favour of the Chinese courts [531] . The so-called 'forum conveniens' doctrine was not applicable in the present case, since -unlike the courts in England- Chinese courts had currently no jurisdiction to determine the terms of global FRAND portfolio licences in the absence of an agreement of the parties to the dispute [531] . What is more, the Court found that it could reasonably not be expected by Conversant to consent in granting jurisdiction to the Chinese courts in the current setting [531] .

In the eyes of the Supreme Court, the English courts involved in the present dispute were also not obliged to stay their proceedings in expectation of the outcome of the Chinese validity proceedings [532] . The latter concerned only the validity of Conversant's Chinese patents, whereas the proceedings initiated in England referred to the determination of the terms of a FRAND licence for Conversant's global SEP portfolio [532] .


3. Non-discrimination

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

The Supreme Court agreed with both the High Court and the Court of Appeal and found that this was not the case. The Court explained that FRAND does not imply a so-called 'hard-edged' non-discrimination obligation, requiring from the patent holder to offer the same or similar terms to all similarly situated licensees [533] .

Under the ETSI IPR Policy (Article 6.1.), the patent holder must commit to make licences available on FRAND terms. In the eyes of the Supreme Court, this is a 'single, unitary obligation', not three distinct obligations that the licence terms should be fair, and separately, reasonable, and separately, non-discriminatory [534] . Accordingly, the terms and conditions should be 'generally available as a fair market price for any market participant' and reflect the 'true value' of the SEP portfolio, 'without adjustment depending on the individual characteristics' of a particular licensee [535] .

The Supreme Court made further clear, that the FRAND undertaking under the ETSI IPR Policy does not imply a so-called 'most favourable licence' clause, obliging patent holders to grant licences on terms equivalent to the most favourable licence terms to all similarly situated licensees [536] . Looking in detail at the creation of the ETSI IPR Policy, the Court observed that ETSI had previously expressly rejected proposals to include such a clause in the FRAND undertaking [537] .

Furthermore, the Court noted that there is no 'general presumption' that differential pricing is harmful to private or public interests involved [538] . On the contrary, there are circumstances in which the SEP holder's choice to offer lower than the benchmark rates to specific licensees is reasonable in a commercial sense [539] . This applies, for instance, with respect to the so-called 'first mover advantage': The Court recognised that it can be 'economically rational' and 'commercially important' to agree a lower rate with the first ever licensee, because, apart from generating initial income on the SEPs, the licence signed can also 'validate' the portfolio in the market and facilitate licensing in the future [539] . The same is also true with respect to so-called 'fire sales', that is cases, in which the patent holder is forced to licence at lower rates in order to secure its commercial survival, as it has been the case at the time, in which Unwired Planet signed the licensing agreement with Samsung [540] .


4. Abuse of market dominance / Huawei framework

The fourth issue examined by the Supreme Court was whether, by bringing infringement proceedings against Huawei, Unwired Planet had abused a dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) and should, therefore, be denied access to injunctive relief. In particular, Huawei had argued that an injunction should be denied, because Unwired Planet had failed to comply with the conduct requirements established by the Court of Justice of the European Union (CJEU) in the matter Huawei v ZTE (Huawei judgment or scheme) [541] .

The Supreme Court held that this was not the case [542] . In the eyes of the Court, the Huawei judgment establishes an obligation of the patent holder to notify the standards implementer about the infringing use of the SEPs in question, prior to filing an action for injunctive relief, which, if breached, results in abusive behaviour in terms of Article 102 TFEU [543] . The 'nature' of this obligation depends on the circumstances of each individual case [543] . The Court held that Unwired Planet had given adequate notice to Huawei prior to filing the present infringement action [544] .

