Case Law post CJEU ruling Huawei v ZTE

Case law search

Updated 23 January 2018

LG Mannheim

LG Mannheim
4 March 2016 - Case No. 7 O 24/14

A. Facts

Case No. 7 O 24/14 [292] related to the infringement of patent EP 0.734.181.B1, which covered technology for decoding video signals in the DVD standard (‘subtitle data encoding/decoding and recording medium for the same’). [293] The defendant was a German subsidiary of a Taiwanese electronics company. It sold computers that used such DVD-software. The claimant, a Japanese electronics company, commercialised the patent in question through a patent pool. In early 2013, the patent pool approached the defendant’s parent company about the use of their patents in general.

On 30 May 2014, the defendant offered to enter into a license agreement for the respective German patent. The defendant indicated that it was willing to enter into negotiations for a portfolio license (but for Germany only). It was also willing to have the claimant determine the royalties owed under section 315 of the German Civil Code. On 25 July 2014, the claimant suggested to change the license offer to a worldwide portfolio license. The defendant rejected and informed the claimant on 22 August 2014 as to the number of respective computers they put into circulation between July 2013 and June 2014 in Germany.

On 13 March 2015, the claimant made an offer for a worldwide portfolio license. On 5 May 2015, the defendant requested the relevant claim charts and further details as to how the license fees had been calculated. On 25 June 2015, the claimant sent the claim charts but refused to elaborate on the calculation method. The claimant suggested a meeting in which it would answer further questions. The defendant responded on 13 July 2015 that most of the claim charts lacked necessary details. In a meeting between the claimant and the defendant’s parent company on 3 September 2015, the parties were unable to reach an agreement. On 30 September 2015, the claimant sent a PowerPoint presentation containing explanations regarding the patent and the calculation of the license fees.

The District Court of Mannheim granted an injunction order on 4 March 2016. [294] It also held that the defendant was liable for compensation and ordered it to render full and detailed accounts of its sales to determine the amount of compensation owed. Further, the District Court ordered a recall and removal of all infringing products from the relevant distribution channels.

B. Court’s Reasoning

1. Notice of Infringement

According to the Huawei/ZTE ruling, the claimant is required to notify the defendant of the alleged patent infringement. According to the District Court, this notice is supposed to provide the defendant an opportunity to assess the patent situation. [295] Thus, it is insufficient to notify the defendant that its products contain the respective standard and it is therefore infringing the SEP. Instead, the claimant is required to specify the infringed patent, the standard in question, and that the patent has been declared essential. The level of detail required depends on the respective situation. [296] However, the description does not need to be as thorough as a statement of claim in patent litigation. In the eyes of the court, the customary claim charts (which show the relevant patent claims and the corresponding passages of the standard) will typically be sufficient. By sending the charts to the defendant, the claimant had met its obligations under the Huawei/ZTE ruling. [297]

The Huawei/ZTE principles require the SEP holder to give notice of infringement before commencing patent infringement proceedings. Otherwise, the SEP holder would abuse its market power, which would mean that the patent infringement court would not be able to grant an injunction order. However, according to the District Court, in such a situation the SEP holder would not lose its patent rights, but would be prevented from exercising those rights in court. [298] Proceedings that had been commenced prior to the Huawei/ZTE ruling present a special case. In that situation, the SEP holder could not have been aware of the obligations that the CJEU subsequently imposed on claimants. Thus, it must be possible for an SEP holder to go through the Huawei/ZTE process subsequently without losing the pending lawsuit. [299] On this basis, the District Could held that the claimant had taken all necessary steps after commencing proceedings, which met the Huawei/ZTE requirements. [300]

