Case Law post CJEU ruling Huawei v ZTE

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Updated 17 January 2018

Sisvel v Haier

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

A. Facts

The claimant is the owner of European patent EP B1, allegedly covering data transmission technology under the GPRS standard. The defendants produce and market devices using the GPRS standard. On 10 April 2013, the claimant made a commitment towards ETSI by declaring to grant a license on FRAND terms regarding, inter alia, patent EP B1. In various letters and meetings between 2012 and 2015, the claimant informed the parent companies of the defendants about its patent portfolio and made an offer, but no licensing agreement was entered into. These interactions took place before the CJEU handed down its Huawei v. ZTE ruling in July 2015. On 3 November 2015, the District Court granted an injunction order. [23] The District Court also held that the defendants were liable for compensation in principle and ordered them to render full and detailed account of its sales. Further, the District Court ordered a recall and removal of all infringing products from the relevant distribution channels.

The defendants lodged an appeal with the Higher Regional Court of Düsseldorf. They argued, inter alia, that the District Court had not taken into account the procedural requirements set out by the CJEU in the decision Huawei v. ZTE [24] and that the claimant had not made a license offer on FRAND conditions. [25] The Higher Regional Court of Düsseldorf partially granted the appeal. It held that the defendants were under an obligation to render accounts and that they owed compensation in principle. [26] However, it held that the defendants were under no obligation to recall and remove the products from the relevant distribution channels because the claimant was in breach of its obligations under EU competition law (‘kartellrechtlicher Zwangslizenzeinwand’). [27] The Higher Regional Court did not have to decide about the injunction order because the parties had agreed to settle the matter in this regard (the patent had expired in September 2016). [28]

B. Court’s reasoning

1. Market Power

The Higher Regional Court held that the claimant was a dominant undertaking within the meaning of Art 102 TFEU. [29] In the eyes of the court, proprietorship of an SEP does not automatically constitute a dominant market position because not all SEPs necessarily influence competition in the downstream product market. [30] Rather, it needs to be ascertained whether or not market dominance exists in respect of each SEP individually. A dominant market position exists, for example, if it would not be possible to successfully market a competitive product without using the respective SEP, or if compatibility and interoperability under the standard could not be guaranteed. In contrast, a dominant position does not exist if the technology covered by the SEP is only of little importance for consumers in the relevant market. [30] On this basis, the Higher Regional Court had no doubts that the claimant was in a dominant market position [31] because the patent in question was related to data transfer, an essential function of the GPRS standard. [32]

2. Notice of Infringement

The Higher Regional Court held that the claimant had given proper notice of infringement under the CJEU requirements. According to the court, the procedure set out by the CJEU in the Huawei v. ZTE ruling applied to transitional cases (i.e. proceedings that had commenced before the CJEU decision, but where the decisions were handed down after). [33] The District Court had wrongfully assumed that the Huawei v. ZTE principles did not apply to the case at hand. CJEU decisions pursuant to Art 267 TFEU apply ab initio (‘ex tunc’) and thus to transitional cases. [34] The Higher Regional Court argued that the Huawei v. ZTE case itself had been of a transitional nature and that the CJEU had been aware of the diverging principles created by the German Federal Court of Justice in the Orange Book Standard decision in 2009. [34] Nevertheless, the CJEU had not distinguished between transitional and ‘new’ cases. As a consequence, the claimant was under an obligation to notify the defendants of the infringement. The written correspondence between the parties from 2012 and 2013 met this requirement [35]

The Higher Regional Court also held that it was sufficient to notify the defendants’ parent companies. [36] The claimant can reasonably expect that the parent company will pass on the respective information to all subsidiaries that are active on the relevant product markets. Requiring the claimant to give additional notices to the subsidiaries would be an unjustified formality (‘bloße Förmelei’). [36]

3. The Defendant’s Willingness to Enter into a License Agreement

As a consequence, the defendants were under an obligation to declare their willingness to enter into a license agreement on FRAND terms. [37] Several months had passed between the notice of infringement and the defendants’ declaration of willingness. However, the defendants had made it clear in an email from December 2013 that they were willing to enter into a license agreement. In the eyes of the Higher Regional Court, this was sufficient because there was ample time between this declaration and the commencement of proceedings in 2014.

In the further course of the negotiations, the rejection of certain license terms by the defendant was not necessarily an indicator for general unwillingness. [38] The defendant’s willingness needs to be seen in the overall context of the case. Unwillingness would be demonstrated only if the defendant definitively and finally rejects the claimant’s offers (the ‘last word’). [38] The Higher Regional Court held that the statements made by the defendants in the course of the negotiations did not justify such a conclusion. [38]

4. The SEP Owner’s Licensing Offer and the Standard Implementer’s Reaction

The Higher Regional Court held that the District Court had been incorrect to leave open the question as to whether the claimant’s offer had been FRAND. [39] The Higher Regional Court took the view that the CJEU had established an intricate system of consecutive actions that the parties must take. A claimant needs to make an offer on FRAND terms only if the defendant declared its willingness to enter into a license agreement on FRAND terms. Similarly, a defendant is under an obligation to make a counter-offer on FRAND terms only if the claimant made an offer on FRAND terms. [40] According to the Higher Regional Court, this view flows from the wording of the Huawei v. ZTE ruling that relates the content of offer and counter-offer (‘such an offer’; ‘responded to that offer’). [40] An SEP owner who has given a commitment to an SSO to offer FRAND licenses can be expected to make a FRAND offer that can reasonably be accepted by the defendant. In addition, a defendant needs to be able to assess whether the conditions of the claimant’s offer are FRAND. Requiring a defendant to make a FRAND counter-offer no matter what the claimant had offered earlier would be a contradiction of this basic proposition of the Huawei v. ZTE ruling. [40] Thus, it was necessary to have a decision in respect of the conditions of the claimant’s licensing offer.

The Higher Regional Court held that the claimant’s licensing offer did not meet FRAND requirements [41] because it discriminated against the defendants. [42] The court reiterated that infringement courts cannot limit their assessment to a summary review of whether the conditions were not evidently non-FRAND. Rather, infringement courts need to make a full assessment of the license conditions. [43]

The court held that dominant undertakings are under no obligation to treat all business partners in exactly the same way. [44] SEP owners have discretion regarding the license fees that they charge. [45] Different treatment of licensees is accepted if it can be justified as a result of normal market behavior. [46] Further, license conditions can be abusive only if they are significantly different between licensees. [46] These principles also apply to SEP owners who have given a FRAND declaration because this commitment refers to Art 102 lit. c) TFEU. [47] The burden of proof for such substantially unequal treatment lies with the defendant, [48] whilst the onus is on the claimant to prove that this unequal treatment is justified. [48] However, as the defendant will typically not have the necessary information, the claimant is under an obligation to provide information as to which competitors have been granted licenses and on what terms. [48] On this basis the Higher Regional Court concluded that the claimant had treated the defendants significantly differently from their competitors [49] without having a proper justification. [50] In particular, the claimant could not prove that discounts given to a competitor were common in the industry, [51] or that these discounts were a result of the particularities of the case. [52]

  • [23] LG Düsseldorf, 3 November 2015, File No. 4a O 93/14
  • [24] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 32.
  • [25] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 34.
  • [26] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 75.
  • [27] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 74 and 175.
  • [28] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 47.
  • [29] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 177 et seqq.
  • [30] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 182.
  • [31] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 185.
  • [32] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 186.
  • [33] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 202.
  • [34] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 203.
  • [35] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 215.
  • [36] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 213.
  • [37] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 220.
  • [38] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 240.
  • [39] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 244.
  • [40] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 245.
  • [41] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 242.
  • [42] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 251.
  • [43] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 249.
  • [44] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 254.
  • [45] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 255 and 257.
  • [46] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 256.
  • [47] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 257.
  • [48] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 258.
  • [49] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 263.
  • [50] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 268.
  • [51] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 270 et seqq.
  • [52] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 275 et seqq. and paras 290 et seqq.

Updated 10 April 2019

Huawei v ZTE

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

A. Facts

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

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

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

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

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

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

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

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

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

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

B. Court’s Reasoning

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

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

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

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

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

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

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

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


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

Updated 17 January 2018

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

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

A. Facts and Main Judgment

The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue relate to telecommunication network coding and procedures. In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents and one non-technical trial relating to competition law issues, FRAND issues, injunctive relief and damages for past infringements.Unwired Planet v. Huawei [2017] EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html In its decision on 5 April 2017 (the ‘main judgment’), the Patents Court (Birrs J) held that two patents were valid and that they had been infringed, and that the claimant was in a dominant position, but had not abused this position. The court stated that a final decision about an injunction to restrain patent infringements should be made separately. A few weeks after the main judgment, a license representing the FRAND terms between the two parties was prepared (the ‘settled license’), but had not yet been entered into. [112] Further, the defendant offered to give an undertaking to the court to enter into the license settled by the Patents Court or any other court. [113]

In its subsequent decision on 7 June 2017 (the case at hand), the parties argued whether the court should grant an injunction order given the existence of the settled license. Other minor issues of the case related to damages, declaratory relief, costs and permission to appeal. [114] The court granted an injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 (the ‘final order’). [115] The injunction order would be discharged if the defendant entered into a FRAND license and it would be stayed pending appeal. The court also declared that the settled license represented the FRAND terms in the given circumstances between the parties and that the defendant had to pay GBP 2.9 million of the claimant’s costs. Permission to appeal was granted to the defendant in respect of three issues and to the claimant in respect of one issue. [115]

B. Court’s Reasoning

1. Injunction

The main issue considered by the court was the interplay between the injunction, the settled license and the undertaking offered by the defendant. Patent EP (UK) 2 229 744 will expire in 2028. The settled license’s expiry date is 31 December 2020, [116] which would put the defendant in a difficult position if it attempts to renegotiate the license while the injunction is still in place. The defendant would even risk being in contempt of court if it continued to sell equipment if there was an argument that the license had come to an end for other reasons (e.g. repudiatory breach of contract). [117] However, the court took the view that it cannot be said that the defendant must be free to sell products if the license has ceased to exist. [116] Similarly, it cannot be said with certainty that the claimant must have an injunction at that date.

Thus, the court considered what the correct form of injunction in respect of a FRAND undertaking should be when a court has settled a license but the defendant has not entered into it (‘FRAND injunction’). [118] The court held that the FRAND injunction should contain a proviso that it will cease to have effect as soon as the defendant enters into the FRAND license. The injunction should also be subject to an express liberty to either party to return to court in the future if the FRAND license ceases to exist or expires while the patent is still valid. [118]

The court also held that despite the court’s discretion as to whether an injunction is granted, an injunction is normally effective, proportionate and dissuasive in IP cases. [119] Although the practical effect of a defendant’s undertaking and an injunction are similar, rights holders usually insist on an injunction. [120] One reason is that it involves a public vindication of the claimant’s rights. [120] As the claimant has been forced to come to court, an offer of undertaking after judgment is usually considered too late. [120] In this case, the defendant had maintained throughout the negotiations and the trial that it was under no obligation to accept a worldwide license. [121] Thus, according to the court, the right thing to do was to grant a FRAND injunction which will be stayed on terms pending appeal.

2. Other Issues

The court held that the issue of damages is closely related to the main issue. [122] If the defendant entered into the settled license, all payments would be covered by the license. If the defendant did not enter into the settled license, an order for damages is required. As a consequence, the court order should be in the same form as the FRAND injunction (stayed pending appeal and ceasing to have effect if the parties enter into the settled license). [122]

The parties also disagreed about the wording of the court declaration regarding the FRAND terms of the settled license. [123] The court dismissed the defendant’s suggestion as too complicated and the claimant’s suggestion as incomprehensive. Instead, the court declaration would be ‘the license annexed to the judgment represents the FRAND terms applicable between the parties in the relevant circumstances’. [124] Further, the court rejected the defendant’s petition to make a declaration that the claimant had not abused its dominant market position. [125] It took the view that the main judgment made a clear finding on this issue in summary paragraph 807(17).

Further, the parties disagreed about the extent of the defendant’s obligation to bear the claimant’s costs. The claimant argued that it should be regarded as the successful party so that the defendant had to pay its costs (GBP 6.4million). [126] The defendant argued the claimant had been clearly wrong regarding the applicable FRAND rate [127] and the appropriate thing would be to make no cost order. The court rejected the idea that there was no overall winner (as argued by the defendant) because the claimant was successful on the issues of the nature of the license and the existence and abuse of market dominance. [128] The ensuing question was whether any deductions were appropriate. [129] The court held that neither party had offered terms that were essentially FRAND. [130] However, the rates offered by the claimant were significantly further away from the end result than the rates offered by the defendant. [130] Thus, the defendant’s costs in relation to the FRAND rate issue were not recoverable by the claimant.