Considering the further duties established by the Huawei judgment, the Supreme Court confirmed the view previously taken by the High Court and the Court of Appeal that the Huawei scheme is not 'mandatory', but rather establishes a 'route map, which, if followed precisely, will ensure that [the patent holder] can seek an injunction without risking infringing article 102' [545] . Other than that, the Huawei judgment provides 'a number of points of reference to assist in assessing the all-important question of whether each of the parties is willing to enter into a licence on FRAND terms' [544] . Having said that, the Supreme Court found that Unwired Planet had been willing to grant a FRAND licence to Huawei, so that it had not behaved abusively [544] .


5. Damages instead of injunctive relief?

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

The Supreme Court found that there is no basis for substituting an injunction by an award of damages in the present case [546] . On the one hand, neither Unwired Planet nor Conversant could employ the 'threat of an injunction' as a means for imposing 'exorbitant fees' on Huawei or ZTE, since they would be entitled to an injunction, only if they have offered a licence on terms which the court would have already confirmed as FRAND [547] .

Furthermore, the Court took the view that an award of damages is 'unlikely to be an adequate substitute for what would be lost by the withholding of an injunction', since the SEP holder would be required to bring proceedings against an implementer patent-by-patent and country-by-country, which was considered to be 'impractical' [548] . What is more, standards implementers would then have 'an incentive to continue infringing until, patent by patent, and country by country, they were compelled to pay royalties', a fact that would make FRAND licensing more difficult, since, as the Supreme Court pointed out, 'it would not make economic sense' for infringers to voluntarily take a licence [549] .

On the other hand, an injunction 'is likely to be a more effective remedy': By prohibiting infringement altogether, an injunction may give an infringer 'little option' but to accept the FRAND terms offered by the SEP holder, 'if it wishes to remain in the market' [549] . For the above reasons, the Supreme Court highlighted that an injunction is 'necessary in order to do justice' [550] .

  • [518] Unwired Planet v Huawei, High Court of Justice for England and Wales, judgment dated 5 April 2017, Case No. [2017] EWHC 711(Pat).
  • [519] Unwired Planet v Huawei, UK Court of Appeal, judgment dated 23 October 2018, Case No. [2018] EWCA Civ 2344.
  • [520] Conversant v Huawei and ZTE, High Court of Justice for England and Wales, judgment dated 16 April 2018, Case No. [2018] EWHC 808 (Pat).
  • [521] Conversant v Huawei and ZTE, UK Court of Appeal, judgment dated 30 January 2019, Case No. [2019] EWCA Civ 38.
  • [522] Unwired Planet v Huawei and Conversant v Huawei and ZTE, UK Supreme Court, judgment dated 30 January 2019, Case No. [2019] EWCA Civ 38.
  • [523] Ibid, paras. 49 et seqq.
  • [524] Ibid, para. 61.
  • [525] Ibid, para. 58.
  • [526] Ibid, para. 62.
  • [527] Ibid, para. 60.
  • [528] Ibid, para. 63.
  • [529] Ibid, para. 64.
  • [530] Ibid, paras. 68-84.
  • [531] Ibid, para. 97.
  • [532] Ibid, paras. 99 et seqq.
  • [533] Ibid, paras. 112 et seqq.
  • [534] Ibid, para. 113.
  • [535] Ibid, para. 114.
  • [536] Ibid, para. 116.
  • [537] Ibid, paras. 116 et seqq.
  • [538] Ibid, para. 123.
  • [539] Ibid, para. 125.
  • [540] Ibid, para. 126.
  • [541] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [542] Unwired Planet v Huawei and Conversant v Huawei and ZTE, UK Supreme Court, judgment dated 30 January 2019, Case No. [2019] EWCA Civ 38, paras. 149 et seqq.
  • [543] Ibid, para. 150.
  • [544] Ibid, para. 158.
  • [545] Ibid, paras. 157 and 158.
  • [546] Ibid, para. 163.
  • [547] Ibid, para. 164.
  • [548] Ibid, para. 166.
  • [549] Ibid, para. 167.
  • [550] Ibid, para. 169.