2. The SEP Owner’s Licensing Offer

The District Court expressed its view that the CJEU had wanted to establish a procedure that keeps the infringement proceedings free of complicated deliberations about the conditions of the offer, similarly to the German Federal Court of Justice decision Orange Book Standard. [301] If the alleged infringer argues that the conditions of the offer are not FRAND – and, according to the court, alleged infringers typically do so – it is not the role of the infringement court to examine the conditions of the offer and decide whether they are FRAND or not. [296] Thus, the District Court took the view that an infringement court only assesses in a summary review whether the conditions were not evidently non-FRAND. An offer is only non-FRAND if it is under the relevant circumstances abusive. For example, this would be the case if the conditions offered to the alleged infringer were significantly worse than those offered to third parties. [302] The District Court held that in the case in issue the royalties were not evidently non-FRAND because the royalty rates were generally accepted in the market. [303]

The offer needs to include the calculation method in respect of the royalties. [302] However, the CJEU did not elaborate on the level of detail required. [304] The District Court took the view that the SEP holder needs to enable the alleged infringer to understand why the offer is FRAND. In the case in issue, the claimant had included the calculation method. It had also provided further explanations regarding the calculation, which met the Huawei/ZTE requirements. [305]

3. The standard implementer’s reaction

The alleged infringer is required to respond to the SEP proprietor’s license offer, even if the infringer is of the opinion that the offer does not meet the FRAND criteria. [304] The only possible exception is an offer that, by means of summary examination, is clearly not FRAND, which would constitute an abuse of market power. A counter-offer would need to be made as soon as possible, taking into account recognized commercial practices in the field and good faith. The District Court held that the defendant had not made an adequate counter-offer. It is common business practice to enter into license agreements in respect of worldwide portfolio licenses. [306] The defendant’s counter-offer only included the respective German license, which was deemed by the District Court as insufficient. [306] Further, the defendant had not made an adequate deposit into the court as required under the Huawei/ZTE principles. [307]

C. Other Important Issues

The court held that the procedures prescribed by the Huawei/ZTE ruling apply to applications for injunctions and recall orders, but not to rendering accounts and compensation. Regarding rendering accounts and compensation, SEP holders could pursue their rights in court without additional requirements. [304]

Further, the District Court was of the opinion that an alleged breach of Art. 101 TFEU could not be raised as a defence in patent infringement proceedings. Even if the claimant’s conduct was anti-competitive pursuant to Art. 101 TFEU, the standardisation agreement would be void. [308] This has no implications for patent infringement proceedings.

The court also held that there was no general rule that the SEP holder could only bring proceedings against the manufacturer of the infringing product. [309] In the eyes of the District Court, the Higher Regional Court of Karlsruhe decision 6 U 44/15 (23 April 2015) did not establish such a principle. In that case, the defendant was a company that acted merely as a distributor of infringing products (which means it was reselling the products without making any alterations). In contrast, the defendant in the present case had installed the infringing software onto laptops and then sold them under its own brand name. Thus, the two cases were not comparable. [309]

  • [292] See also OLG Karlsruhe, 8 September 2016, 6 U 58/16 (application to stay execution of LG Mannheim, 7 O 24/14).
  • [293]  LG Mannheim, 4 March 2016, 7 O 24/14, pp. 4-6.
  • [294] LG Mannheim, 4 March 2016, 7 O 24/14, pp. 2-3.
  • [295] LG Mannheim, 4 March 2016, 7 O 24/14, p. 22.
  • [296] LG Mannheim, 4 March 2016, 7 O 24/14, p. 23.
  • [297] LG Mannheim, 4 March 2016, 7 O 24/14, p. 34/35.
  • [298] LG Mannheim, 4 March 2016, 7 O 24/14, p. 26.
  • [299] LG Mannheim, 4 March 2016, 7 O 24/14, pp. 27-30.
  • [300] LG Mannheim, 4 March 2016, 7 O 24/14, p. 33.
  • [301] LG Mannheim, 4 March 2016, 7 O 24/14, p. 21.
  • [302] LG Mannheim, 4 March 2016, 7 O 24/14, p. 24.
  • [303] LG Mannheim, 4 March 2016, 7 O 24/14, p. 37.
  • [304] LG Mannheim, 4 March 2016, 7 O 24/14, p. 25.
  • [305] LG Mannheim, 4 March 2016, 7 O 24/14, p. 35/36.
  • [306] LG Mannheim, 4 March 2016, 7 O 24/14, p. 38.
  • [307] LG Mannheim, 4 March 2016, 7 O 24/14, pp. 38-40.
  • [308] LG Mannheim, 4 March 2016, 7 O 24/14, p. 43.
  • [309] LG Mannheim, 4 March 2016, 7 O 24/14, p. 44.