The fifth and final issue was in respect of permission to appeal. The court granted the defendant permission on three grounds: first, the necessity of granting a global license (including the court’s view that there is only one applicable license fee); [131] second, the hard-edged non-discrimination point; [132] and third, the issue of injunctive relief and abuse of market dominance under the CJEU ruling Huawei v. ZTE. [133] Conversely, the claimant was granted permission to appeal on the blended global benchmark issue (using a blended global rate as a benchmark, leading to the question whether another discount for the Chinese market should given). [134]

  • [111] Unwired Planet v. Huawei [2017] EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html
  • [112] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 2.
  • [113] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 8.
  • [114] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 1.
  • [115] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 70.
  • [116] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 22.
  • [117] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 19.
  • [118] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 20.
  • [119] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 25.
  • [120] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 26.
  • [121] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 29.
  • [122] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 33.
  • [123] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 34.
  • [124] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 36.
  • [125] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 38.
  • [126] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), paras 39-40.
  • [127] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 41.
  • [128] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 44.
  • [129] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 45.
  • [130] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 56.
  • [131] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 170 et seqq.
  • [132] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 177 and 481 et seqq.
  • [133] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 627 et seqq.
  • [134] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 537 et seqq.

Updated 3 December 2018

District Court, LG Düsseldorf

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

A. Facts

The Claimant holds a patent essential to the data communication standards ADSL2+ and VDSL2 (Standard Essential Patent or SEP) [163] . The previous holder of the patent in question had declared towards the standardization organisation International Telecommunication Union (ITU) its willingness to make the patent accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [164] .

The Defendant offers communication services in Germany to retail and wholesale clients, including DSL connections using the standards ADSL2+ and VDSL2 [165] .

The Intervener supplies the Defendant with equipment (especially DSL transceivers and DSL Boards), allowing network services based on the above standards [165] .

In January 2016, the Claimant brought an action against the Defendant before the District Court (Landgericht) of Düsseldorf (Court) requesting for a declaratory judgement recognizing Defendant’s liability for damages arising from the infringement of its SEP as well as the provision of information and the rendering of accounts (liability proceedings) [166] . During the course of these proceedings, the Claimant made two offers for a licensing agreement to the Defendant. The Defendant made a counter-offer to the Claimant and provided security for the use of the SEP [167] . The parties failed to reach an agreement.

In June 2016, the Defendant filed an action for a declaratory judgement against the Claimant before the Dublin High Court in Ireland, requesting the High Court to declare that both Claimant’s offers were not FRAND and that Defendant’s counter-offer was FRAND [168] . Taking the ongoing liability proceedings in Germany into account, the Dublin High Court stayed its proceedings [168] .

In September 2017, the Claimant brought a second action against the Defendant before the District Court of Düsseldorf, requesting for injunctive relief (injunction proceedings) [169] . In February 2018, the Claimant made another licensing offer to the Defendant in the pending injunction proceedings [167] .

With the present judgment, the Court dismissed Claimant’s action in the injunction proceedings [170] .


B. Court’s reasoning

Although the Court held that the services offered by the Defendant infringe the SEP in suit [171] , it found that the Claimant cannot enforce its patent rights for the time being [172] , since it failed to fully comply with the obligations stipulated by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTEHuaweiv ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13. (Huawei obligations or framework) with respect to dominant undertakings in terms of Article 102 of the Treaty for the Functioning of the EU (TFEU) [170] .

1. Dominant market position

The Court found that the Claimant holds a dominant market position in terms of Article 102 TFEU [174] .

In the Court’s eyes, the relevant market for assessing dominance with regards to SEPs is, as a rule, the (downstream) market for products or services implementing the standard, to which the SEP refers [175] . Each SEP outlines an own relevant (licensing) market, unless – from the SEP users’ perspective – equivalent alternative technologies for the same technical problem exist [176] . Since the Court held that, in the present case, none of the existing technological alternatives to the standards ADSL2+ and VDSL2 (e.g. HFC networks, LTE, HDSL, SHDSL, ADSL, SDSL, VDSL, fibre optic networks, radio relay technology or internet services via satellite) offers an equivalent solution to users [177] , it defined the relevant market as the market for products and services allowing for internet connections through DSL technology [178] .

Regarding to the subsequent question of whether the Claimant has a dominant position in the above market, the Court first made clear that ownership of a SEP does not per se establish such condition [179] . The fact that a patent is essential to a standard does neither give rise to the (rebuttable) presumption that the SEP holder can distort competition in downstream markets, because products complying with the standard need to use the SEP [179] . Since a high number of patents is usually declared as standard essential, not every SEP can actually (significantly) affect the competitiveness of products or services in downstream markets; the effect of each SEP on a downstream market has, therefore, to be established on a case-by-case basis by taking into account the circumstances of each individual case [179] .

The Court explained that a dominant market position is given, when the use of the SEP is required for entering the market, particularly for securing the general technical interoperability and compatibility of products or services under a standard [179] . The same is true, if the patent user could not market competitive products or services without a licence (for instance, because only a niche market exists for non-compliant products) [179] . No market dominance exists, however, when the SEP covers a technology which is only of little importance to the majority of the buyers in the relevant market [179] .

According to the Court, the latter was not the case here; on the contrary, the Defendant cannot offer competitive products or services in the market for DSL internet connections, without using the SEP in suit [180] .

2. Huawei framework

In the Court’s view, the parties to SEP licensing negotiations need to fulfill the mutual conduct obligations under the Huawei framework step by step and one after another [181] . The Court did not see any flaws in the parties’ conduct with respect to the first two steps of the Huawei framework (SEP holder’s notification of infringement and SEP user’s declaration of willingness to obtain a licence), held, however, that the Claimant did not meet its consequent obligation to make a FRAND licensing offer to the Defendant [182] .

Notification of infringement

The Court found that the Claimant had fulfilled its obligation to notify the Defendant about the infringing use of the SEP in suit prior to the commencement of the injunction proceedings [183] .

First, the Court pointed out that a respective notification (as well as a later licensing offer) can be made by the SEP holder itself, or by any other affiliated company within the same group of companies, especially by the patent holder’s parent company [184] . On the other hand, it is not required that the infringement notification is addressed to the company that will later be party to the infringement proceedings; in general, it is sufficient to address the notification to the parent company within a group of companies [184] .

In terms of content, the notification of infringement must name the patent in suit (including the patent number) and indicate the contested embodiments as well as the (allegedly) infringing acts of use [185] . A detailed (technical and/or legal) explanation of the infringement (particularly an analysis of how the individual features of the patent claims are infringed) is not required; the addressee needs just to be put in the position to assess the infringement allegations, if necessary by seeking expert advice [185] . In this context, the Court disagreed with the District Court of Mannheim which had requested the SEP holder to inform the user about the essentiality of the patent to the standard and/or attach claim charts to the notification of infringement [185] .

In terms of timeliness, the Court took the view that the notification of infringement can be made alongside with SEP holder’s offer for a FRAND licence to the user (prior to the initiation of court proceedings) [186] . In this case, the second step under the Huawei framework will be skipped (that is the SEP user’s declaration of its willingness to obtain a licence). According to the Court, this fact does not, however, have an impact on the SEP holder’s position: If the SEP user is willing to enter into a licence, this approach would safe time (although the SEP user should be granted more time than usual to assess and react to both the notification of infringement and the FRAND offer) [186] . If, on the other hand, the SEP user is unwilling to obtain a FRAND licence, then the SEP holder will just have made a licensing offer absent a respective obligation under the Huawei framework [186] .

In the present case, the fact that the Claimant did not make a separate notification of infringement prior to the initiation of the injunction proceedings, was not considered problematic. The Court pointed out that the Defendant was fully informed about the infringement allegation by the action for damages raised by the Claimant long before the injunction proceedings, so that a separate notification was not required [187] .

Willingness to obtain a FRAND licence

The Court further found that the Defendant had fulfilled its Huawei obligation to express its willingness to obtain a FRAND licence [188] .

In terms of content, no high demands should be placed on the SEP user’s respective declaration; it is not subject to formal requirements and can be of a general nature, as long as the willingness to obtain a licence is clearly stated [189] . Given the circumstances of the specific case, even an implicit behaviour can suffice [189] .

In terms of timeliness, the Court held that a strict deadline, within which the SEP user ought to make its declaration, cannot be set [190] . The respective time frame must be determined on a case-by-case basis under consideration of the circumstances of each case [190] . If the SEP holder’s notification of infringement contains only the minimum required information, a reaction within a period of five or even three months at the most could be expected [190] . In case that the infringement notification contains information going beyond the required minimum, an even quicker reaction could be required from the SEP user under certain circumstances [190] .

In the present case, the Court held that the Defendant has implicitly declared its willingness to enter into a FRAND licence with the Claimant at the latest at the point in time, in which the injunction proceedings were initiated [191] . At that time, the Defendant had already made a counter-offer for a FRAND licence to the Claimant and had also provided security for the use of Claimant’s patents [192] .

In this context, the Court noted that neither the fact that the Defendant contested Claimant’s claims in the parallel liability proceedings not the fact that it raised an action for declaratory judgement against the Claimant before the Dublin High Court can support the argument that the Defendant has deviated from its previous declaration of willingness [193] .

SEP holder’s licensing offer

The Court held that the offer which the Claimant made to the Defendant in course of the injunction proceedings was not FRAND [194] . Since the Claimant expressly relied only on this offer to establish its compliance with the Huawei framework, the Court did not assess the FRAND conformity of the two previous offers of the Claimant to the Defendant [167] .

In terms of timeliness, the Court stressed out that the SEP holder must make a FRAND licensing offer to the user before the initiation of infringement proceedings [195] . Under German procedural law, proceedings are initiated after the claimant has made the required advance payment on costs, even if the statement of claims has not been served to the defendant, yet [196] .

The Court did not rule out that SEP holder’s failure to fulfil its Huawei obligations prior to the commencement of infringement proceedings can be remedied during the course of the proceedings [197] . Depending on the circumstances of each case, the SEP holder should be given the opportunity – within the limits of procedural deadlines – to react to (justified) objections of the SEP user and eventually modify its offer [197] . Denying the SEP holder this opportunity without exceptions would be contrary to the principle of procedural economy; the patent holder would be forced to withdraw its pending action, make a modified licensing offer to the patent user and, subsequently, sue the latter again [197] . In this context, the Court explained that failure to meet the Huawei obligations does not permanently impair SEP holder’s rights [198] . Notwithstanding the above, the Court made, however, clear that the possibility of remedying a flawed licensing offer is subject to narrow limits; the CJEU intended to relieve licensing negotiations between SEP holder and SEP user from the burden imposed on parties by ongoing infringement proceedings, and particularly the potential undue pressure to enter into a licensing agreement which such proceedings can put on the SEP user [199] .

Against this background, the Court expressed doubts that the Claimant’s licensing offer, which was made in the course of the pending injunction proceedings could be considered as timely [169] . Nevertheless, the Court left this question open, because, in its eyes, the Claimant’s offer was not FRAND in terms of content [200] .

The Court did not deem necessary to decide whether the FRAND conformity of the SEP holder’s offer must be fully assessed in infringement proceedings, or whether only a summary assessment of its compatibility with FRAND suffices [201] . In the Court’s view, Claimant’s offer was anyway both not fair and discriminatory [202] .

Fair and reasonable terms

The Court held that the licensing terms offered by the Claimant to the Defendant were not fair and reasonable [203] .

First, the terms did not adequately consider the effects of patent exhaustion [204] . As a rule, FRAND requires licensing offers to contain respective provisions [205] . The clause contained in Claimant’s offer, establishing the possibility of a reduction of the royalties owed by the Defendant in case of the exhaustion of licensed patents, is not fair, because it puts the burden of proof regarding to the amount of the reasonable reduction of the royalties on the Defendant’s shoulders [206] .

Second, the clause, according to which Defendant’s payment obligations regarding to past uses of the SEP in suit should be finally settled without exceptions and/or the possibility to claim reimbursement, was also considered not fair [207] . The Defendant would be obliged to pay royalties for past uses, although it is not clear whether the Claimant is entitled to such payments [208] .

Third, the Court found that the exclusion of the Defendant’s wholesale business from Claimant’s licensing offer was also not fair [209] . According to the principle of contractual autonomy, patent holders are free to choose to which stage of the distribution chain they offer licences [210] . In the present case, however, excluding a significant part of the Defendant’s overall business, namely the wholesale business, from the licensing offer, hinders a fair market access [210] .

Non-discrimination

Besides from the above, the Court ruled that the Claimant’s offer was discriminatory [211] .

