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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

LG Mannheim

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

A. Facts

Case No. 7 O 24/14 [8] 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’). [9] 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. [10] 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. [11] 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. [12] 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. [13]

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. [14] 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. [15] On this basis, the District Could held that the claimant had taken all necessary steps after commencing proceedings, which met the Huawei/ZTE requirements. [16]

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. [17] 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. [12] 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. [18] 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. [19]

The offer needs to include the calculation method in respect of the royalties. [18] However, the CJEU did not elaborate on the level of detail required. [20] 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. [21]

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. [20] 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. [22] The defendant’s counter-offer only included the respective German license, which was deemed by the District Court as insufficient. [22] Further, the defendant had not made an adequate deposit into the court as required under the Huawei/ZTE principles. [23]

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. [20]

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. [24] 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. [25] 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. [25]

  • [8] See also OLG Karlsruhe, 8 September 2016, 6 U 58/16 (application to stay execution of LG Mannheim, 7 O 24/14).
  • [9]  LG Mannheim, 4 March 2016, 7 O 24/14, pp. 4-6.
  • [10] LG Mannheim, 4 March 2016, 7 O 24/14, pp. 2-3.
  • [11] LG Mannheim, 4 March 2016, 7 O 24/14, p. 22.
  • [12] LG Mannheim, 4 March 2016, 7 O 24/14, p. 23.
  • [13] LG Mannheim, 4 March 2016, 7 O 24/14, p. 34/35.
  • [14] LG Mannheim, 4 March 2016, 7 O 24/14, p. 26.
  • [15] LG Mannheim, 4 March 2016, 7 O 24/14, pp. 27-30.
  • [16] LG Mannheim, 4 March 2016, 7 O 24/14, p. 33.
  • [17] LG Mannheim, 4 March 2016, 7 O 24/14, p. 21.
  • [18] LG Mannheim, 4 March 2016, 7 O 24/14, p. 24.
  • [19] LG Mannheim, 4 March 2016, 7 O 24/14, p. 37.
  • [20] LG Mannheim, 4 March 2016, 7 O 24/14, p. 25.
  • [21] LG Mannheim, 4 March 2016, 7 O 24/14, p. 35/36.
  • [22] LG Mannheim, 4 March 2016, 7 O 24/14, p. 38.
  • [23] LG Mannheim, 4 March 2016, 7 O 24/14, pp. 38-40.
  • [24] LG Mannheim, 4 March 2016, 7 O 24/14, p. 43.
  • [25] LG Mannheim, 4 March 2016, 7 O 24/14, p. 44.