Updated 6 March 2018

OLG Düsseldorf

OLG Düsseldorf
18 July 2017 - Case No. I-2 U 23/17

A. Facts

The Claimant is holder of a patent declared as essential to a standard (Standard Essential Patent, SEP). The Defendant is a provider of telecommuni­cation services. Under the policy governing the relevant standard, the Claimant is obliged to license its SEP on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions. Against Claimant’s SEP a nullity action is pending. The Claimant, nevertheless, concluded portfolio licensing agreements also covering the SEP in question with two companies.

Since November 2012, the Claimant made efforts to license his SEP also to the Defendant. The parties could, however, not reach an agreement. In January 2016, the Claimant brought an action against the Defendant before the Regional Court of Düsseldorf requesting for a declaration of the Defendant’s liability for damages as well as rendering of accounts (main proceedings). After the main proceedings were ini­tiated, the Claimant made two offers for a license agreement to the Defendant. In order to protect busi­ness secrets connected with these offers, the Claimant requested the Defendant to sign a Non-Disclosure Agreement (NDA). The Defendant refused to sign a NDA. Moreover, the Defendant brought an action against the Claimant before an Irish Court requesting for a declaration that Claimant’s offers did not comply with FRAND.

Subsequently, the Claimant filed a motion for a preliminary injunction against the Defendant before the Regional Court of Düsseldorf. The Regional Court of Düsseldorf dismissed Claimant’s motion. The Claimant appealed this judgement. With the present ruling the competent Higher Regional Court of Düsseldorf in­dicated that the Claimant’s appeal has no prospects of success.

B. Court’s reasoning

The court made clear that preliminary injunctions involving SEPs are subject to the same strict prerequi­sites as injunctions referring to non-SEPs. The SEP-holder has, therefore, to adequately establish the va­lidity of the SEP, its use by the alleged infringer as well as the urgency of its request for a preliminary injunction.

Besides this, prior to seeking for a preliminary injunction, the SEP holder also has to fulfill the require­ments set forth by the Court of Justice of the European Union in its decision in the matter Huawei ./. ZTE (Huawei judgement). This follows from the fact that SEP-holders’ claims for injunctive relief are, in prin­ciple, only enforceable, after the prerequisites established by the Huawei judgement have been fully met.

Since preliminary injunctions may severely affect alleged infringer’s ongoing business, such injunctions can only be granted, when both the validity and the use of the SEP by the alleged infringer appear to be given with a high degree of certainty.

The validity of a SEP is deemed to be given, when the SEP has been confirmed in patent opposition or nullity proceedings. Without a prior confirming decision, the validity of a SEP can, exceptionally, also be regarded as being given, when

  • the alleged infringer has unsuccessfully intervened in the proceedings, in which the SEP was granted,
  • no opposition or nullity proceedings were initiated against the SEP, because it is universally consid­ered to be able to receive patent protection (one indication for this being, for instance, the fact that the SEP was licensed to renowned licensees),
  • the objections raised against SEP’s validity can be proven to be unfounded even by the limited means of the summary examination foreseen in proceedings for interim relief, as well as
  • in “extraordinary circumstances”, in which the SEP-holder will face substantial disadvantages, if he is forced to wait with the initiation of proceedings against the infringer, until after the end of opposition or nullity proceedings pending against the SEP.

Against this background, the court argued that the Claimant is most likely not entitled to the requested preliminary injunction.