To begin with, the Court stressed out that FRAND refers to a range of acceptable royalty rates: As a rule, there is not only a single FRAND-compliant royalty rate [201] . Furthermore, as far as a corresponding commercial/industry practice exists, offers for worldwide portfolio licences are, in general, in line with the Huawei framework, unless the circumstances of the individual case require a different approach (for instance a limitation of the geographical scope of the licence, in case that the user is active only in a single market) [212] .

Furthermore, the Court explained that the non-discriminatory element of FRAND does not oblige the SEP holder to treat all users uniformly [213] . The respective obligation applies only to similarly situated users, whereas exceptions are allowed, provided that a different treatment is justified [213] . In any case, SEP holders are obliged to specify the royalty calculation in a manner that allows the user to assess whether the offered conditions are non-discriminatory or not. The respective information needs to be shared along with the licensing offer; only when the SEP user has obtained this information a licensing offer triggering an obligation of the latter to react is given [214] .

In the Court’s view, presenting all existing essential licensing agreements concluded with third parties, covering the SEPs in suit or a patent portfolio including said SEPs (comparable agreements), has priority over other means for fulfilling this obligation [215] . In addition, SEP holders have to produce also court decisions rendered on the FRAND-conformity of the rates agreed upon in the comparable agreements, if such decisions exist [216] .

Whether presenting comparable agreements (and relevant case law) suffices for establishing the non-discriminatory character of the offered royalty rates depends on the number and the scope of the available agreementsI [217] . In case that no or not enough comparable agreements exist, SEP holders must (additionally) present decisions referring to the validity and/or the infringement of the patents in question and agreements concluded between other parties in the same or a comparable technical field, which they are aware of [218] . If the SEP in suit is part of a patent portfolio, SEP holders must also substantiate the content of the portfolio and its impact on the offered royalty rates [219] .

Having said that, the Court pointed out that an unequal treatment resulting in a discrimination in antitrust terms is not only at hand, when a dominant patent holder grants preferential terms to specific licensees, but also when it chooses to enforce its exclusion rights under a SEP in a selective manner [220] . The latter is the case, when the SEP holder brings infringement actions only against certain competitors and, at the same time, allows other competitors to use its patent(s) without a licence [220] . However, such a conduct is discriminatory only if, depending on the overall circumstances of each case (for instance, the extend of the infringing use and the legal remedies available in the country, in which claims need to be asserted), it would have been possible for the SEP holder with reasonable efforts to enforce its patent rights against other infringers (which it was or should have been aware of) [220] . In favour of an equal treatment of competitors, the level of action which must be taken by the SEP holder in this respect should not be defined narrowly [220] . However, it has to be taken into account, that – especially in the early stages of the implementation of a standard – the SEP holder will usually not have the means required to enforce its rights against a large number of infringers; in this case, the choice to enforce its rights only against infringers with market strength first appears reasonable [221] .

Based on the above considerations, the Court ruled that the Claimant’s choice to sue only the Defendant and its two main competitors, without asserting the SEP in suit against the rest of their competitors, respectively against their suppliers, was discriminatory [222] . The Claimant should have already, at least, requested the companies, against which no action was filed, to obtain a licence, particularly since the remaining period of validity of the SEP in suit is limited [223] . Furthermore, the Court found that the Claimant’s refusal to make a licensing offer to the Intervener, although the latter had requested for a licence, was also discriminatory; in the Court’s view, the Claimant failed to provide an explanation justifying this choice [224] .

Since the Claimant’s offer was found to be non-compliant with FRAND, the Court refrained from ruling on the conformity of Defendant’s counter-offer and the security provided with the Huawei framework [225] .


C. Other issues

The Court ruled that in accordance with Article 30 para. 3 of the German Patent Law (PatG) the registration in the patent register establishes the presumption of ownership, allowing the entity which is registered as patent holder to assert the rights arising from the patent before court [226] .

  • [163] District Court of Düsseldorf, 11 July 2018, Case-No. 4c O 81/17Ibid, paras. 3 and 82.
  • [164] Ibid, para. 13.
  • [165] Ibid, para. 12.
  • [166] Ibid, paras. 14 and 211.
  • [167] Ibid, para. 15.
  • [168] Ibid, para. 16.
  • [169] Ibid, para. 236.
  • [170] Ibid, paras. 140 and 313 et seqq.
  • [171] Ibid, paras. 114 et seqq.
  • [172] Ibid, paras. 60 and 140.
  • [173] Huaweiv ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
  • [174] Ibid, para. 142.
  • [175] Ibid, para. 148.
  • [176] Ibid, paras. 153 and 146.
  • [177] Ibid, paras. 159 - 181.
  • [178] Ibid, para. 158.
  • [179] Ibid, para. 147.
  • [180] Ibid, paras. 183 et seqq.
  • [181] Ibid, para. 191.
  • [182] Ibid, para. 188.
  • [183] Ibid, paras. 195 et seqq.
  • [184] Ibid, para. 199.
  • [185] Ibid, para. 198.
  • [186] Ibid, para. 200.
  • [187] Ibid, para. 203.
  • [188] Ibid, para. 205.
  • [189] Ibid, para. 208.
  • [190] Ibid, para. 207.
  • [191] Ibid, para. 210.
  • [192] Ibid, para. 212.
  • [193] Ibid, paras. 215 et seq.
  • [194] Ibid, para. 220.
  • [195] Ibid, paras. 222 et seqq.
  • [196] Ibid, para. 225.
  • [197] Ibid, para. 233.
  • [198] Ibid, para. 228.
  • [199] Ibid, para. 230.
  • [200] Ibid, para. 237.
  • [201] Ibid. para. 241.
  • [202] Ibid, para. 242.
  • [203] Ibid, paras. 283 et seqq.
  • [204] Ibid, para. 285.
  • [205] Ibid, para. 288.
  • [206] Ibid, paras. 292 et seq.
  • [207] Ibid, paras. 298 et seqq.
  • [208] Ibid, para. 301.
  • [209] Ibid, para. 306.
  • [210] Ibid, para. 311.
  • [211] Ibid, para. 271.
  • [212] Ibid, para. 250.
  • [213] Ibid, para. 248.
  • [214] Ibid, para. 267.
  • [215] Ibid, paras. 256 and 259 et seq.
  • [216] Ibid, para. 262.
  • [217] bid, paras. 258 and 264.
  • [218] Ibid, paras. 263 and 265.
  • [219] Ibid, para. 265.
  • [220] Ibid, para. 273.
  • [221] Ibid, para. 274.
  • [222] Ibid, para. 276.
  • [223] Ibid, para. 277.
  • [224] Ibid, para. 281.
  • [225] Ibid, para. 315.
  • [226] Ibid, paras. 75 et seq.

Updated 1 November 2017

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

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

  1. Facts
    The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue (EP (UK) 2 229 744, EP (UK) 2 119 287, EP (UK) 2 485 514, EP (UK) 1 230 818, EP (UK) 1 105 991, EP (UK) 0 989 712) relate to telecommunication network coding and procedures [227] . Most were part of a large patent portfolio that the claimant had acquired from a major telecommunications company in 2013. [228] In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents. This summary focuses on the non-technical trial addressed competition law issues, FRAND issues, injunctive relief and damages for past infringements. [229]
    In April 2014 the claimant made an open offer to the defendant, a major international smartphone manufacturer, to grant a license in respect of the claimant’s entire global patent portfolio (containing SEPs and non-SEPs). The defendant refused the offer, contending that there was no patent infringement, that the patents were not essential, and that they were invalid. The defendant also argued that the offer was not FRAND and thus did not constitute an abuse of a dominant market position under Art. 102 TFEU. In July 2014 the claimant made a further offer, limited to the claimant’s SEPs. Again, the defendant refused, arguing that the license conditions were not FRAND. [230] In June 2015 both parties made further offers. These offers were the result of directions from the court. The claimant offered a worldwide portfolio license while the defendant wanted to limit the territorial scope to the United Kingdom. [231] Between August and October 2016 the parties exchanged further offers without reaching an agreement. [232]
    The Patents Court (Birrs J) held that the claimant was in a dominant position, but did not abuse this position. [233] The defendant was not prepared to take a license on FRAND conditions and the claimant was not in breach of competition law. Thus, the court held that a final injunction to restrain patent infringements should be granted. An injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 was granted on 7 June 2017. [234]
  2. Court’s reasoning
    1. Market power
      The court defined the relevant market for assessing dominance as a distinct market for licensing each SEP individually. [235] European case law indicated that owning an SEP could be a rebuttable presumption for the existence of a dominant position. [236] The claimant’s pleaded position was a non-admission of dominance rather than a denial coupled with a positive case to the contrary. It was the view of the court that this was insufficient to rebut the presumption. In particular, the claimant’s argument of countervailing buyer power was unconvincing because it had not been supported by a proper economic analysis. [237]
    2. SEP Proprietor’s Licensing Offer
      1. FRAND Declaration as Conceptual Basis
        The court pointed out that that the FRAND undertaking also applied in the case that the SEP proprietor was not in a dominant position. It held that the FRAND undertaking operated as a practical constraint on a SEP owner’s market power. [238] The ETSI declaration made by the SEP proprietor is also the starting point for determining the FRAND rate. The underlying issue, which is discussed at length by the court, [239] is if such a declaration forms a contract and whether that contract can benefit third parties. The court acknowledged that the legal effect of this declaration, in particular its enforceability, is a controversial issue under French law. [240] However, the court reasoned that the FRAND declaration is an important aspect of technology standardisation. Holders of SEPs are not compelled to give a FRAND declaration. If they do, the undertaking would be enforceable and irrevocable due to public interest. [240]
        The court applied a procedural approach to FRAND. It emphasised that FRAND describes not only a set of license terms, but also the process by which a set of terms are agreed. [241] It applies to both the SEP-holder and the implementer/defendant. In particular, this approach allows for starting offers that leave room for negotiation. On the other hand, making extreme offers and taking an uncompromising approach which prejudices fair, reasonable, and non-discriminatory negotiation is not a FRAND approach. [242] This approach also means that the SEP proprietor is under an obligation to make a FRAND offer and to enter into FRAND license agreements. [243]
      2. ‘True FRAND Rate’
        The court considered that there is only a single set of terms for a given set of circumstances that would meet FRAND conditions (‘true FRAND rate’). [244] This eliminates the so-called Vringo-problem, [245] i.e. if FRAND were a range there would be two different but equally FRAND offers. Thus, if the court would grant or not an injunction, it would be unfair for the alleged infringer or SEP holder respectively. [246]
        The court was of the opinion that the true FRAND rate approach does not cause problems under competition law. Theoretically, if only one set of terms is truly FRAND, and if FRAND also represents the line between abusive and non-abusive conduct under Art. 102 TFEU, then every agreed SEP-licence could be at serious risk of being abusive. [247] However, the court took the view that FRAND-compliance and compliance with Art. 102 TFEU are not the same thing (the court pointed out that the CJEU in the Huawei ruling appears to equate an obligation to make a FRAND offer with compliance with Art 102 TFEU). [248] Since Art. 102 TFEU condemns excessive pricing, [249] a royalty rate can be somewhat higher than the true FRAND rate and still not be contrary to competition law. Conversely, for a breach of competition law, it will be necessary but not sufficient that the rate is not the true FRAND rate. [249]
      3. Discrimination
        The court held that the correct approach is to start from a global rate as a benchmark and to then adjust this rate as appropriate. [250] It distinguished between two concepts of discrimination. First, the ‘general’ concept of non-discrimination describes an overall assessment of FRAND which can be used to derive the benchmark mentioned above. [251] It is based on the intrinsic value of the patent portfolio, but it does not depend on the licensee. The court held that this benchmark should be applied to all licensees seeking the same kind of license. [252]
        Second, the ‘hard-edged’ non-discrimination obligation, which takes into account the nature of the potential licensee, [251] is a distinct concept that could be used to adjust license terms. However, the court held that the FRAND declaration does not introduce such a hard-edged non-discrimination concept. [253] If, contrary to the view taken by the court, the FRAND undertaking did include hard-edged non-discrimination, a licensee could only have the right to a lower rate granted to another licensee (i.e. a specific non-discrimination obligation resulting from the FRAND declaration) if the difference would otherwise distort competition between the two licensees. [252]
      4. Territorial Scope of License
        The court held that the defendant’s offer that was limited to UK licenses was not FRAND. In the court’s opinion country by country licensing is inefficient for goods such as mobile telecommunications devices that are distributed across borders. [254] It would also be inefficient to negotiate many different licenses and then to keep track of so many different royalty calculations and payments. No rational business would do this, if it could be avoided. [254] This was illustrated by the fact that the vast majority of licenses introduced in the trial were worldwide licenses. [255] Further, it is common ground that the industry assesses patent families rather than individual patents within the family. Assessing portfolios on a family basis inevitably involved tying a patent in one jurisdiction with a patent in another. [256] Thus, according to the court, a worldwide license would not be contrary to competition law. As willing and reasonable parties would agree on a worldwide licence, the insistence by the defendant on a license which was limited to the UK was not FRAND. [257]
  3. Court’s reasoning
    1. Comparable agreements and reasonable aggregate royalty rate
      The court held that for determining the royalty rate, the evidence of the parties would be relevant, including evidence of how negotiations actually work in the industry. [258] Other freely-negotiated license agreements might be used as comparables. [259] This may be compared with a top down approach [260] can also be used in which the rate is set by determining the patentee’s share of relevant SEPs and applying that to the total aggregate royalty for a standard, but this may be more useful as a cross-check. [261] Royalty rates determined by other courts might be useful as persuasive precedents. However, in the eyes of the court, a license rate determined at a binding arbitration does not carry much weight as to what parties are usually paying. [258] License agreements must meet certain criteria to be comparable. [262] First, the licensor is the claimant. Second, the license agreement is recent. However, it is not necessary that the licensee is the defendant or a comparable company because different market participants have different bargaining powers, which is reflected in the negotiations and the resulting royalty rates. [262] Finally the court confirmed that a royalty based on the handset price was appropriate and implied a reasonable aggregate royalty rate of 8.8%of the handset price. The court found that the 8.8% was reasonable, in part, because the aggregate implied by either party’s case was higher (10.4% and 13.3%). [263]
    2. Principles derived from Huawei v. ZTE
      The court also provided a compiled overview of its interpretation of the Huawei v. ZTE ruling. [264] In the eyes of the court, the ‘willingness to conclude a licence on FRAND terms’ refers to a willingness in general. The fact that concrete proposals are also required does not mean it is relevant to ask whether the proposals are actually FRAND or not. If the patentee complies with the procedure as set out by the CJEU, then bringing a claim for injunction is not abusive under Art 102. But even if sufficient notice is given, bringing a claim can constitute an abuse because complying with the procedure does not mean that a patentee can behave with impunity. In other words, there might be other aspects that make the claim abusive. Conversely, bringing such a claim without prior notice will necessarily be abusive. Significantly, the court held, the legal circumstances of this case differ from the circumstances assumed by the CJEU in a crucial respect. A FRAND undertaking can be effectively enforced irrespective of Art 102. The defendant does not need Art 102 TFEU to have a defence to the injunction claim.
  • [227] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 2
  • [228] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 54 et seqq.
  • [229] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 3
  • [230] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 5
  • [231] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 7-8
  • [232] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 11-14
  • [233] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 807
  • [234] Unwired Planet v Huawei, EWHC 1304 (Pat)
  • [235] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 631
  • [236] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 634
  • [237] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 636-646
  • [238] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 656
  • [239] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 108-145
  • [240] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 146
  • [241] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 162
  • [242] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 163
  • [243] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 159
  • [244] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 164
  • [245] See Vringo v ZTE [2013] EWHC 1591 (Pat) and [2015] EWHC 214 (Pat)
  • [246] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 158
  • [247] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 152
  • [248] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154
  • [249] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153
  • [250] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 176
  • [251] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 177
  • [252] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 503
  • [253] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 501
  • [254] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 544
  • [255] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 534
  • [256] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 546
  • [257] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 572
  • [258] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 171
  • [259] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 170
  • [260] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 178
  • [261] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 806 (10)
  • [262] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 175
  • [263] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 476
  • [264] Unwired Planet v. Huawei [2017] EWHC 711(Pat), 744