Updated 26 January 2017

Saint Lawrence v Vodafone

LG Düsseldorf
31 March 2016 - Case No. 4a O 73/14

  1. Facts
    Since 28 August 2014 Claimant, a non-practicing entity, is the proprietor of the European patent EP 1 125 276 B1 “J”, originally granted to applicants “Voiceage, and allegedly covering part of the AMR-WB standard. Defendant is a company active in the telecommunications sector and which markets AMR-WB-based devices, inter alia devices produced by the Intervener in this case. After the adoption (“freeze”) of AMR-WB by ETSI on 10 April 2001, Claimant (who was not an ETSI member during the setting of the AMR-WB standard) made, on 29 May 2001, a commitment towards ETSI to grant licenses on FRAND terms inter alia for patent EP J. Claimant and its parent company “O” offer the SEP and all other patents of the same family to third parties by means of a portfolio license. Licensing conditions are accessible on the Internet and various producers in the sector have taken a license under these conditions. Prior to the submission of the patent infringement action on 23 July 2014 and to the advance payments on costs on 29 July 2014, Claimant alerted neither Defendant nor the manufacturer of the contested embodiments, who acted as an intervener in the present proceedings and became aware of the lawsuit in August 2014. By e-mails on 31 July and (as a reminder) on 9 December 2014, the first of which included a copy of the statement of claims and reached the defendant before it was formally served with the statement, Claimant notified the alleged patent violation to Defendant. After Defendant’s reply as of 12 January 2015, Claimant presented a draft licensing agreement to Defendant by letter as of 22 April 2015. On 9 December 2014, the Intervener (HTC) declared willingness to take a license for that patent, inter alia for the patent-in-suit, provided infringement was found in Mannheim’s District Court. It further declared that it would accept royalties determined by a court or arbitration tribunal. Claimant, in turn, offered a licensing agreement by letters as of 12 January 2015 and 25 March 2015 respectively. In the course of meetings taking place since 23 January 2014, [61] Claimant offered a license to the Intervener. On 23 February 2015 and on 2 April 2015 respectively, the Intervener made two licensing offers, including third party determination (arbitration panel or English court) of the amount of royalty, for the whole German patent portfolio of Claimant. An additional offer for a licensing agreement, limited to Germany and implementing a royalty of USD 0.0055 per patent by reference to the “WCDMA Patent Pools”, was made by the Intervener on 6 March 2015 and 24 September 2015 respectively, but it was finally refused by Claimant on 4 October 2015. Moreover, the Intervener provided a bank “guarantee of payment” as of 3 September 2015, being modified by letter as of 10 November 2015, and also rendered account of past and prospective sales in Germany since 2011.
  2. Court’s reasoning
    1. Market power and notice of infringement
      The court leaves open the question of whether the SEP conferred market power to Claimant since it did, in any case, find no abuse of such potential market power. [62] The court declared the Huawei rules applicable to claims for the recall of products. [63] As regards the Huawei requirement to alert the standard user of the infringement, the decision arrived at various findings of interest: Firstly, the judges found that—in “non-transitional” cases where the lawsuit was brought after the Huawei decision—the infringement notification has to take place before the action is filed, or the latest before the advance payment on costs is made. In transitional cases, such as the present case, a delayed infringement notification, taking place after the advance payment on costs as well as the submission of the court action, but before the statement of claims is served, is admissible. [64] Moreover, an infringement notification could possibly be omitted (in particular) if—as in the present case—the patent user already disposes of all necessary information and lacks willingness to license. [65] In non-transitional cases, however, the court doubts whether it is possible to rectify an omitted infringement notification without withdrawing the action. [66] Secondly, the court specified the minimum content of the infringement notification which has to indicate at least the number of the patent, the contested embodiments and the alleged acts of use performed by the standard implementer. The court did not decide whether additional information has to be provided, in particular regarding the interpretation of the patent claims or on which part of the standard the patent reads, but it stated that such additional information is not harmful to the patent proprietor. [67] Lastly, the court detailed on the particular situation of the Intervener, being Defendant’s manufacturer and supplier in the present case: Even though a FRAND defense successfully raised by the Intervener would in general also cover subsequent levels of the distribution chain, the Huawei requirements apply only indirectly to suppliers of contested embodiments which have not been sued themselves. Accordingly, the SEP proprietor is not obliged to notify the patent infringement to third parties, but as soon as a request to grant a license on FRAND terms is submitted the (adapted) Huawei procedure applies. [68] In casu, no separate infringement notice vis-à-vis the Intervener was required since the Intervener was, since August 2014, aware of the action having been brought.
    2. The SEP owner’s licensing offer
      Since the patent user did not express its willingness to conclude a licensing agreement in due time, the court found Claimant to comply with the Huawei requirement to submit a licensing offer on FRAND terms even though the offer was made in the course of the ongoing litigation. For transitional cases, as the present one, this holds true even if infringement notification and court action take place at the same time. [69] Besides, the court analyzed under which circumstances licensing conditions can be considered as FRAND according to Huawei. In the opinion of the judges, the more licensing agreements implementing comparable terms the SEP proprietor has already concluded, the stronger is the presumption that these conditions are FRAND, unless factual reasons—which are to be demonstrated by the patent user—justify modified terms. Recognized commercial practice in the relevant sector has to be considered when defining the admissible scope of the licensing agreement. If patent portfolios are usually covered by group or worldwide licenses in the relevant market, a (worldwide) portfolio license will be FRAND unless the circumstances of the specific case, e.g. the SEP proprietor’s market activity being limited to one geographic market, require a modification. [70] Accordingly, Claimant’s (worldwide) licensing offer to Defendant for the whole AMR-WB pool, demanding royalties of USD 0.26 per mobile device that implemented the standard and was produced or marketed in countries in which the SEP was in force, and complying with Claimants existing licensing practice (accessible on the Internet and already implemented in 12 licensing agreements) was declared FRAND. While the court considered that comparable licensing agreements “represent an important indicator of the adequacy of the license terms offered” it clarified that the significance of a patent pool as an indication of FRAND conformity is “limited”. Defendant and the Intervener failed to show that the portfolio comprised (non-used) non-SEPs as well. [71] They further failed to show that the pre-concluded licensing agreements provided no valid basis for comparison as they were concluded under the threat of pending litigation. [72] In order to fulfill the Huawei obligation of specifying the calculation of royalties, the SEP proprietor only has to provide the information necessary to determine the amount of royalties to be paid, e.g. the royalty per unit and the products covered by the license. While the court left undecided whether additional indications, e.g. concerning the FRAND character of the licensing offer, are necessary to comply with Huawei, it found that the SEP proprietor’s duty to inform should not be interpreted too strictly as FRAND does regularly encompass a range of values that will be fair, reasonable, and non-discriminatory. [73] Claimant’s licensing offer presented to the Intervener was considered as being FRAND for the same reasons. Furthermore, the court emphasized that the contractual clause allowing for judicial review of the royalties offered could be a possible way to avoid abusive practices and to ensure that licensing offers correspond to FRAND terms. [74]