First, the Claimant failed to establish the validity of the SEP in dispute with the required high degree of certainty. A decision confirming the SEP in dispute is missing, since the nullity proceedings are still pending. Furthermore, the exceptions allowing this conclusion to be drawn, even without a prior con­firming decision, do most likely not apply. In particular, the fact that the Claimant concluded portfolio licensing agreements with two other companies covering also the SEP in question, does not suffice to adequately establish its validity. This fact only proves that the licensees held the SEP-holder’s portfolio as being able to receive patent protection as a whole, not, however, that they considered the SEP itself as being worthy of such protection. Furthermore, due to the high level of technical complexity, the court does not expect that the objections raised against the validity of the SEP can be proven as being unfounded solely on basis of the limited examination means available to the court in the present pro­ceedings for interim relief.

Second, the court has also substantial doubts that urgency is given. The Claimant was aware of the alleged infringement since 2012. Nevertheless, the Claimant refrained from making his claim for injunctive relief enforceable by fulfilling the Huawei judgement requirements. Furthermore, in the main proceedings ini­tiated prior to the present proceedings for preliminary injunction, the Claimant did not request for injunc­tive relief, but limited his action against the Defendant to damages and rendering of accounts. In terms of urgency, it could be expected from the Claimant to request for injunctive relief already in the main proceedings. Furthermore, the fact that the Defendant brought an action before an Irish Court requesting a declaration that Claimant’s offers did not comply with FRAND, also fails to establish urgency. It is the Defendant’s right to seek legal redress.

C. Other issues

In addition, the court expressed its view regarding the consequences of the refusal of a potential licensee to sign a NDA covering information connected with the SEP-holder’s offer for a licensing agreement on FRAND terms, without, however, ruling on this question on the merits of the present case.

The court suggested that the unjustified refusal of a licensee to enter into a NDA does not release the SEP-holder from the obligations established by the Huawei judgement, namely the obligation to make a FRAND offer to the licensee and specify the underlying conditions (particularly the price calculation). An unjusti­fied refusal of the licensee to sign a NDA shall, however, lead to easing the SEP-holder’s burden to provide the licensee with detailed explanations regarding the justification of its licensing conditions, to the extent that this is required for protecting its justified confidentiality interests. Instead of detailed information, “merely indicative observations would, basically, suffice. The licensee cannot object the FRAND con­formity of the SEP-holder’s offer based on the insufficient specification of the licensing terms.
Updated 23 January 2018

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

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

A. Facts

The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue (EP (UK) 2 229 744, EP (UK) 2 119 287, EP (UK) 2 485 514, EP (UK) 1 230 818, EP (UK) 1 105 991, EP (UK) 0 989 712) relate to telecommunication network coding and procedures. [427] Most were part of a large patent portfolio that the claimant had acquired from a major telecommunications company in 2013. [428] 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. [429]

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. [430] 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. [431] Between August and October 2016 the parties exchanged further offers without reaching an agreement. [432]

The Patents Court (Birrs J) held that the claimant was in a dominant position, but did not abuse this position. [433] 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. [434]

B. Court’s Reasoning

1. Market Power

The court defined the relevant market for assessing dominance as a distinct market for licensing each SEP individually. [435] European case law indicated that owning an SEP could be a rebuttable presumption for the existence of a dominant position. [436] 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. [437]

2. SEP Proprietor’s Licensing Offer

a. FRAND Declaration as Conceptual Basis

The court pointed out that that the FRAND undertaking also applied in the case that the SEP proprietor was not in a dominant position. It held that the FRAND undertaking operated as a practical constraint on a SEP owner’s market power. [438] 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, [439] 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. [440] 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. [440]

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. [441] 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. [442] This approach also means that the SEP proprietor is under an obligation to make a FRAND offer and to enter into FRAND license agreements. [443]

b. ‘True FRAND Rate’

The court considered that there is only a single set of terms for a given set of circumstances that would meet FRAND conditions (‘true FRAND rate’). [444] This eliminates the so-called Vringo-problem, [445] 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. [446]