Updated 12 March 2019

Fraunhofer-Gesellschaft (MPEG-LA) v ZTE.

LG Düsseldorf
9 November 2018 - Case No. Case-No. 4a O 15/15

A. Facts

The Claimant, Fraunhofer-Gesellschaft zur Förderung der Angewandten Forschung, holds a patent essential to the practice of the AVC/H.264 standard concerning the compression of video data (Standard Essential Patent of SEP) [1] . The patent holder committed towards the relevant standardization body to make this patent accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions. The Claimant contributed the SEP in question to a patent pool administered by MPEG LA LLC (MPEG LA), comprising more the 5,000 patents referring to the AVC/H.264 standard (MPEG LA pool) [2] .

The Defendant, a German subsidiary of a Chinese group of companies, sells – among other things – mobile phones manufactured by its parent company (parent company) which practise the AVC/H.264 standard in Germany [3] .

MPEG LA uses a standard licensing agreement, which is publicly available at its website [4] . It has signed licensing agreements with approx. 1,400 implementers [4] .

By e-mail dated 8 September 2011, MPEG LA sent a copy of its standard licensing agreement to the Defendant’s parent company and informed the latter that its “mobile handset and tablet products” infringe patents included in its “AVC patent portfolio” (without indicating, however, either the concrete patent numbers or the specific infringing products) [5] .

On 15 September 2011, the parent company asked MPEG LA to send any relevant documents by mail to its IPR Manager [6] . A copy of MPEG LA’s standard licensing agreement reached the parent company in late September 2011 [7] .

In 2012, the parent company acquired patents included in the MPEG LA pool [2] .

Since MPEG-LA and the parent company could not reach an agreement on a licence covering the MPEG LA pool [8] , the Claimant brought an action against the Defendant before the District Court of Düsseldorf in Germany (Court), requesting for injunctive relief, information and rendering of accounts, the destruction and the recall of infringing products as well as for a declaratory judgement confirming Defendant’s liability for damages on the merits [9] .

During the proceedings, the Defendant declared its willingness to obtain a licence for the patent in suit and other SEPs of the Claimant referring to the AVC/H.264 standard [10] . Moreover, the Defendant sent to MPEG LA two signed copies of MPEG LA’s standard licensing agreement, along with a statement of accounts of its past sales and a bank guarantee [11] . MPEG LA did not countersign this agreement. It insisted, instead, on a licence that would cover all companies belonging to the same group as the Defendant [12] .

With the present judgment, the Court granted Claimant’s requests.


B. Court’s reasoning

The Court held that the mobile phones sold by the Defendant in Germany infringe Claimant’s SEP in suit [13] . It also found that by filing the present suit the Claimant did not abuse its dominant market position in violation of Article 102 of the Treaty for the Functioning of the EU (TFEU), since it had fully complied with the conduct obligations stipulated by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [14] (Huawei obligations or framework) with respect to dominant undertakings [15] .

1. Dominant market position

The Court found that the Claimant holds a dominant market position in terms of Article 102 TFEU [16] .

The Court defined the relevant market for the assessment of dominance as the market for licences for any given patent [17] . A dominant market position can further also exist, when the patent holder can hinder competition in downstream markets for standard-compliant products and services [17] .

The Court made, however, clear that ownership of a SEP does not per se establish market dominance [18] . A dominant market position is given, when the use of the SEP is required for entering the market [18] . The same is true, if the patent user could not market competitive products or services, without access to the respective SEP [18] .

Based on these considerations, the Court saw no ‘reasonable’ doubt that the Claimant was a dominant undertaking: It was undisputed that almost all mobile phones available worldwide use the AVC/H.264 standard and that no “realistic” alternative to the MPEG LA pool existed in the licensing market for patents essential to this standard [19] .

2. Huawei framework

The Court found, however, that the Claimant did not abuse its dominant position by suing the Defendant in the present case, since its conduct was in line with the Huawei framework [20] . The Huawei framework establishes mutual conduct obligations for both SEP holders and SEP users, which need to be fulfilled step by step and one after another (meaning that each party’s obligation to act arises only after the other party has fulfilled its own obligation) [21] . Subject to the Huawei framework is not only the patent holder’s claim for injunctive relief, but also the claim for the destruction of infringing products [22] .

In this context, the Court pointed out that the Huawei framework applies, irrespective of whether a ‘well-established’ licensing practice concerning the asserted patents already existed before the CJEU delivered the Huawei judgment, or not [23] . The Claimant had argued that, in the present case, the Court should apply the (German) legal standard that preceded the Huawei framework (which was based on the so-called ‘Orange-Book-Standard’ ruling of the Federal Supreme Court [24] ), since with respect to the SEP in suit a ‘routine’ practice already existed prior to the Huawei judgement [25] . The Court explained that the Huawei judgment does not contain either an explicit or an implicit limitation of its scope of application [26] . Furthermore, even if a ‘well-established’ licensing practice existed, the need to apply the Huawei framework will still be given, in order to bridge the nevertheless existing information gap between patent holder and implementer concerning the (potential) infringement of SEPs [27] . Finally, it would be very challenging for courts to distinguish whether a ‘well-established’ licensing practice excluding the application of the Huawei framework is at hand, or not [28] . Notwithstanding the above, according to the Court, the actual licensing practice of the patent holder could be of ‘particular significance’ when assessing the compliance of the latter with the Huawei obligations: Such practice could, for instance, serve as an indicator of the appropriateness of SEP holder’s licensing offer to the implementer [29] .

Having said that, the Court found no flaws in Claimant’s conduct. In the Court’s view, the Claimant had met its Huawei obligation to notify the Defendant about the infringement of its patent as well as the obligation to present the Defendant with a written licensing offer covering also the patent in suit. The Defendant, on the other hand, adequately expressed its willingness to enter into a licence, failed, however, to make a FRAND counter-offer to the Claimant. Since an adequate counter-offer was missing, the Court did not take up the question whether the bank guarantee provided by the Claimant to MPEG LA constitutes an adequate security in terms of the Huawei framework [30] .

Notification of infringement

The Court ruled that the Claimant had adequately notified the Defendant about the infringement of the SEP in suit through the e-mail sent by MPEG LA to the parent company on 8 September 2011 [31] .

The fact that this e-mail was not addressed to the Defendant, but to the parent company, did not raise any concerns as to the compatibility of the notification with the Huawei framework. The Court explained that a notification of infringement addressed only to the parent company of a group of companies is sufficient, as far as it can be assumed that the notification will be forwarded to the subsidiaries con­cerned [32] . The sole fact that a company belongs to a group justifies such an assumption, unless indications to the contrary exist [32] . This was, however, not the case here.

Besides that, the Court did not consider it inappropriate that the aforementioned e-mail was not sent to the parent company by the Claimant, but by MPEG LA (which is not the holder of the SEP in suit) [33] . The Court held that MPEG LA is entitled to perform legal actions in connection with the licensing of the MPEG LA pool on behalf of the Claimant [34] . The Defendant could not contest that this was not the case, since MPEG LA’s standard licensing agreement, which it is aware of, contains an indication about MPEG LA’s respective capacity [35] . In addition, the Defendant’s parent company was also aware of MPEG LA’s capacity to act on behalf of the Claimant, since it joined the MPEG LA pool as a patent holder in 2012 [36] .

The Court further ruled that, in terms of content, a notification of infringement must – at least – name the patent in suit (including the patent number) and indicate the contested embodiments as well as the (allegedly) infringing acts of use [37] . A detailed (technical and/or legal) explanation of the infringement is not required; the implementer needs just to be put in the position to assess the infringement allegations, if necessary, by seeking expert advice [38] . A notification of infringement is, therefore, not necessary, when it constitutes just a ‘pointless formality’ [38] . This is true, when according to the overall circumstances of the case, one can safely assume that the implementer is aware of the infringement, so that claiming that the SEP holder failed to provide adequate notification prior to the initiation of court proceedings would appear to be abusive [38] . The respective test is, however, subject to strict conditions [38] .

Based on the above considerations, the Court found that MPEG LA’s e-mail to the parent company dated 8 September 2011 should be considered – as an exception – to constitute a sufficient notification of infringement, although it did not contain the minimum information required (particularly the patent number and a reference to the specific infringing embodiments) [39] . The overall circumstances of the case (especially the fact that the parent company acquired patents included in the MPEG LA pool in 2012 and had also previously been in contact with MPEG LA regarding a standard licensing agreement) [40] , give rise to the assumption that the parent company had already been aware of the MPEG LA pool and the fact that AVC/H.264-compliant products need to be licensed [41] .

Willingness to obtain a FRAND-licence

The Court held that the parent company had adequately expressed its willingness to obtain a FRAND-licence through the e-mail sent to MPEG LA on 15 September 2011 [42] .

In the eyes of the Court, this e-mail indicates the parent company’s intention to deal with issues concerning the licensing of patents referring to the AVC/H.264 standard. This is sufficient under the Huawei framework [43] . The implementer is not required to refer to a specific licensing agreement [43] .

SEP holder’s licensing offer

The Court further found that the standard licensing agreement sent by MPEG LA to the parent company presents an offer accountable to the Claimant which is in line with the Huawei framework in terms of both form and content [44] .

The fact that the offer was addressed to the parent company and not to the Defendant was not relevant, since the parties were discussing about a licensing agreement on group level and the parent company had itself requested to receive the draft agreement [45] .