    3. The standard implementer’s reaction
      The court found that the more details the infringement notification contains, the less time remains for the standard user to examine the patent(s) at issue and to express its willingness to conclude a licensing agreement on FRAND terms. In the present case, Defendant did not comply with Huawei because it took more than five months to react and then only asked for proof of the alleged infringement. Given this excessive delay, the court did not decide whether Defendant’s reaction satisfied the Huawei requirements in terms of content. It denied the possibility to remedy a belated reaction by a subsequent declaration of willingness to license. On the contrary, and as a consequence of the patent user’s non-compliance, the SEP proprietor may continue the infringement action without violating Article 102 TFEU, but it still has to grant licenses on FRAND terms. [75] Whether the Intervener satisfied the ECJ criteria was left undecided. [76] The court made some further remarks of interest as to the Huawei requirements concerning the standard implementer: Firstly, it left undecided whether the obligation of the patent user to diligently respond is caused also by a (potentially) non-FRAND licensing offer. [77] Secondly, a standard user who has taken a license is not prevented from challenging validity and essentiality of the SEP afterwards, nor is the SEP proprietor entitled to terminate the license if such a challenge takes place. However, the standard implementer may not delay the (unconditional) conclusion of the licensing agreement until a final court decision on these issues has been rendered. While validity and standard-essentiality is litigated, the licensee remains obliged to pay royalties and it cannot request to insert into the licensing contract a clause entitling it to reclaim paid royalties in case of its success in court. [78] Thirdly, as, in the present case, no specific counter-offers satisfying FRAND terms were submitted and Defendant could not establish that Claimant had waived this requirement the court did not decide on whether a SEP proprietor is obliged to negotiate further although itself and the patent user have submitted FRAND offers. [79] None of the counter-offers of the Intervener were FRAND in terms of content. They were either inadmissibly limited to Germany, contained no precise royalty, were not submitted “promptly” because the standard user had waited until the oral pleadings in the parallel procedure, or they proposed royalties per device which the court considered as too low. [80] While it was therefore held to be irrelevant whether, in the first place, the Intervener duly declared its willingness to license, the court emphasized that the Intervener’s readiness to take a license only after the SEP infringement was determined in court did not satisfy the Huawei standard of conduct. [81] Moreover, the obligation imposed by Huawei to provide appropriate security and to render account was not fulfilled. While Defendant refrained from taking any of these actions, the Intervener waited several months after the counter-offers were refused in order to submit its bank “guarantee of payment”, which was not recognized as “appropriate security” due to its amount and its limitation to acts of use in Germany. [82] Neither was the Intervener’s initial proposal to have the security—if requested by Claimant—determined by an arbitration tribunal or by an English court accepted as an appropriate way to provide security. [83]
  3. Other important issues
    According to the court, the Huawei requirements apply to both non-practicing entities and other market participants. [84] Suing a network operator instead of the undertakings producing devices operating in the network constitutes (at least under the circumstances of this case and absent selective enforcement) no violation of competition law even though this strategy might aim at using the action against the network operator as a “lever” to obtain licensing commitments from the device suppliers. On the other hand, device manufacturers are entitled to a FRAND license as well and can raise the FRAND defense if such a license is not granted. In consequence, the court perceives a fair balance of interests as the SEP proprietor can choose on which level of the chain of production to sue while the undertakings in the chain of production can choose on which level to take a license. [85] Furthermore, no patent ambush-defense based on § 242 BGB could be raised because, firstly, Defendant and the Intervener could not substantiate the alleged patent ambush by “Y” and “C”, being the original SEP proprietors; secondly, they could not show that a different patent declaration conduct would have resulted in a different version of the standard excluding the patent-in-suit; thirdly, the alleged patent ambush would, arguably, have resulted only in a FRAND-licensing obligation and, fourthly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [86]
  • [61] This is the date mentioned by the Court although “23 January 2015” may seem more plausible and the date given by the Court may result from a scrivener’s error.
  • [62] Case No. 4a O 73/14, para. 184
  • [63] Case No. 4a O 73/14, para. 187
  • [64] Case No. 4a O 73/14, para. 195 et seq.
  • [65] Case No. 4a O 73/14, para. 208-210
  • [66] Case No. 4a O 126/14, para. IV, 3, a, bb, 2, c
  • [67] Case No. 4a O 73/14, para. 193
  • [68] Case No. 4a O 73/14, para. 270 et seq.
  • [69] Case No. 4a O 73/14, para. 222 et seq.
  • [70] Case No. 4a O 73/14, para. 225 et seq.
  • [71] Case No. 4a O 73/14, para. 225 et seq. On the relevance of the SIPRO-pool royalty rates, cf. LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 245-248. On the facts indicating that a worldwide license was appropriate LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 249-255.
  • [72] Case No. 4a O 73/14, para. 234-242. The court argued that it is questionable in principle how much the threat of a claim for injunctive relief can (inadmissibly) affect license agreement negotiations, since the Orange Book case law of the BGH (German Federal Court of Justice), the Motorola decision of the European Commission, and now the CJEU judgment in the Huawei Technologies/ZTE Case could be and can be invoked against inappropriate demands that are in breach of antitrust law.
  • [73] Case No. 4a O 73/14, para. 256 et seq.
  • [74] Case No. 4a O 73/14, para. 279 et seq.
  • [75] Case No. 4a O 73/14, para. 214-220
  • [76] Case No. 4a O 73/14, para. 214-220; 278
  • [77] Case No. 4a O 73/14, para. 266
  • [78] Case No. 4a O 73/14, para. 185 et seq.; 262 et seq.
  • [79] Case No. 4a O 73/14, para. 264
  • [80] Case No. 4a O 73/14, para. 291 et seq.
  • [81] Case No. 4a O 73/14, para. 278
  • [82] Case No. 4a O 73/14, para. 267 et seq.; 299 et seq.
  • [83] Case No. 4a O 73/14, para. 304
  • [84] Case No. 4a O 73/14, para. 189
  • [85] Case No. 4a O 73/14, para. 309-313
  • [86] Case No. 4a O 73/14, para. 317 et seq.