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. [447] However, the court took the view that FRAND-compliance and compliance with Art. 102 TFEU are not the same thing (the court pointed out that the CJEU in the Huawei ruling appears to equate an obligation to make a FRAND offer with compliance with Art 102 TFEU).Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154./span> Since Art. 102 TFEU condemns excessive pricing, [449] 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. [449]

c. Discrimination

The court held that the correct approach is to start from a global rate as a benchmark and to then adjust this rate as appropriate. [450] 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. [451] 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. [452]

Second, the ‘hard-edged’ non-discrimination obligation, which takes into account the nature of the potential licensee, [451] 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. [453] 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. [452]

d. Territorial Scope of License

The court held that the defendant’s offer that was limited to UK licenses was not FRAND. In the court’s opinion country by country licensing is inefficient for goods such as mobile telecommunications devices that are distributed across borders. [454] 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. [454] This was illustrated by the fact that the vast majority of licenses introduced in the trial were worldwide licenses. [455] 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. [456] 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. [457]

C. Other Important Issues

1. Comparable agreements and reasonable aggregate royalty rate

The court held that for determining the royalty rate, the evidence of the parties would be relevant, including evidence of how negotiations actually work in the industry. [458] Other freely-negotiated license agreements might be used as comparables. [459] This may be compared with a top down approach [460] 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. [461] 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. [458] License agreements must meet certain criteria to be comparable. [462] 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. [462] 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%). [463]

2. Principles derived from Huawei v. ZTE

The court also provided a compiled overview of its interpretation of the Huawei v. ZTE ruling. [464] 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.
  • [427] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 2.
  • [428] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 54 et seqq.
  • [429] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 3.
  • [430] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 5.
  • [431] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 7-8.
  • [432] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 11-14.
  • [433] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 807.
  • [434] Unwired Planet v Huawei, EWHC 1304 (Pat).
  • [435] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 631.
  • [436] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 634.
  • [437] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 636-646.
  • [438] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 656.
  • [439] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 108-145.
  • [440] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 146.
  • [441] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 162.
  • [442] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 163.
  • [443] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 159.
  • [444] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 164.
  • [445] See Vringo v ZTE [2013] EWHC 1591 (Pat) and [2015] EWHC 214 (Pat).
  • [446] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 158.
  • [447] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 152.
  • [448] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154./span> Since Art. 102 TFEU condemns excessive pricing,Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153. a royalty rate can be somewhat higher than the true FRAND rate and still not be contrary to competition law. Conversely, for a breach of competition law, it will be necessary but not sufficient that the rate is not the true FRAND rate.Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153.
  • [449] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153.
  • [450] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 176.
  • [451] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 177.
  • [452] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 503.
  • [453] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 501.
  • [454] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 544.
  • [455] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 534.
  • [456] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 546.
  • [457] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 572.
  • [458] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 171.
  • [459] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 170
  • [460] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 178
  • [461] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 806 (10)
  • [462] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 175.
  • [463] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 476.
  • [464] Unwired Planet v. Huawei [2017] EWHC 711(Pat), 744.

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) [228] . 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 [229] .

The Defendant offers communication services in Germany to retail and wholesale clients, including DSL connections using the standards ADSL2+ and VDSL2 [230] .

The Intervener supplies the Defendant with equipment (especially DSL transceivers and DSL Boards), allowing network services based on the above standards [230] .

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) [231] . 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 [232] . 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 [233] . Taking the ongoing liability proceedings in Germany into account, the Dublin High Court stayed its proceedings [233] .

In September 2017, the Claimant brought a second action against the Defendant before the District Court of Düsseldorf, requesting for injunctive relief (injunction proceedings) [234] . In February 2018, the Claimant made another licensing offer to the Defendant in the pending injunction proceedings [232] .

With the present judgment, the Court dismissed Claimant’s action in the injunction proceedings [235] .

B. Court’s reasoning

Although the Court held that the services offered by the Defendant infringe the SEP in suit [236] , it found that the Claimant cannot enforce its patent rights for the time being [237] , 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) [235] .

1. Dominant market position

The Court found that the Claimant holds a dominant market position in terms of Article 102 TFEU [239] .