Furthermore, the fact that the draft agreement sent to the parent company did not directly provide for the licensing of all subsidiaries (including the Defendant) was also not considered as harmful [46] . Insofar, the Court held that under the Huawei framework it is, as a rule, acceptable that the patent holder enters into licensing negotiations only with the parent company within a group of companies [47] . Whether subsidiaries can (or should) also be licensed, will be the object of these negotiations [48] . An exception would apply only then, when it is made clear already at the beginning of the licensing negotiations that the offer made to the parent company cannot include its subsidiaries [49] . This was, however, not the case here, since the standard licensing agreement sent to the parent company indicates MPEG LA’s willingness to grant licences also to the subsidiaries of the former [50] .

Besides that, the Court did not consider the fact that the standard licensing agreement sent to the parent company did not cover the sale of licensed products to wholesalers and retailers (but regarded only sales to end users) to be in conflict with the Huawei framework, although the Defendant was engaged also in this business [51] . According to the Court, sales to wholesalers and retailers would be covered by the effects of patent exhaustion, even without an express provision in a potential licensing agreement [52] .

The Court further ruled that the Huawei requirement, according to which the SEP holder’s licensing offer must specify the royalty calculation, was met, although the draft standard licensing agreement sent to the parent company does not contain detailed explanation of the way the royalties were calculated [53] . In the Court’s view, the respective explanation does not require a ‘strict mathematical derivation’ of the royalty; moreover, it will, as a rule, suffice to demonstrate that the (standard) royalty rates offered have been accepted in the market by presenting existing licensing agreements with third parties (comparable agreements) [54] . If a sufficient number of comparable licences is presented, then the SEP holder will usually not be required to provide further information regarding the appropriateness of its licensing offer [54] . It will need, however, to provide information on all essential comparable agreements, in order to rule out the risk that only agreements supporting the offered royalty level are presented [54] . In this context, the Court noted that it cannot be required from the SEP holder to present all comparable agreements along with the licensing offer to the implementer; a respective industry practice does not exist [55] .

Against this background, the Court did not consider it to be harmful that the standard licensing agreement sent to the parent company by MPEG LA did not include a detailed explanation of the royalty calculation in the above sense [56] . On the one hand, the parent company was aware that this (standard) agreement had been accepted in the market by a great number of licensees [56] . On the other hand, the parent company was also adequately aware of the way the offered royalties were calculated, since it held patents included in the MPEG LA pool itself [57] .

Apart from the above, the Court held that the standard licensing agreement offered to the parent company was FRAND also in terms of content.

According to the Court, a licensing offer cannot be considered as fair and reasonable, if the patent holder requests royalties that go significantly beyond the (hypothetical) price that would have been formed in an effectively competitive market, unless there is a commercial justification for the royalty level requested [58] . Particularly in connection with the licensing of SEPs, an offer can lie outside the FRAND-scope, if the cumulative royalty burden imposed on the implementer would not be tenable in commercial terms [58] . The Court made clear that in this context, no exact mathematical derivation of a FRAND-conform royalty rate is required; moreover, an approximate value is to be determined based on assessments and estimations [58] . In this respect, comparable agreements can serve as an ‘important indicator’ of the fair and reasonable character of the offered royalty rates [58] .

Regarding to the non-discriminatory element of FRAND, the Court pointed out that it applied only to similar situated cases; an unequal treatment is allowed, as long as it is objectively justified [59] . Limitations in this context may especially occur, when the implementation of the patent is necessary for entering a downstream market or when a product becomes competitive only when it uses the patent’s teachings [59] . As a rule, the burden of proof with respect to the discriminatory character of a licensing offer rests on the implementer. Since the latter will usually not be aware of the existence or the content of comparable agreements of the patent holder, it may seem appropriate to request the patent holder to provide the implementer with respective details, as far as this is reasonable [60] . The information to be shared should cover all existing licensees and include which (concretely designated) company with which importance in the relevant market has obtained a licence on which conditions [60] .

Looking at the standard licensing agreement sent to the parent company, the Court observed that the fact the MPEG LA sought for a licence covering all companies within the group, to which the Defendant belonged, was not violating FRAND principles [61] . In the electronics and mobile communications industries, licences covering a group of companies are in line with the industry practice [62] . Patent holder have a special interest in concluding such licences particularly in cases, in which – as in the present case – the parent company manufactures products which are sold worldwide by its subsidiaries. This is because licences at group level makes sure that patent holders can enforce their rights effectively, without having to distinguish between licenced and unlicenced products within a group of companies [63] .

In addition, the Court made clear that pool licences, as the one offered to the parent company, are appropriate under the Huawei framework [64] . An offer for a pool licence cannot per se be seen as abusive (Article 101 TFEU) [65] . On the contrary, such licences usually serve the interest of potential licensees to be granted access to the whole standard on uniform conditions under one roof, without having to seek a licence from every single patent holder separately [65] .

Implementer’s counter-offer

The Court found that the Defendant failed to make a FRAND counter-offer [66] .

Sending signed copies of MPEG LA’s standard licensing agreement back to MPEG LA can be regarded as a counter-offer [67] . The fact, however, that this offer concerned a licence limited to the Defendant and, thus, not covering the parent company (and all further companies belonging to the same group) was not FRAND conform [68] . The Court accepted that licences at group level mirror the industry practice in the field in question; accordingly, no objections can be raised when a patent holder contributing its patents to a pool is willing to grant only licences covering all group companies [69] .

Since the counter-offer was not FRAND in terms of content, the Court did not have to decide, whether it was made in due time, or not [70] .

  • [1] Fraunhofer-Gesellschaft (MPEG-LA) v ZTE, District Court of Düsseldorf, judgement dated 9 November 2018, cited by www.nrwe.de, para. 56.
  • [2] Ibid, para. 58
  • [3] Ibid, para. 57
  • [4] Ibid, para. 59
  • [5] Ibid, paras. 61 et seqq. and 340
  • [6] Ibid, para. 65
  • [7] Ibid, para. 66
  • [8] Ibid, para. 73
  • [9] Ibid, para. 42
  • [10] bid, para. 74
  • [11] Ibid, paras. 75 et seq
  • [12] Ibid, para. 75
  • [13] Ibid, paras. 127 – 254
  • [14] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13
  • [15] Fraunhofer-Gesellschaft (MPEG-LA) v ZTE, District Court of Düsseldorf, judgement dated 9 November 2018, cited by www.nrwe.de, Ibid, para. 280
  • [16] Ibid, para. 283 and paras. 291 et seqq
  • [17] Ibid, para. 286
  • [18] Ibid, para. 287
  • [19] Ibid, paras. 291 et seqq
  • [20] Ibid, para. 296
  • [21] Ibid, para. 300
  • [22] Ibid, para. 302
  • [23] Ibid, para. 308
  • [24] Under the ‘Orange-Book-Standard’ regime, in order to avoid an injunction, the implementer was required to make a licensing offer to the patent holder, which the latter could not refuse without acting in an anticompetitive manner; see Federal Supreme Court (Bundesgerichtshof), judgment dated 6 May 2009, Case No. KZR 39/06
  • [25] Ibid, para. 305
  • [26] Ibid, paras. 306 et seqq
  • [27] Ibid, para. 310
  • [28] Ibid, para. 311
  • [29] Ibid, para. 312
  • [30] Ibid, para. 421
  • [31] Ibid, para. 314
  • [32] Ibid, para. 320
  • [33] Ibid, para. 318
  • [34] Ibid, para. 329
  • [35] Ibid, paras. 336 et seq
  • [36] Ibid, para. 338
  • [37] Ibid, para. 198
  • [38] Ibid, para. 315
  • [39] Ibid, paras. 340 et seq
  • [40] Ibid, paras. 342 et seqq
  • [41] Ibid, para. 344
  • [42] Ibid, para. 346
  • [43] Ibid, para. 348
  • [44] Ibid, para. 352
  • [45] Ibid, para. 367
  • [46] Ibid, para. 369
  • [47] Ibid, para. 370
  • [48] Ibid, para. 378
  • [49] Ibid, para. 371
  • [50] Ibid, para. 374
  • [51] Ibid, para. 376
  • [52] Ibid, para. 377
  • [53] Ibid, para. 380
  • [54] Ibid, para. 381
  • [55] Ibid, para. 386
  • [56] Ibid, para. 382
  • [57] Ibid, para. 387
  • [58] Ibid, para. 391
  • [59] Ibid, para. 392
  • [60] Ibid, para. 393
  • [61] Ibid, para. 397
  • [62] Ibid, para. 398
  • [63] Ibid, para. 399
  • [64] Ibid, para. 402
  • [65] Ibid, para. 404
  • [66] Ibid, para. 410
  • [67] Ibid, para. 413
  • [68] Ibid, para. 416
  • [69] Ibid, para. 417
  • [70] Ibid, para. 411

Updated 2 August 2019

Philips v Wiko, Court of Appeal of The Hague

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

A. Facts

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

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

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

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

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

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

B. Court’s reasoning

German Proceedings and Lis Pendens

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

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

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

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

Patent essentiality and infringement

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

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

FRAND negotiations and application of the Huawei steps

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

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

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

FRAND offer

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

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

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

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

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

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

Wiko’s counteroffer

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

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

- 0.042% for the compliant rate (EUR 0.027)

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

- 0.0315% for past sales (EUR 0.020).

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

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

Abuse of a dominant position

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

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

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

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

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

Updated 30 October 2018

Unwired Planet v Huawei, UK Court of Appeal

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

A. Facts

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

Starting in September 2013, the Claimant contacted the Defendants several times, requesting the latter to engage in discussions for a licence regarding its SEP portfolio. [290] In March 2014, the Claimant sued the Defendants as well as Samsung and Google for infringement of five of its UK SEPs before the UK High Court of Justice (High Court). [291] The Claimant also initiated parallel infringement proceedings against the Defendants in Germany. [292]

The High Court conducted three technical trials first, focusing on the validity and essentiality of four of the SEPs in suit. [293] By April 2016, these trials were completed; the High Court held that two of the SEPs in suit were both valid and essential, whereas two other patents were found to be invalid. [293] The parties agreed to postpone further technical trials indefinitely. [293]

In July 2016, Samsung took a licence from the Claimant covering, among other, the SEPs in suit. [294] The Claimant also settled the infringement proceedings with Google. [295]

In late 2016, the trial concerned with questions regarding to the licensing of the SEPs in suit commenced between the Claimant and the Defendants. Over the course of these proceedings the parties made licensing offers to the each other. However, they failed to reach an agreement. The Defendants indicated they were willing to take a licence under Claimant’s UK patent portfolio, whereas the Claimant contended that it was entitled to insist upon a worldwide licence. [296]

In April 2017, the High Court granted an UK injunction against the Defendant, until such time as it entered into a worldwide licensing agreement with the Claimant on the specific rates, which the court determined to be Fair, Reasonable and Non-Discriminatory (FRAND) [297] in accordance with the undertaking given by the Claimant towards the European Telecommunications Standards Institute (ETSI). [298] Pending appeal, the High Court stayed the injunction. [299]

Shortly after the High Court delivered its decision, the Defendants began proceedings against the Claimant in China, which are still pending. [300]

With the present judgment, the UK Court of Appeal dismissed the Defendants’ appeal against the decision of the High Court. [301]


B. Court’s reasoning

The Defendants appealed the decision of the High Court on the following three grounds:

1. The High Court’s finding that only a worldwide licence was FRAND is erroneous; the imposition of such a licence on terms set by this court based on a national finding of infringement of UK patents is wrong in principle. [302]

2. The offer imposed to the Defendants by the High Court is discriminatory in violation of Claimant’s FRAND undertaking, since the rates offered are higher than the rates reflected in the licence granted by the Claimant to Samsung. [303]

3. The Claimant is not entitled to injunctive relief; by bringing the infringement proceedings against the Defendants, without meeting the requirements established by the Court of Justice of the European Union (“CJEU”) in the matter Huawei v ZTE [304] (Huawei judgment) before, the Claimant abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the European Union (“TFEU”). [305]

Notably, the High Court’s determination of the rates which apply to the worldwide licence that the court requested the Defendants to take was not challenged by any of the parties to the proceedings. [306]


1. Worldwide licences

The Court of Appeal disagreed with the Defendants’ notion that imposing a worldwide licence on an implementer is wrong, because it amounts to an (indirect) interference with foreign court proceedings relating to patents subsisting in foreign territories, which would have been subject to materially different approaches to the assessment of FRAND royalty rates and could, therefore, lead to different results (particularly the ongoing litigation between the parties in China and Germany). [307]