Updated 9 November 2020

Sharp v Daimler

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

A. Facts

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

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

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

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

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

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

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

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

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

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

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

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

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

With the present judgment [1] (cited by https://www.gesetze-bayern.de/Content/Document/Y-300-Z-BECKRS-B-2020-N-22577?hl=true), the Court granted an injunction against Daimler and also recognised Daimler's liability to pay damages on the merits. The Court further ordered Daimler to recall and destroy infringing products, render accounts and provide information necessary for the calculation of damages to Sharp.


B. Court's reasoning

The Court found that the patent-in-suit is essential to the practice of the 4G/LTE standard [2] and infringed [3] . For this reason, Sharp was entitled -among other claims- to injunctive relief [4] .

Daimler asserted a so-called 'FRAND-defence', basically, arguing that by filing an infringement action, Sharp abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) and should, therefore, be denied an injunction. Among other points, it was argued that Sharp had failed to comply with the conduct requirements established by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [5] (Huawei decision, or framework).

The Court dismissed the FRAND-defence raised by Daimler and also found that Daimler could not rely on a FRAND-defence derived from its suppliers [6] .

Abuse of market dominance

According to the Court, an abuse of market dominance by the enforcement of SEPs can occur, if the patent holder did not make 'sufficient efforts' to satisfy the 'particular responsibility' attached to its dominant position and facilitate the signing of an agreement with a licensee, which is 'in principle willing to take a licence' [7] . This requires, however, that the implementer, who already uses the protected technology without authorization by the right holder, is willing to take a licence on FRAND terms [8] . The Court explained that it cannot be requested by the SEP holder to 'impose' a licence to any standards user [8] .

Based on the above, the Court found that the initiation of the present proceedings by Sharp was not abusive in terms of Article 102 TFEU [9] . The Court did not establish whether Sharp had a dominant market position, but just assumed that this was the case [9] Nevertheless, an abuse of (assumed) dominance was not given, since Daimler had failed to adequately express willingness to obtain a licence for Sharp's SEP portfolio [10] .

Willingness

The Court explained that the implementer has to 'clearly' and 'unambiguously' declare that it is willing to sign a licence with the SEP holder 'on whatever terms are in fact FRAND' and, subsequently, engage in licensing negotiations in a 'target-oriented' manner (citing Federal Court of Justice, judgment dated 5 May 2020 – Sisvel v Haier, Case No. KZR 36/17 and High Court of Justice of England and Wales, judgment dated 5 April 2017, Case No. [2017] EWHC 711(Pat) – Unwired Planet v Huawei) [8] .

This means that the implementer should not delay licensing negotiations [11] . In the eyes of the Court, this is particularly important since implementers, which already use the patented standardized technology prior to negotiations, could have the -sole or predominant- interest to delay the signing of a licence until the expiration of the patent [11] .

Having said that, the Court found that Daimler did not behave as a 'willing' licensee [10] .

Looking at Daimler's behaviour before the counteroffer to Sharp was made, the Court held that a 'clear' declaration of willingness is missing [12] . In its first response to Sharp dated 7 June 2019, Daimler did not express a commitment of any kind going beyond the general willingness to discuss a licence, if Sharp's patents were used [13] . Furthermore, Daimler's letter dated 23 July 2019 did neither contain an adequate declaration of willingness, particularly since Daimler referred Sharp -without specification- to its suppliers and insisted that Sharp is obliged to license the latter [14] . The same is true with respect to the statement dated 18 September 2019, in which Daimler again referred to its suppliers and refused to provide Sharp with information necessary for drawing up a licensing offer [15] . The Court noted that although no legal obligation to share the information requested by Sharp existed, Daimler's respective refusal made clear that it did not engage in the discussions in a 'target-oriented manner', but rather aimed at delaying the negotiations [16] . This is also confirmed by the fact that Daimler's response came almost six weeks after Sharp's respective request; the Court did not see any reason why Daimler's reaction took so long [16] .