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 [240] . Each SEP outlines an own relevant (licensing) market, unless – from the SEP users’ perspective – equivalent alternative technologies for the same technical problem exist [241] . 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 [242] , it defined the relevant market as the market for products and services allowing for internet connections through DSL technology [243] .

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 [244] . 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 [244] . 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 [244] .

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 [244] . 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) [244] . 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 [244] .

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 [245] .

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 [246] . 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 [247] .

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 [248] .

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 [249] . 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 [249] .

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 [250] . 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 [250] . 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 [250] .

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) [251] . 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) [251] . 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 [251] .

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 [252] .

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 [253] .

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 [254] . Given the circumstances of the specific case, even an implicit behaviour can suffice [254] .

In terms of timeliness, the Court held that a strict deadline, within which the SEP user ought to make its declaration, cannot be set [255] . The respective time frame must be determined on a case-by-case basis under consideration of the circumstances of each case [255] . 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 [255] . 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 [255] .

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 [256] . 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 [257] .

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 [258] .

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 [259] . 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 [232] .

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 [260] . 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 [261] .

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 [262] . 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 [262] . 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 [262] . In this context, the Court explained that failure to meet the Huawei obligations does not permanently impair SEP holder’s rights [263] . 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 [264] .

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 [234] . Nevertheless, the Court left this question open, because, in its eyes, the Claimant’s offer was not FRAND in terms of content [265] .

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 [266] . In the Court’s view, Claimant’s offer was anyway both not fair and discriminatory [267] .

Fair and reasonable terms

The Court held that the licensing terms offered by the Claimant to the Defendant were not fair and reasonable [268] .

First, the terms did not adequately consider the effects of patent exhaustion [269] . As a rule, FRAND requires licensing offers to contain respective provisions [270] . 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 [271] .

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 [272] . The Defendant would be obliged to pay royalties for past uses, although it is not clear whether the Claimant is entitled to such payments [273] .

Third, the Court found that the exclusion of the Defendant’s wholesale business from Claimant’s licensing offer was also not fair [274] . According to the principle of contractual autonomy, patent holders are free to choose to which stage of the distribution chain they offer licences [275] . 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 [275] .


Besides from the above, the Court ruled that the Claimant’s offer was discriminatory [276] .

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 [266] . 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) [277] .

Furthermore, the Court explained that the non-discriminatory element of FRAND does not oblige the SEP holder to treat all users uniformly [278] . The respective obligation applies only to similarly situated users, whereas exceptions are allowed, provided that a different treatment is justified [278] . 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 [279] .

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 [280] . 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 [281] .

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 [282] . 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 [283] . 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 [284] .

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 [285] . 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 [285] . 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) [285] . 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 [285] . 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 [286] .

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 [287] . 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 [288] . 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 [289] .

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 [290] .

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 [291] .