The Court of Appeal explained that in imposing a worldwide licence the High Court did neither adjudicate on issues of infringement or validity concerning any foreign SEPs, nor was it deciding what the appropriate relief for infringement of any foreign SEPs might be (particularly since it made clear that a FRAND licence should not prevent a licensee from challenging the validity or essentiality of any foreign SEPs and should make provision for sales in non-patent countries which do not require a licence) [308] . [309]

Moreover, the High Court simply determined the terms of the licence that the Claimant was required to offer to the Defendants pursuant to its FRAND undertaking towards ETSI. [310] Such an undertaking has international effect. [311] It applies to all SEPs of the patent holder irrespective of the territory in which they subsist. [312] This is necessary for two reasons: first, to protect implementers whose equipment may be sold and used in a number of different jurisdictions. [312] Second, to enable SEP holders to prevent implementers from “free-riding” on their innovations and secure an appropriate reward for carrying out their research and development activities and for engaging with the standardisation process. [313]

Accordingly, the High Court had not erred in finding that a worldwide licence was FRAND. On the contrary, there may be circumstances in which only a worldwide licence or at least a multi-territorial licence would be FRAND. [314] German Courts (in Pioneer Acer [315] and St. Lawrence v Vodafone [316] ) as well as the European Commission in its Communication dated 29 November 2017 [317] had also adopted a similar approach. [318]

Having said that, the Court of Appeal recognized that it may be “wholly impractical” for a SEP holder to seek to negotiate a licence for its patents on a country-by-country basis, just as it may be “prohibitively expensive” to seek to enforce its SEPs by litigating in each country in which they subsist. [313] In addition, if in the FRAND context the implementer could only be required to take country-by-country licences, there would be no prospect of any effective injunctive relief being granted to the SEP holder against it: the implementer could avoid an injunction, if it agreed to pay the royalties in respect of its activities in any particular country, once those activities had been found to infringe. [319] In this way, the implementer would have an incentive to hold out country-by-country, until it was compelled to pay. [319]

In its discussion of this topic, the Court of Appeal disagreed with the view taken by the High Court that in every given set of circumstances only one true set of FRAND terms exists. Nevertheless, the court did not consider that the opposite assumption of the High Court had a material effect to the its decision. [320]

In the eyes of the Court of Appeal, it is “unreal” to suggest that two parties, acting fairly and reasonably, will necessarily arrive at precisely the same set of licence terms as two other parties, also acting fairly and reasonably and faced with the same set of circumstances. [321] The reality is that a number of sets of terms may all be fair and reasonable in a given set of circumstances. [321] Whether there is only one true set of FRAND terms or not, is, therefore, more of a “theoretical problem” than a real one. [322] If the parties cannot reach an agreement, then the court (or arbitral tribunal) which will have to determine the licensing terms will normally declare one set of terms as FRAND. The SEP holder would then have to offer that specific set of terms to the implementer. On the other hand, in case that the court finds that two different sets of terms are FRAND, then the SEP holder will satisfy its FRAND undertaking towards ETSI, if it offers either one of them to the implementer. [322]

Furthermore, the Court of Appeal dismissed Defendants’ claim that imposing a worldwide licence is contrary to public policy and disproportionate. [323] In particular, the Defendants argued that this approach encourages over-declaration of patents [324] and is not compatible with the spirit of the Directive 2004/48/EC on the enforcement of intellectual property rights, [325] which requires relief for patent infringement to be proportionate. [326]

Although the Court of Appeal recognised the existence of the practice of over-declaration and acknowledged that it is a problem, it held that this phenomenon cannot justify “condemning” SEP holders with large portfolios to “impossibly expensive” litigation in every territory in respect of which they seek to recover royalties. [327] The court also found that there was nothing disproportionate about the approach taken by the High Court, since the Defendants had the option to avoid an injunction by taking a licence on the terms which the court had determined. [328]


2. Non-discrimination

The Court of Appeal rejected the Defendants’ argument [329] that the non-discrimination component of Claimant’s FRAND undertaking towards ETSI obliges the Claimant to offer to the Defendants the same rates as those contained in the licence granted to Samsung. [330]

The Court of Appeal made clear that the obligation of the SEP holder not to discriminate is, in principle, engaged in the present case, since the Claimant’s transaction with the Defendants is equivalent to the licence it granted to Samsung. [331] In the court’s eyes, when deciding whether two transactions are equivalent one needs to focus first on the transactions themselves. Insofar, differences in the circumstances in which the transactions were entered into, particularly economic circumstances, such as the parties’ financial position [332] or market conditions (e.g. cost of raw materials), cannot make two otherwise identical transactions non-equivalent (releasing, therefore, the patent holder from the obligation not to discriminate). Changes in such circumstances could only amount to an objective justification for a difference in treatment. [333]

Considering the specific content of the SEP holder’s respective obligation, the Court of Appeal agreed with the High Court’s finding that the non-discrimination element of a SEP holder’s FRAND undertaking does not imply a so-called “hard-edged” component (imposing on the patent holder an obligation to offer the same rate to similarly situated implementers). [334] It argued that the “hard-edged” approach is “excessively strict” and fails to achieve a balance between a fair return to the SEP owner and universal access to the technology. [335] It could have the effect of compelling the SEP holder to accept a level of compensation for the use of its invention which does not reflect the value of the licensed technology and, therefore, harm the technological development of standards. [336]

Furthermore, the “hard-edged” discrimination approach should be rejected also because its effects would result in the insertion of the “most favoured licensee” clause in the FRAND undertaking. In the view of the Court of Appeal, the industry would most likely have regarded such a clause as inconsistent with the overall objective of the FRAND undertaking. [337]

Conversely, the Court of Appeal followed the notion described by the High Court as the “general” non-discrimination approach: [338] the FRAND undertaking prevents the SEP holder from securing rates higher than a “benchmark” rate which mirrors a fair valuation of its patent(s), but it does not prevent the patent holder from granting licences at lower rates. [338] For determining the benchmark rate, prior licences granted by the SEP holder to third parties will likely form the “best comparables”. [339]

The Court of Appeal argued that the “general” approach is in line with the objectives of the FRAND undertaking, since it ensures that the SEP holder is not able to “hold-up” implementation of the standard by demanding more than its patent(s) is worth. [340] However, the FRAND undertaking does not aim at leveling down the royalty owed to the SEP holder to a point where it no longer represents a fair return for its patent(s), or to removing its discretion to agree royalty rates lower than the benchmark rate, if it chooses to do so. [340]

In this context, the Court of Appeal made clear that it does not consider differential pricing as per se objectionable, since it can in some circumstances be beneficial to consumer welfare. [341] The court sees no value in mandating equal pricing for its own sake. On the contrary, once the hold-up effect is dealt with by ensuring that licences are available at the benchmark rate, there is no reason for preventing the SEP holder from charging less than the licence is worth. [341] Should discrimination appear below the benchmark rate, it should be addressed through the application of competition law; as long as granting licences at rates lower than the benchmark rate causes no competitive harm, there is no reason to assume that the FRAND undertaking constrains the ability of the SEP holder to do so. [342]


3. Abuse of dominant Position / Huawei v ZTE

The Court of Appeal further rejected Defendants’ argument that, by bringing the infringement proceedings prior to fulfilling the obligations arising from the Huawei judgment, the Claimant abused its dominant market position in violation of Article 102 TFEU. [343]

To begin with, the Court of Appeal confirmed the finding of the High Court that the Claimant held a dominant market position and dismissed the respective challenge by the latter. [344] It did not find any flaw in the High Court’s view that the SEP holder has a 100% market share with respect to each SEP (since it is “common ground” that the relevant market for the purpose of assessing dominance in the case of each SEP is the market for the licensing of that SEP [345] ) and that the constrains imposed upon the SEP holder’s market power by the limitations attached to the FRAND undertaking [346] and the risk of hold-out that is immanent to the structure of the respective market, [347] can either alone or together rebut the assumption that it most likely holds market power. [348]

Notwithstanding the above, the Court of Appeal held that the Claimant had not abused its market power in the present case. [349]

The court agreed with the finding of the High Court that the Huawei judgment did not lay down “mandatory conditions”, in a sense that that non-compliance will per se render the initiation of infringement proceedings a breach of Article 102 TFEU. [350] The language used in the Huawei judgment implies that the CJEU intended to create a “safe harbor”: if the SEP holder complies with the respective framework, the commencement of an action will not, in and of itself, amount to an abuse. [351] If the SEP holder steps outside this framework, the question whether its behaviour has been abusive must be assessed in light of all of the circumstances. [352]

In the court’s eyes, the only mandatory condition that must be satisfied by the SEP holder before proceedings are commenced, is giving notice to the implementer about the infringing use of its patents. [353] This follows from the clear language used by the CJEU with respect to this obligation. [354] The precise content of such notice will depend upon all the circumstances of the particular case. [354] In general, if an alleged infringer is familiar with the technical details of the products it is dealing and the SEP it may be infringing, but has no intention of taking a licence on FRAND terms, it will not be justified to deny the SEP holder an injunction, simply because it had not made a formal notification prior to the commencement of proceedings. [355]

On the merits, the court accepted the High Court’s assessment that the Claimant had not behaved abusively and particularly the finding, that the Defendants, who were in contact with the Claimant prior to the proceedings, had sufficient notice that the Claimant held SEPs which ought to be licensed, if found infringed and essential. [356]

Considering further that the respective conduct requirements were not established at the point in time, in which the infringement action was filed (since the present proceedings were initiated before the CJEU delivered the Huawei judgment), the Court of Appeal noted that it would very likely not be fair to accuse the Claimant of abusive behavior. [357] Insofar the court agreed with the respective approach developed by German courts in co-called “transitional” cases (Pioneer v Acer, [358] St. Lawrence v Vodafone [358] and Sisvel v Haier [359] ) [360] .

  • [290] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, Case-No. A3/2017/1784, [2018] EWCA Civ 2344, para. 233.
  • [291] Ibid, para. 6 et seqq.
  • [292] Ibid, para. 233.
  • [293] Ibid, para. 7.
  • [294] Ibid, paras. 8 and 137 et seqq.
  • [295] Ibid, para. 8.
  • [296] Ibid, para. 9 et seqq.; para. 31 et seqq.
  • [297] Ibid, para 17.
  • [298] Ibid, para 130.
  • [299] Ibid, para 18.
  • [300] Ibid, para 112.
  • [301] Ibid, para 291.
  • [302] Ibid, paras. 19 and 45 et seqq.
  • [303] Ibid, paras. 20 and 132 et seqq.
  • [304] Huawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-170/13.
  • [305] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 21, paras. 211 et seqq and para. 251.
  • [306] Ibid, para. 17.
  • [307] Ibid, paras. 74 and 77 et seq.
  • [308] Ibid, para. 82.
  • [309] Ibid, para. 80.
  • [310] Ibid, para. 79 et seq.
  • [311] Ibid, para. 26.
  • [312] Ibid, para. 53.
  • [313] Ibid, para. 54 et seq., para. 59.
  • [314] Ibid, para. 56.
  • [315] Pioneer v Acer, District Court of Mannheim, judgement dated 8 January 2016, Case No. 7 O 96/14.
  • [316] St. Lawrence v Vodafone, District Court of Düsseldorf, judgement dated 31 March 2016, Case No. 4a O 73/14.
  • [317] Communication From the Commission to the European Parliament, the Council and the European Economic and Social Committee, “Setting out the EU Approach to Standard Essential Patents”, 29 November 2017, COM(2017) 712 final.
  • [318] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 74.
  • [319] Ibid, para. 111.
  • [320] Ibid, para. 128.
  • [321] Ibid, para. 121.
  • [322] Ibid, para. 125.
  • [323] Ibid, para. 75.
  • [324] Ibid, para. 92
  • [325] Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights (Official Journal of the EU L 195, 02/06/2004, p. 16)
  • [326] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 94.
  • [327] Ibid, para. 96.
  • [328] Ibid, para. 98.
  • [329] Ibid, para. 20 and 132 et seqq.
  • [330] Ibid, paras. 207 and 210.
  • [331] Ibid, para. 176.
  • [332] Ibid, para. 173.
  • [333] Ibid, para. 169 et seq.
  • [334] Ibid, paras. 194 et seqq.
  • [335] Ibid, para. 198.
  • [336] Ibid, para. 198.
  • [337] Ibid, para. 199.
  • [338] Ibid, para. 195.
  • [339] Ibid, para. 202.
  • [340] Ibid, para. 196.
  • [341] Ibid, para. 197.
  • [342] Ibid, para. 200.
  • [343] Ibid, para. 21, paras. 211 et seqq and para. 251.
  • [344] Ibid, para. 212.
  • [345] Ibid, para. 216.
  • [346] Ibid, para. 219.
  • [347] Ibid, para. 220.
  • [348] Ibid, para. 229.
  • [349] Ibid, para. 284.
  • [350] Ibid, para. 269.
  • [351] Ibid, para. 270.
  • [352] Ibid, para. 269 and 282.
  • [353] Ibid, para. 253 and 281.
  • [354] Ibid, para. 271.
  • [355] Ibid, para. 273.
  • [356] Ibid, para. 284
  • [357] Ibid, para. 275
  • [358] See above
  • [359] Sisvel v Haier, Higher District Court of Düsseldorf, judgement dated 30 March 2017, Case No. 15 U 66-15.
  • [360] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 279.