In addition, the Court noted that the finding that Daimler acted as an 'unwilling' licensee was reinforced by Daimler's overall behaviour in the discussions with the Avanci platform [17] . The Court held that for the assessment of the 'willingness' of an implementer who raises a FRAND defence the entire conduct must be taken into account, not only facts occurring, in terms of time, directly after receipt of an infringement notification [18] . The standard for the assessment of willingness should not depend on the -rather random- fact of whether the implementer was first approached by the patent holder or took the initiative to seek a licence itself, instead [19] . Although the duties established in the Huawei judgment (one of which is to react to an infringement notification by expressing 'willingness' to obtain a licence) shall, as a rule, be followed as 'steps' in the order described by the CJEU, exceptions must be allowed on a case-by-case basis, if the parties' behaviour allows for that and a purely 'formalistic' view of the Huawei framework does not appear appropriate [20] . According to the Court this was the case here, since Daimler that had been in contact with Avanci since September 2016 and had not expressed the willingness to take a licence at any point in time [21] .

The Court further found that Daimler's counteroffer dated 17 December 2019, which was made only after the infringement action was filed, could not remedy the missing willingness [22] . In the view of the Court, the fact that the counteroffer was followed by a request towards Sharp to consent to a stay of the ongoing proceedings showed, in the present case, that Daimler only aimed at causing delay; the counteroffer could, therefore, not compensate the 'massive unwillingness' which Daimler had demonstrated up to that point in time [23] . In this respect, the Court noted that the possibility to remedy flaws during pending court proceedings (e.g. by making a counteroffer), is, in principle, given, however, under increasingly stricter conditions as the trial progresses [24] .

The Court also highlighted that, in terms of content, Daimler's counteroffer did not express a willingness to obtain a licence on 'whatever terms are in fact FRAND' [25] . By using a different 'reference point' for the royalty calculation, Daimler had counteroffered only a fraction of the fees offered by Sharp or collected by Avanci from its competitors, so that the rejection of the counteroffer was 'logically necessary' [26] .

In this context, the Court made clear that for the assessment of willingness only the behaviour of Daimler was relevant [27] . What is more, Daimler could not rely on the -alleged- willingness of the suppliers that joined the proceedings to obtain a licence from Sharp, in order to avoid an injunction [28] . Accordingly, the Court did not examine whether Daimler's suppliers had indeed acted as 'willing licensees' [28] .

Non-discrimination / licensing level

Apart from the above, the Court explained that Sharp did not act in an abusive or discriminatory manner by seeking to license only Daimler as the end device manufacturer [29] .

The Court took the view that Sharp was not obliged to license Daimler's suppliers [30] . The fact that in the (German) automotive sector it is common that suppliers take licences concerning components sold to car manufacturers, does not oblige Sharp to respect and accept this practice [31] . On the contrary, as far as its products increasingly use wireless telecommunications technologies, Daimler must accept the practices prevailing in this field which include licensing also to end device manufacturers [31] .

Irrespective of this, Sharp is under no legal duty to grant licences to component manufacturers; it is only obliged to grant 'access' to the standard, on which its SEPs read [32] . The patent holders' commitment towards ETSI creates an obligation to license SEPs to third parties [33] . The Court highlighted that this does not entail, however, an obligation to grant licences at all levels of the value chain [34] . Such an obligation does not arise either from competition nor from patent or contract law in conjunction with the FRAND undertaking towards ETSI [34] .

In particular, EU competition law does not establish an obligation to license SEPs at all levels of the value chain [35] . According to the Court, patent holders are, in principle, free to choose the level of the value chain for licensing [36] . In the Huawei judgment, the CJEU pointed out that the FRAND undertaking creates 'legitimate expectations' on the part of third parties to be licensed by the patent holder. The Court held, however, that by that no obligation to license all suppliers of an end-device manufacturer is created; access to the market does not necessarily require a licence, but just a 'possibility of legal use', which can be, for instance, given through a licence granted at the last level of the value chain, from which suppliers can draw 'have-made-rights' [36] .

The Court also explained that neither patent law dictates the level of the value chain, at which SEP licences must be granted [37] . Especially the fact that not all patents contained in a SEP portfolio are necessarily exhausted at all times at the level of component manufacturers speaks for licensing at the end-device level (in addition to the more efficient 'management' of the licensing fees which is possible in this scenario) [38] .

Finally, the Court pointed out that contract law in conjunction with the FRAND undertaking towards ETSI do not impose an obligation on the patent holder to license every interested third party [39] . Under the applicable French law, Section 6.1. ETSI IPR Policy is to be understood as establishing only an obligation to negotiate a FRAND agreement in good faith with a party seeking a licence [40] . However, by referring to 'equipment', this provision addresses only end-device manufacturers, since not all components necessarily implement the standard as a whole [41] . In the eyes of the Court, the views expressed by the European Commission in different occasions in the past do not lead to a different conclusion [42]

FRAND defence raised by suppliers

The Court further found that Daimler cannot profit from a FRAND defence raised by suppliers [43] . The defendant can rely on such defence only if the patent holder is under an obligation to license the suppliers; this does not apply, however, when the defendant is in a position to sign a licence with the SEP holder itself which sufficiently considers patent exhaustion within the relevant value chain [43] .