  • [228] District Court of Düsseldorf, 11 July 2018, Case-No. 4c O 81/17Ibid, paras. 3 and 82.
  • [229] Ibid, para. 13.
  • [230] Ibid, para. 12.
  • [231] Ibid, paras. 14 and 211.
  • [232] Ibid, para. 15.
  • [233] Ibid, para. 16.
  • [234] Ibid, para. 236.
  • [235] Ibid, paras. 140 and 313 et seqq.
  • [236] Ibid, paras. 114 et seqq.
  • [237] Ibid, paras. 60 and 140.
  • [238] Huaweiv ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
  • [239] Ibid, para. 142.
  • [240] Ibid, para. 148.
  • [241] Ibid, paras. 153 and 146.
  • [242] Ibid, paras. 159 - 181.
  • [243] Ibid, para. 158.
  • [244] Ibid, para. 147.
  • [245] Ibid, paras. 183 et seqq.
  • [246] Ibid, para. 191.
  • [247] Ibid, para. 188.
  • [248] Ibid, paras. 195 et seqq.
  • [249] Ibid, para. 199.
  • [250] Ibid, para. 198.
  • [251] Ibid, para. 200.
  • [252] Ibid, para. 203.
  • [253] Ibid, para. 205.
  • [254] Ibid, para. 208.
  • [255] Ibid, para. 207.
  • [256] Ibid, para. 210.
  • [257] Ibid, para. 212.
  • [258] Ibid, paras. 215 et seq.
  • [259] Ibid, para. 220.
  • [260] Ibid, paras. 222 et seqq.
  • [261] Ibid, para. 225.
  • [262] Ibid, para. 233.
  • [263] Ibid, para. 228.
  • [264] Ibid, para. 230.
  • [265] Ibid, para. 237.
  • [266] Ibid. para. 241.
  • [267] Ibid, para. 242.
  • [268] Ibid, paras. 283 et seqq.
  • [269] Ibid, para. 285.
  • [270] Ibid, para. 288.
  • [271] Ibid, paras. 292 et seq.
  • [272] Ibid, paras. 298 et seqq.
  • [273] Ibid, para. 301.
  • [274] Ibid, para. 306.
  • [275] Ibid, para. 311.
  • [276] Ibid, para. 271.
  • [277] Ibid, para. 250.
  • [278] Ibid, para. 248.
  • [279] Ibid, para. 267.
  • [280] Ibid, paras. 256 and 259 et seq.
  • [281] Ibid, para. 262.
  • [282] bid, paras. 258 and 264.
  • [283] Ibid, paras. 263 and 265.
  • [284] Ibid, para. 265.
  • [285] Ibid, para. 273.
  • [286] Ibid, para. 274.
  • [287] Ibid, para. 276.
  • [288] Ibid, para. 277.
  • [289] Ibid, para. 281.
  • [290] Ibid, para. 315.
  • [291] Ibid, paras. 75 et seq.

Updated 26 January 2017

Saint Lawrence v Vodafone

OLG Düsseldorf
9 May 2016 - Case No. I-15 U 36/16

  1. Facts
    The proceedings concerned the subsequent application of Defendant in Case No. 4a O 73/14 seeking to suspend the execution of the district court’s decision until the appellate court has decided on the merits of an appeal brought by Defendant. As to the facts of the case, it can be referred to the summary above.
    Due to the specific nature of the proceedings, the standard of review was limited to a summary examination of the decision rendered by the court of first instance. The court of appeal can suspend execution only if it comes to the conclusion that the challenged decision will probably not be upheld in second instance because it appears manifestly erroneous.
  2. Court’s reasoning
    1. Notice of infringement and declaration of willingness to license
      Firstly, the court of appeal focused on the Huawei requirement to submit an infringement notification prior to the initiation of proceedings. Although the court voiced some doubts over whether a distinction between transitional and non-transitional cases is permitted and whether, in transitional cases, reliance of a SEP proprietor on the Orange Book standard of conduct is worthy of protection, it did not consider the result reached by the lower court as manifestly erroneous. Since the SEP proprietor has the option to withdraw its action, to perform its Huawei obligations and to re-file the claim afterwards, it seems overly formalistic to deny the option to perform the Huawei obligations within the ongoing trial. Among a number of further reasons [44] for its position the court stressed that the ECJ intended the Huawei framework to be fact-sensitive. [45]
      Secondly, the court confirmed the lower court’s view that Defendant did not comply with its Huawei obligation to express its willingness to conclude a licensing agreement because it reacted belatedly (more than five months after the infringement notification) and in an evasive manner. The fact that proceedings have been initiated by Claimant does not alter the Huawei requirements and Defendant will particularly not be granted more time to comply with its respective obligations. [46]
    2. The SEP owner’s licensing offer / The standard implementer’s reaction
      The court left it undecided whether the lower court erred in focusing on a licensing offer which Claimant presented solely to the Intervener but not to Defendant. According to the court the conduct of the parties required by Huawei constitutes a mechanism of alternating, consecutive steps in which no subsequent conduct requirement is triggered unless the other party performed the previous “step”. In consequence, Claimant was, in the present case, not obliged to submit a FRAND licensing offer at all since Defendant had failed to signal willingness to license. [47]
      The lower court’s finding that Claimant’s licensing offer was FRAND while the Intervener’s counter-offer failed to meet this threshold was accepted. Hence, the court considered it as irrelevant under the present circumstances—and as a completely open question in general—whether a SEP proprietor is obliged, before bringing an action for prohibitory injunction against the supplier of a standard-implementing device, to (cumulatively) submit a FRAND licensing offer not only to the supplier but also to the producer of said device. [48]
  3. Other important issues
    The remarks of the lower court rejecting, in the present case, a patent ambush-argument were not deemed manifestly erroneous, mainly because the lower court had reasonably argued that such an abusive practice would only result in the SEP proprietor’s obligation to grant licenses on FRAND terms. [49]
    Licensing negotiations (allegedly) undertaken by Defendant after the decision of the lower court provided no reason to suspense execution since it was not evident to the court that Defendant had thereby fulfilled its Huawei obligations. [50]
  • [44] For details, cf. OLG Düsseldorf, 9 May 2016 - Case No. I-15 U 36/16, para. 2, b, aa
  • [45] Case No. I-15 U 36/16, para. 2, b, aa
  • [46] Case No. I-15 U 36/16, para. 2, b, bb
  • [47] Case No. I-15 U 36/16, para. 2, b, cc
  • [48] Case No. I-15 U 36/16, para. 2, b, ff
  • [49] Case No. I-15 U 36/16, para. 2, b, ee
  • [50] Case No. I-15 U 36/16, para. 2, b, dd