Updated 2 August 2019

Tagivan (MPEG-LA) v Huawei, District Court (Landgericht) of Düsseldorf

OLG Düsseldorf
15 November 2018 - Case No. 4a O 17/15

A. Facts

The Claimant, Tagivan II LLC, holds a patent essential to the practice of the AVC/H.264 standard concerning the compression of video data (Standard Essential Patent, or SEP). The patent in question is subject to a FRAND commitment (FRAND stands for Fair, Reasonable and Non-Discriminatory terms and conditions) made towards the relevant standardisation body. It was included into a patent pool administered by MPEG LA LLC (MPEG LA), comprising more the 5,000 patents referring to the AVC/H.264 standard (MPEG LA pool) [1] .

The Defendant, a German subsidiary of a Chinese group of companies, sells – among other things – mobile phones in Germany that practise the AVC/H.264 standard [2] .

MPEG LA uses a standard licensing agreement, which is publicly available at its website [3] . Since 2004, MPEG-LA has signed approx. 2,000 agreements with implementers [4] , 1,400 of which are still in force [3] .

In 2009, MPEG LA and the Defendant’s parent company (parent company) started discussions about a potential licence covering other standards, especially the MPEG-2 standard. On 6 September 2011, MPEG LA informed the parent company about the possibility to obtain a licence also regarding the AVC/H.264 standard, by sending PDF-copies of its standard licensing agreement to the parent company via email [5] . On 15 September 2011, the parent company suggested to arrange a call on this issue [6] . In February 2012, MPEG LA sent the pool’s standard licensing agreement for the AVC/H.264 standard to the parent company also by mail [7] .

In November 2013, the discussions between MPEG LA and the parent company ended without success [8] . The parties resumed negotiations in July 2016; again, no agreement was reached [8] .

The Claimant then brought an action against the Defendant before the District Court of Düsseldorf in Germany (Court), requesting for injunctive relief, information and rendering of accounts, the destruction and the recall of infringing products as well as for a declaratory judgement confirming Defendant’s liability for damages on the merits [9] .

In November 2017, during the course of the present proceedings, the Defendant made a counteroffer to the Claimant for a licence, which – in contrast to MPEG LA’s standard licensing agreement – was limited to the Claimant’s patent portfolio and established different royalty rates for different regions, in which the Defendant sold products [10] .

In March and September 2018 (again during the proceedings), the Defendant provided bank guarantees to the Claimant covering past and future sales of (allegedly) infringing products. The security amounts were calculated based on the Defendant’s counteroffer dated November 2017 [11] . Furthermore, the Defendant made a second counteroffer to the Claimant shortly after the last oral hearing before the Court [12] .

With the present judgment, the Court granted Claimant’s requests.

B. Court’s reasoning

The Court found that the patent in suit was valid [13] , standard essential [14] and infringed by the products sold by the Defendant in Germany [15] . Furthermore, the Court held that by filing the present suit the Claimant did not abuse its dominant market position in violation of Article 102 of the Treaty for the Functioning of the EU (TFEU), since it had fully complied with the conduct obligations stipulated by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [16] (Huawei obligations or framework) with respect to dominant undertakings [17] .

Dominant market position

The Court found that the Claimant holds a dominant market position in terms of Article 102 TFEU [18] .

The Court defined the relevant market for the assessment of dominance as the market, in which licences for any given patent are offered [19] . A dominant market position can further also exist, when the patent holder can hinder competition in downstream markets for standard-compliant products and services [19] .

The Court made clear that ownership of a SEP does not per se establish market dominance [20] . A dominant market position is given, when the use of the SEP is required for entering the market [21] . The same is true, if the patent user could not market competitive products or services, without access to the respective SEP [22] .

Based on these considerations, the Court saw no ‘reasonable’ doubt that the Claimant was a dominant undertaking: It was undisputed that almost all mobile phones available worldwide use the AVC/H.264 standard and that no ‘realistic’ alternative to the MPEG LA pool existed in the licensing market for patents essential to this standard [23] .

Huawei framework

The Court found, however, that the Claimant did not abuse its dominant position by suing the Defendant in the present case, since its conduct was in line with the Huawei framework [24] . The Huawei framework establishes mutual conduct obligations for both SEP holders and SEP users, which need to be fulfilled step by step and one after another (meaning that each party’s obligation to act arises only after the other party has fulfilled its own obligation) [25] . Subject to the Huawei framework is not only the patent holder’s claim for injunctive relief, but also the claim for the destruction of infringing products [26] .

In this context, the Court pointed out that the Huawei framework applies, irrespective of whether a ‘well-established’ licensing practice concerning the asserted patents already existed before the CJEU delivered the Huawei judgment, or not [27] . The Claimant had argued that, in the present case, the Court should apply the (German) legal standard that preceded the Huawei framework (which was based on the so-called ‘Orange-Book-Standard’ ruling of the Federal Supreme Court [28] ), since with respect to the SEP in suit a ‘routine’ practice already existed prior to the Huawei judgement. The Court explained that the Huawei judgment does not contain either an explicit or an implicit limitation of its scope of application [29] . Furthermore, even if a ‘well-established’ licensing practice existed, the need to apply the Huawei framework will still be given, in order to bridge the, nevertheless, existing information gap between patent holder and implementer concerning the (potential) infringement of SEPs [30] . Finally, it would be very challenging for courts to distinguish whether a ‘well-established’ licensing practice excluding the application of the Huawei framework is at hand, or not [30] . Notwithstanding the above, according to the Court, the actual licensing practice of the patent holder could be of ‘particular significance’ when assessing the compliance of the latter with the Huawei obligations: Such practice could, for instance, serve as an indicator of the appropriateness of SEP holder’s licensing offer to the implementer [31] .

Having said that, the Court found no flaws in Claimant’s conduct. In the Court’s view, the Claimant had met its Huawei obligation to notify the Defendant about the infringement of its patent as well as the obligation to present the Defendant with a written FRAND licensing offer covering also the patent in suit. The Defendant, on the other hand, adequately expressed its willingness to enter into a licence, failed, however, to make a FRAND counteroffer to the Claimant. Since an adequate counteroffer was missing, the Court did not take up the question whether the bank guarantees provided by the Defendant constitute an adequate security in terms of the Huawei framework.

Notification of infringement

The Court ruled that the Claimant had adequately notified the Defendant about the infringement of the SEP in suit through the email sent by MPEG LA to the parent company on 6 September 2011 [32] .

The fact that this email was not addressed to the Defendant, but to the parent company, did not raise any concerns as to the compatibility of the notification with the Huawei framework. The Court explained that a notification of infringement addressed only to the parent company of a group of companies is sufficient, as far as it can be assumed that the notification will be forwarded to the subsidiaries concerned [33] . The sole fact that a company belongs to a group justifies such an assumption, unless indications to the contrary exist [34] . This was, however, not the case here.

Besides that, the Court did not consider it inappropriate that the aforementioned e-mail was not sent to the parent company by the Claimant, but by MPEG LA (which is not the holder of the SEP in suit) [35] . The Court held that MPEG LA is entitled to perform legal actions in connection with the licensing of the MPEG LA pool on behalf of the Claimant. The Defendant could not contest that this was not the case, since MPEG LA’s standard licensing agreement, which it is aware of, contains an indication about MPEG LA’s respective capacity [36] . In addition, the Defendant’s parent company was most likely aware of MPEG LA’s capacity to act on behalf of the Claimant, since it had entered into direct negotiation with MPEG LA already in 2009, that is almost two years prior to the notification of infringement [37] .

The Court further ruled that, in terms of content, a notification of infringement must – at least – name the infringed patent (including the patent number) and indicate the contested embodiments as well as the (allegedly) infringing acts of use [38] . A detailed (technical and/or legal) explanation of the infringement is not required; the implementer needs just to be put in the position to assess the infringement allegations, if necessary, by seeking expert advice [38] . A notification of infringement is, therefore, not necessary, when it constitutes just a ‘pointless formality’ [38] . This is true, when according to the overall circumstances of the case, one can safely assume that the implementer is aware of the infringement, so that claiming that the SEP holder failed to provide adequate notification prior to the initiation of court proceedings would appear to be abusive [38] . The respective test is, however, subject to strict conditions [38] .

Based on the above considerations, the Court found that MPEG LA’s email to the parent company dated 6 September 2011 should be considered – as an exception – to constitute a sufficient notification of infringement, although it did not contain the minimum information required (particularly the patent number and a reference to the specific infringing embodiments) [39] . The overall circumstances of the case (especially the fact that the parent company had been in negotiations with MPEG LA already since 2009 and, therefore, should have been aware that MPEG LA has granted licences for the AVC/H.264 standard to the implementers mentioned at its website), give rise to the assumption that the parent company had been conscious of the fact that AVC/H.264-compliant products need to be licensed [40] .

Willingness to obtain a licence

The Court held that the parent company had adequately expressed its willingness to obtain a FRAND-licence through the email sent to MPEG LA on 15 September 2011 [41] .

In the eyes of the Court, this email indicates the parent company’s intention to deal with issues concerning the licensing of patents referring to the AVC/H.264 standard, especially if it is seen in the context of the negotiations between MPEG LA and the parent company that had commenced in 2009 [41] . This is sufficient under the Huawei framework: A general, informal statement suffices [42] . The implementer is not required to refer to a specific licensing agreement (on the contrary, this could be considered harmful under certain circumstances) [42] .

SEP holder’s offer

The Court further found that the standard licensing agreement sent by MPEG LA to the parent company in February 2012 presents an offer accountable to the Claimant which is in line with the Huawei framework in terms of both form and content [43] .

The fact that the standard licensing agreement was not tailored to the parent company but was designed for use towards a large number of (potential) licensees (the name of the licensee ought to be added in each case separately), was not criticized by the Court. MPEG-LA had made clear that the documents sent by mail in February 2012 would serve as the basis for negotiations and a future agreement with the parent company [44] .

In addition, the Court did not take an issue with the fact that the offer was addressed to the parent company and not to the Defendant, since the parties were discussing about a licensing agreement on group level and the parent company had been involved in the communications from the beginning [45] .

The Court further ruled that the Huawei requirement, according to which the SEP holder’s licensing offer must specify the royalty calculation, was met, although the draft standard licensing agreement sent to the parent company did not contain a detailed explanation of the way the royalties were calculated [46] . The Court found that, in the present case, it was sufficient that the parent company was aware that the (standard) agreement presented to her had been accepted in the market by a great number of licensees [47] . In the Court’s view, the explanation of the royalty calculation does not require a ‘strict mathematical derivation’ of the royalty; moreover, it will, as a rule, suffice to demonstrate that the (standard) royalty rates offered have been accepted in the market by presenting existing licensing agreements with third parties (comparable agreements) [48] . If a sufficient number of comparable licences is presented, then the SEP holder will usually not be required to provide further information regarding the appropriateness of its licensing offer [48] . It will need, however, to provide information on all essential comparable agreements, in order to rule out the risk that only agreements supporting the offered royalty level are presented [48] . In this context, the Court noted that it cannot be required from the SEP holder to present all comparable agreements along with the licensing offer to the implementer; a respective industry practice does not exist [49] .

Apart from the above, the Court held that the standard licensing agreement offered to the parent company was FRAND also in terms of content [50] .

According to the Court, a licensing offer cannot be considered as fair and reasonable, if the patent holder requests royalties that go significantly beyond the (hypothetical) price that would have been formed in an effectively competitive market, unless there is a commercial justification for the royalty level requested [51] . Particularly in connection with the licensing of SEPs, an offer can lie outside the FRAND-scope, if the cumulative royalty burden imposed on the implementer would not be tenable in commercial terms [51] . The Court made clear that, in this context, no exact mathematical derivation of a FRAND-conform royalty rate is required; moreover, an approximate value is to be determined based on assessments and estimations [51] . In this respect, comparable agreements can serve as an ‘important indicator’ of the fair and reasonable character of the offered royalty rates [51] .