The Court considered that this was the case here. Daimler's suppliers did not have an own claim to be granted a licence against Sharp, but a claim for a 'legally secured access' to standardised technology which cannot be considered in favour of Daimler [44] .


C. Other issues

Furthermore, the Court ruled that there are no grounds for a limitation of Sharp's claim for injunctive relief based on proportionality considerations [45] . Daimler had argued that no injunction should be granted based on the patent in suit, since the vehicles it manufactures are 'complex' products integrating a large number of components and the telematic control unit, on which Sharp's SEPs read, is of minor importance for the car.

The Court made clear that, under German law, proportionality is a general principle of constitutional rank that is to be considered also with respect to injunctive relief, if a respective objection is raised by the defendant [46] . According to the jurisprudence of the Federal Court of Justice, an injunction might not be immediately enforceable in exceptional cases, in which the implementer would suffer hardships not justified by the patent holder's exclusionary right in violation of the principle of good faith [47] .

In the eyes of the Court, any limitation of the right to injunctive relief shall come into question 'in very few exceptional cases' and must, thus, be subject to strict conditions, not least for preserving the 'legal order' as well as 'legal certainty and predictability' [48] . A case-by-case assessment of all relevant facts must take place, whereas the overall substantive and procedural framework (including e.g. the need to provide security for the enforcement of first-instance injunctions) should be considered [48] . The Court explained that only hardships going beyond the usual consequences of an injunction can be taken into account [48] . It should be expected from the infringer to make efforts towards the signing of a licence as soon as possible and take precautions against a potential injunction after receipt of an infringement notification, at the latest [48] .

Against this background, the Court noted that even if only a single component of Daimler's vehicles might be affected in the present case, the dispute revolves around the licensing of a complex patent portfolio (either Sharp's or Avanci's portfolio) [49] . The Court was further not convinced that the features enabled by Sharp's patents were of minor importance to Daimler's vehicles, since a significant part of innovation referring to 'connected cars' relates from both technical and economic angle closely to mobile telecommunications technologies [50] . Finally, the Court also criticized the fact that Daimler did not make serious efforts for signing a licence with Sharp or Avanci [51] .

  • [1] Sharp v Daimler, District Court of Munich, judgment dated 10 September 2020, Case-No. 7 O 8818/19
  • [2] Ibid, paras. 68 et seqq
  • [3] Ibid, paras. 25 et seqq
  • [4] Ibid, para. 90
  • [5]  Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13
  • [6] Sharp v Daimler, District Court of Munich, judgment dated 10 September 2020, Case-No. 7 O 8818/19, para. 121
  • [7] Ibid, para. 124
  • [8] Ibid, para. 125
  • [9] Ibid, para. 128
  • [10] Ibid, paras. 130 et seqq
  • [11] Ibid, para. 126
  • [12] Ibid, paras. 132 et seqq
  • [13] Ibid, paras. 134 et seq
  • [14] Ibid, paras. 136 et seq
  • [15] Ibid, paras. 138 et seqq
  • [16] Ibid, para. 140
  • [17] Ibid, para. 141
  • [18] Ibid, paras. 142 et seq
  • [19] Ibid, paras. 143 et seq
  • [20] Ibid, para. 144
  • [21] Ibid, paras. 146-149
  • [22] Ibid, para. 150
  • [23] Ibid, paras. 151 and 153
  • [24] Ibid, para. 152
  • [25] Ibid, para. 154
  • [26] Ibid, paras. 154 et seqq
  • [27] Ibid, paras. 158 and 159
  • [28] Ibid, para. 158
  • [29] Ibid, paras. 161 et seqq
  • [30] Ibid, para. 162
  • [31] Ibid, para. 164
  • [32] Ibid, para. 165
  • [33] Ibid, para. 168
  • [34] Ibid, para. 169
  • [35] Ibid, paras. 170 et seqq
  • [36] Ibid, para. 171
  • [37] Ibid, paras. 173 et seq
  • [38] Ibid, para. 174
  • [39] Ibid, paras. 175 et seqq
  • [40] Ibid, paras. 177 et seqq
  • [41] Ibid, para. 178
  • [42] Ibid, paras. 180-183. The Court referred particularly to the decision of the European Commission, Case No. AT.39985 – Motorola; the Communication on the Guidelines on the applicability of Article 101 TFEU to horizontal co-operation agreements (2011/C 11/01); and the Communication on ICT Standardisation Priorities for the Digital Single Market, COM(2016) 176 final.
  • [43] Ibid, para. 167
  • [44] Ibid, para. 185
  • [45] Ibid, paras. 92-102
  • [46] Ibid, para. 93
  • [47] Ibid, para. 94
  • [48] Ibid, para. 95
  • [49] Ibid, paras. 97 et seq
  • [50] Ibid, paras. 100 et seq
  • [51] Ibid, para. 99