Updated 26 January 2017

Saint Lawrence v Vodafone

OLG Düsseldorf
9 May 2016 - Case No. I-15 U 35/16

The proceedings concerned the subsequent application of Defendant in Case No. 4a O 126/14 seeking to suspend execution of the lower court’s decision. As Cases No. 4a O 126/14 and No. 4a O 73/14 are interconnected, the Court came to the same conclusions and framed them in exactly the same wording as in its decision OLG Düsseldorf, 9 May 2016 - Case No. I-15 U 36/16 (cf. above). Therefore, no separate and detailed summary is provided here.

Updated 6 June 2017

OLG Düsseldorf

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

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

  2. Court’s Reasoning
    In its first decision, the court found that the German rules of Civil Procedure do not provide a legal basis for granting an order in the form requested by the Claimant. [51] Such an order would exclude Defendant’s right to be heard with respect to Claimant’s FRAND calculation, in breach of Art. 103 Sec. 1 of the German Constitutional Law (Grundgesetz). [51] The fact that Defendant’s counsels would have access to the relevant information, does not suffice to meet the requirements set forth by the aforementioned provision. Party’s right to be heard contains also the right to personally participate in the proceedings. Consequently, a limitation of a party’s right to be heard reaching so far as Claimant requested, is not possible, unless the party affected expressly waives its right to personally participate in the proceedings. [51] Since the Defendant decided to not do so, a respective order cannot be rendered against it.
    The fact that the Intervener waived its respective right, can also not justify rendering such an order against the Defendant. [52] The Intervener does not join the proceedings as a party, but merely in support of one of the parties. [53] Accordingly, it cannot make decisions that would affect the party’s standing, such as a declaration to waive the right to be heard. In the present case, the Intervener’s decision to waive its respective right may, therefore, impact its own standing in the proceedings, but cannot affect Defendant’s position.

    As a result, the Claimant can either make the confidential information available to the Defendant or keep this information redacted, accepting that the court cannot take redacted information into consideration for its decision. [54]

    Notwithstanding the above, under reference to the “Umweltengel für Tragetaschen” judgement of the German Federal Supreme Court (Bundesgerichtshof) [55] the court held, that, as a rule, it can be expected from the implementer of SEPs to enter into a NDA reinforced by a contractual penalty with the SEP holder. [56] SEP implementer is obliged to facilitate FRAND licensing negotiations to the best of its ability. This includes also taking justified confidentiality interests of the SEP holder into account. [56]

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