Non-discrimination

Regarding to the non-discriminatory element of FRAND, the Court pointed out that it applied only to similar situated cases [52] . Even then, an unequal treatment is allowed, as long as it is objectively justified [52] . Limitations may, nevertheless, occur, especially when the implementation of the patent is necessary for entering a downstream market or when a product becomes competitive, only when it uses the patent’s teachings [52] . As a rule, the burden of proof with respect to the discriminatory character of a licensing offer rests on the implementer. Since the latter will usually not be aware of the existence or the content of comparable agreements of the patent holder, it may, however, seem appropriate to request the patent holder to provide the implementer with respective details, as far as this is reasonable [53] . The information to be shared should cover all existing licensees and include which (concretely designated) company with which importance in the relevant market has obtained a licence on which conditions [53] .

Against this background, the Court found that the offer made by MPEG LA to the parent company was not discriminatory. The Defendant had argued that seeking a licence also covering sales in China violated FRAND, since not every other competitor in the Chinese market was licensed by MPEG LA [54] . The Court observed that the selective assertion of patents against only a part of the competitors in a downstream market might, in principle, be discriminatory [55] . This was, however, not the case here, because the Claimant had already sued another company active in China and was attempting to persuade other companies to obtain a licence [56] . Due to the high cost risk associated with court proceedings, the patent holder is not obliged to sue all potential infringers at once; choosing to assert its patents against larger implementers first was considered by the Court as reasonable, since a win over a large market player could motivate smaller competitors to also obtain a licence (without litigation) [57] .

Furthermore, the Court did not consider the fact that the offered standard licensing agreement contained a cap for the annual licensing fees payable to the MPEG LA pool to be discriminatory [58] . The Defendant had argued that the respective cap disproportionally favoured licensees with high volume sales which offered not only mobile phones, but also other standard compliant products in the market. The Court made, however, clear that Art. 102 TFEU does not establish a ‘most-favoured-licensee’ principle (meaning that the patent holder must offer the same conditions to all licensees) [59] . It is not per se discriminatory to use sale volumes as a criterion for discounts, especially if a company has managed to open up a larger market than its competitors [60] . Discounts can further hardly be discriminatory, if they are offered to every (potential) licensee under the same conditions [60] .

Besides that, the Court dismissed the Defendant’s argument that MPEG LA’s standard licensing agreement is discriminatory, because it is offered to both MPEG LA pool members and third licensees. The Court found that the share of the licensing income paid to pool members, who have also signed a MPEG LA licence, reflects their contribution to the pool and, therefore, does not discriminate the latter against third licensees (who have not contributed any patents to the pool) [61] . In this context, the Court also pointed out that the clauses contained in MPEG LA’s standard licensing agreement, providing for deductions or instalment payments are not discriminatory, particularly because they are offered to all licensees [62] .

The Court was further not convinced that the parent company was discriminated by MPEG LA’s offer, because the MPEG LA pool had refrained from requesting a licence at group level from a competitor, but had only granted a licence to a subsidiary within the respective group, instead. In the Court’s eyes, the Claimant had managed to establish that this exception was objectively justified, since only the subsidiary granted a licence had activities concerning the patents included in the pool [63] .

Fair and reasonable terms

With respect to the assessment of whether MPEG LA’s offer to the parent company was also fair and reasonable, the Court placed particular emphasis on the existing licensing agreements between the MPEG-LA pool and third licensees. The Court took the view, that existing licences can establish the actual presumption that the terms offered (as well as the scope of the licence) are fair and reasonable [64] . Moreover, the fact that licences regarding the same patent portfolio have already been granted for similar products prima facie suggests that the selection of the patents included in the pool was adequate [64] .

Based on these premises, the Court found that the approx. 2,000 standard licensing agreements concluded by the MPEG LA pool provide a ‘strong indication’ (‘erhebliche Indizwirkung’) that the underlying licensing terms are fair and reasonable [65] . In the Court’s view, the Defendant had failed to show sufficient facts that could rebut this indication.

In particular, the Court did not accept Defendant’s claim that, as a rule, licences for products sold in the Chinese market are subject to special conditions. On the contrary, the Court found that the existing MPEG LA pool licences allow the assumption that setting worldwide uniform licence fees corresponds to industry practice [66] . Accordingly, the Court rejected Defendant’s argument, that the royalties offered by MPEG LA to the parent company would hinder the Defendant from making profits with its sales in China, since the overall licensing burden (including licences needed from third parties) would be too high. The Court noted that the price level for Defendant’s sales in China does not significantly differ from the price level in other regions [67] . What is more, the Defendant did not show that further licences are needed with respect to the AVC/H.264 standard [68] . The Court further did not recognise a need to apply special conditions for the Chinese market, because – compared to patents from other regions – a lower number of Chinese patents is contained in the MPEG LA pool. According to the Court, the number of patents in a specific market should not be ‘overestimated’ as a factor for assessing the FRAND conformity of an offer, since even a single patent can block an implementer from a market, generating, therefore, the need for obtaining a licence [69] .

Apart from the above, the Court did not criticise that MPEG LA’s standard licensing agreement did not contain an adjustment clause. Such clauses can secure that the agreed licensing fees remain reasonable, in case that the number of patents contained in the pool changes during the term of the licensing agreement. They are, however, in the Court’s view, not the only mean to reach this goal: Moreover, the clause contained in MPEG LA’s standard licensing agreement, according to which the agreed royalties will not be adjusted either when more patents are added to the pool or when patents are withdrawn from the pool, offers an adequate balance of risk and is, therefore, FRAND compliant [70] . This assumption is also confirmed by the fact that all existing licensees have accepted this clause [71] .

In addition, the Court made clear that pool licences, as the one offered to the parent company, are, in general, appropriate under the Huawei framework. An offer for a pool licence cannot per se be seen as abusive (Article 101 TFEU) [72] . On the contrary, such licences usually serve the interest of potential licensees to be granted access to the whole standard on uniform conditions under one roof, without having to seek a licence from every single patent holder separately [72] .

An offer for a pool licence can, nevertheless, violate FRAND in ‘special circumstances’ [73] , for instance, if not all patents included in the pool are used by the licensee [74] . According to the Court, the fact that the Defendant – as well as mobile phone manufacturers in general – usually use only one of four available profiles of the AVC-Standard does not, however, render the standard licensing agreement offered by MPEG LA unreasonable [75] . This is particularly the case, since Defendant’s products – and especially its latest smartphones – have the technical capability to implement more than one available profile [76] . Besides that, it is reasonable to offer one single licence covering all profiles, since modern products incorporate functionalities of several types of devices (e.g. smartphones offer also digital television functionalities) [76] .

In this context, the Court dismissed Defendant’s arguments that the licence offered by MPEG LA was not FRAND, because it allegedly covered both standard-essential and non-essential patents. The Court recognised that the ‘bundling’ of essential and non-essential patents in a patent pool could, in principle, be incompatible with FRAND, if it is done with the intention to extract higher royalties from licensees by increasing the number of patents contained in the pool [77] . The Defendant failed, however, to present any reliable evidence that this was the case with the MPEG-LA pool [78] .

In the Court’s eyes, the Defendant also failed to establish that the rates offered by MPEG LA would lead to an unreasonably high total burden of licensing costs (‘royalty stacking’) [79] . The theoretical possibility that the Defendant might need to obtain licences also for patents not included in a pool does not per se lead to royalty stacking; the Defendant would have been obliged to establish that the total amount of royalties actually paid does not allow to extract any margin from the sale of its products [80] .

The Court further pointed out that MPEG-LA’s offer did not violate FRAND principles, because it referred to a licence covering all companies within the group, to which the Defendant belonged [81] . In the electronics and mobile communications industries, licences on a group level are in line with the industry practice and, therefore, FRAND-compliant [82] .

Implementer’s counteroffer

Having said that, the Court found that the Defendant failed to make a FRAND counteroffer [83] .

In particular, the counteroffer made in November 2017 after the commencement of the present proceedings violated the FRAND principles in terms of content, because it was limited to a licence covering solely the Claimant’s patent portfolio and not all patents included in the MPEG LA pool [84] . Furthermore, the counteroffer established different licensing rates for different regions (especially for China) without factual justification [85] .

Furthermore, the second counteroffer made by the Defendant after the end of the last oral hearing was belated and, therefore, not FRAND. The Court held that the Claimant was not given sufficient time to respond to that counteroffer, so that there was no need for any further assessment of its content [12] . On the contrary, the Court expressed the view that the purpose of this counteroffer was most likely to delay the infringement proceedings [12] .

Provision of security

Since Defendant’s counter-offers were not FRAND in terms of content, the Court did not have to decide, whether the security provided in form of bank guarantees was FRAND or not. The Court noted, however, that the amounts provided were insufficient, since they were calculated on basis of Defendant’s counteroffer from November 2017, which itself failed to meet the FRAND requirements [86] .

  • [1] Tagivan (MPEG-LA) v Huawei, District Court of Düsseldorf, 9 November 2018, para. 36.
  • [2] Ibid, para. 35.
  • [3] Ibid, para. 37.
  • [4] Ibid, para. 453.
  • [5] Ibid, para. 39.
  • [6] Ibid, para. 43.
  • [7] Ibid, para. 44.
  • [8] Ibid, para. 53.
  • [9] Ibid, para. 2.
  • [10] Ibid, para. 54.
  • [11] Ibid, para. 65.
  • [12] Ibid, para. 716.
  • [13] Ibid, paras. 143-208.
  • [14] Ibid, paras. 209-293.
  • [15] Ibid, paras. 295-302.
  • [16] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
  • [17] Tagivan (MPEG-LA) v Huawei, District Court of Düsseldorf, 9 November 2018, paras. 304 et seqq.
  • [18] Ibid, para. 307.
  • [19] Ibid, para. 310.
  • [20] Ibid, para. 310. In this respect, the Court pointed out that – vice versa – also a non-essential patent might confer a dominant position, if the patented invention is superior in terms of technological merit and/or economical value, para. 312.
  • [21] Ibid, paras. 310 et seq.
  • [22] Ibid, para. 311.
  • [23] Ibid, paras. 315 et seqq.
  • [24] Ibid, para. 321.
  • [25] Ibid, para. 326.
  • [26] Ibid, para. 327.
  • [27] Ibid, para. 330.
  • [28] Under the ‘Orange-Book-Standard’ regime, in order to avoid an injunction, the implementer was required to make a licensing offer to the patent holder, which the latter could not refuse without acting in an anticompetitive manner; see Federal Supreme Court (Bundesgerichtshof), judgment dated 6 May 2009, Case No. KZR 39/06.
  • [29] Ibid, paras. 331 et seqq.
  • [30] Ibid, para. 335.
  • [31] Ibid, para. 337.
  • [32] Ibid, para. 339.
  • [33] Ibid, para. 343.
  • [34] Ibid, para. 345.
  • [35] Ibid, para. 356.
  • [36] Ibid, paras. 357 et seqq.
  • [37] Ibid, paras. 366 et seqq.
  • [38] Ibid, para. 340.
  • [39] Ibid, para. 341.
  • [40] Ibid, paras. 395 et seqq.
  • [41] Ibid, paras. 400 et seqq.
  • [42] Ibid, para. 399.
  • [43] Ibid, para. 405.
  • [44] Ibid, paras. 411-417.
  • [45] Ibid, para. 419.
  • [46] Ibid, para. 421.
  • [47] Ibid, para. 425.
  • [48] Ibid, para. 422.
  • [49] Ibid, paras. 426 et seqq.
  • [50] Ibid, para. 429.
  • [51] Ibid, para. 431.
  • [52] Ibid, para. 432.
  • [53] Ibid, para. 433.
  • [54] Ibid, para. 438.
  • [55] Ibid, para. 443.
  • [56] Ibid, para. 444.
  • [57] Ibid, para. 445.
  • [58] Ibid, para. 579.
  • [59] Ibid, para. 582.
  • [60] Ibid, paras. 583 et seqq.
  • [61] Ibid, para. 564.
  • [62] Ibid, paras. 568 et seqq.
  • [63] Ibid, paras. 573 et seqq.
  • [64] Ibid, para. 451.
  • [65] Ibid, para. 449.
  • [66] Ibid, para. 454.
  • [67] Ibid, paras. 487 et seqq.
  • [68] Ibid, para. 491.
  • [69] Ibid, para. 495.
  • [70] Ibid, paras. 591 et seqq., particularly para. 596.
  • [71] Ibid. para. 597.
  • [72] Ibid. para. 504.
  • [73] Ibid. para. 508.
  • [74] Ibid. para. 514.
  • [75] Ibid. paras. 511 et seqq.
  • [76] Ibid. para. 524.
  • [77] Ibid, para. 528.
  • [78] Ibid, paras. 531-543.
  • [79] Ibid, paras. 545 et seqq.
  • [80] Ibid, para. 546.
  • [81] Ibid, para. 599.
  • [82] Ibid, para. 600.
  • [83] Ibid, para. 603.
  • [84] Ibid, paras. 605 et seqq.
  • [85] Ibid, paras. 617 et seqq.
  • [86] Ibid, para. 625.