Updated 20 February 2018

TQ Delta LLC v Zyxel Communications, [2017] EWHC 3305 (Pat)

English court decisions
21 November 2017 - Case No. HP-2017-000045

A. Facts

The Claimant is holder of two patents declared as essential to the implementation of the DSL standard under the relevant policy (ITU Recommen­dations). According to this policy he is required to license these patents on Fair, Reasonable and Non-Discriminatory (FRAND) terms. The Defendants manufacture and sell various types of equipment complying with the DSL standard.

The parties were unable to reach an agreement on a worldwide portfolio license. The Claimant argued that the Defendants followed a “hold-out” strategy by trying to delay negotiations and litigation as long as possible, in order to avoid royalty payments.

The actions brought before the High Court of Justice of England and Wales (EWHC) involve, on the one hand, the technical issues of validity, essentiality and infringement (technical trials) and, on the other hand, non-technical issues regarding licensing on FRAND terms (non-technical trial).

The parties agreed that the technical trials should be tried separately from, and before, the non-technical trial. After holding a case management conference, the court complied with the parties’ agreement to hold the technical trials first. The court, however, refrained from ordering the stay of the non-technical trial until the completion of the technical trials. Instead, the court allowed it to go ahead.

B. Court’s reasoning

In light of both the decision of the European Union Court of Justice in the matter Huawei v ZTE and the recent decision of the EWHC in the matter Unwired Planet v Huawei the court questioned the practice it followed so far, to hold FRAND related trials after technical trials.

In the court’s opinion, particularly if a global license for a global portfolio is in dispute between the parties, it is worth considering whether the prioritization of the trials should be altered, so that the non-technical trial comes first. If the defendant (potential infringer) wishes to argue that it does not need to take any license under any of the patents in suit, it is not compelled to do so. In this case, however, the defendant risks that it will, subsequently, be injuncted in infringement proceedings.

To justify its decision not to stay the non-technical trial, the Court referred to EWHC’s decision in the matter Unwired Planet v Huawei and pointed out, that the longer these proceedings are postponed, the longer their objective from the Claimant's perspective is frustrated, that is to obtain appropriate relief by way of injunction and/or financial compensation.

C. Other issues

Although the court did not rule on Claimant’s allegation that the Defendants pursued a “hold out” strategy, it made clear – again under reference to the matter Unwired Planet v Huawei that if that is the case, then the Defendants face the risk of being injuncted, if they should be unsuccessful in either of the technical trials.


Updated 24 July 2020

Sisvel v Haier, Federal Court of Justice (Bundesgerichtshof)

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

A. Facts

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

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

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

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

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

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

On 3 November 2015, the District Court granted an injunction against Haier [95] . The District Court also ordered the recall and destruction of infringing products. It further recognised Haier's liability for damages on the merits and ordered Haier to render full and detailed account of the sales of infringing products to Sisvel.

Haier appealed this decision and also requested the Higher District Court of Duesseldorf (Appeal Court) to order a stay in the enforcement of the injunction granted by the District Court. In January 2016, the Appeal Court rendered a respective order [96] .

In the appeal proceedings, Haier argued –among other things– that the District Court had not adequately taken into account the conduct requirements imposed on SEP holders by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE in a decision rendered in July 2015 (Huawei judgment), that is after Sisvel had filed the infringement action [97] . During the course of the proceedings before the Appeal Court, on 16 January 2016, Haier further declared that is was willing to take a FRAND licence from Sisvel, however, only in case that the German courts would finally confirm the validity and infringement of the patent in suit. On 23 March 2016, Haier sent another letter to Sisvel, stating that their position remained unchanged. Moreover, Haier requested claim charts with respect to all of Sisvel's patents as well as further information about the royalty calculation. In December 2016, Sisvel made a further licensing offer to Haier, which was also rejected.

By judgment dated 30 March 2017, the Appeal Court partially granted Haier's appeal [98] . It confirmed Haier's liability for damages on the merits as well as its obligation to render accounts. However, the Appeal Court held that Haier was under no obligation to recall and destroy infringing products, because Sisvel had not complied with its obligations under the Huawei judgment, especially by failing to make a FRAND licensing offer to Haier. The Appeal Court did not have to decide about the claim for injunctive relief, because the parties had agreed to settle the matter in this regard. Reason for that was that the patent in suit had expired in September 2016. Sisvel appealed the decision of the Appeal Court.

In October 2017, the Federal Patent Court narrowed certain claims of the patent in suit and, otherwise, confirmed its validity [99] . In March 2020, the Federal Court of Justice (FCJ or Court), basically, confirmed this decision in second instance [100] .

With the present judgment dated 5 May 2020 [101] (cited by https://juris.bundesgerichtshof.de/cgi-bin/rechtsprechung/document.py?Gericht=bgh&Art=en&sid=3abd1ba29fc1a5b129c0360985553448&nr=107755&pos=0&anz=1), the FCJ reversed the judgment of the Appeal Court. The ruling of the District Court in first instance was confirmed with respect to Sisvel's damage claims and claims for information and rendering of accounts. Sisvel's claims for the recall and destruction of infringing products were limited to products that were in the possession of Haier or had been produced or delivered until the expiration of the patent in suit in September 2016. Sisvel's claim for injunctive relief was not subject to the Court's ruling, since this claim was withdrawn in the course of the preceding proceedings before the Appeal Court after the patent in suit had lapsed.

B. Court's reasoning

The Court found that the patent in suit was essential to the GPRS standard and infringed [102] .

Furthermore, the Court held that by initiating infringement proceedings against Haier, Sisvel had not abused a dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) [103] .

In the Court's eyes, Sisvel met its obligation under the Huawei judgment to notify Haier about the infringing use of its SEPs prior to filing the infringement action. On the other hand, Haier had failed to comply with its Huawei obligation to adequately express its willingness to enter into a licensing agreement with Sisvel. Although this fact was no longer decisive for the present case, the Court also expressed the view that Sisvel had made a FRAND licensing offer to Haier in line with the respective Huawei requirement.

Dominant market position

The Court held that Sisvel had a dominant market position within the meaning of Article 102 TFEU [104] .

The FCJ explained that a dominant market position does not arise alone from the exclusivity rights granted by a patent [105] . For this, several factors need to be considered [106] . One key factor is the relevant market. When a patent is technically essential for complying with a standard developed by a standardisation body (or a de facto standard) and technical alternatives to the standard are not available for products brought on a downstream market, relevant for the assessment of dominance is the (distinct) market, in which licences for the patent in question are offered [107] .

On this basis, the Court found that Sisvel was in a dominant market position: The patent in suit was essential to the practice of the GPRS standard and non GPRS compliant mobile phones could not compete in the (downstream) market, since neither the previous not subsequent standards generations allowed the same features [108] .

In this context, the FCJ was not convinced by Sisvel's argument that SEP holders' market dominance is restricted by the fact that standards implementers – compared to buyers in markets for goods and services – often have a stronger standing in negotiations [109] . The Court saw that –unlike buyers of goods and services– standards implementers are in the favourable position to be able to access protected technology needed for producing standard compliant products, even without an agreement with the patent holder [110] . According to the Court, however, this fact does not suffice to rule out market dominance. The extent of SEP holders' bargaining power towards individual implementers in licensing negotiations is not relevant [111] . A dominant market position is conferred by the patent holder's structural superior market power arising from the legal ability to exclude any implementer from the market by enforcing exclusivity rights [112] .

Similarly, the Court pointed out that the limitations imposed by the Huawei judgment with respect to the enforcement of SEPs likewise do not impair market dominance [113] . The Court noted that these limitations significantly weaken the bargaining position of the SEP holder, since the lever needed for negotiations on an equal footing is not available to the latter to the full extent [113] . Nevertheless, this does not suffice to question the dominant position of the patent holder, even in cases in which the implementer might engage in 'hold-out' by delaying negotiations until the patent expires [113] .

Having said that, the Court pointed out that Sisvel's dominant market position ended, when the patent in suit expired [114] . An SEP holder is no longer dominant, if the legal power to exclude infringing products from entering a (downstream) market is no longer given [114] .

Abuse of market dominance

Looking at the parties' conduct, the Court found – in contrast to the Appeal Court – that Sisvel did not abuse its dominant market position [115] .

The Court made clear that SEP holders are not per se prevented from enforcing the exclusivity rights arising from their patents [116] . The fact that a patent is standard essential does not mean that the patent holder is obliged to tolerate the use of its technology, unless it has allowed such use or was under an obligation to allow such use, as a consequence of holding a dominant market position [116] . According to the FCJ, an obligation to allow the use of SEPs does, however, not exist, when the implementer is not willing to obtain a licence on FRAND terms. A patent holder –even with a dominant market position– is not obliged to 'impose' a licence to any standards user, not least because it has no legal claim to request the signing of a licensing agreement [117] .

Against this background, the Court identified two cases, in which the assertion of exclusivity rights (claims for injunctive relief and/or the recall and destruction of infringing products) by an SEP holder can amount to an abuse of market dominance:

1. The implementer has made an unconditional licensing offer on terms which the patent holder cannot reject, without abusing its dominance or violating its non-discrimination obligation (insofar the Court repeated its previous ruling in 'Orange-Book-Standard'; judgment dated 6 May 2009 – Case No KZR 39/06) [118] ;

2. the implementer is, basically, willing to take a licence, but the SEP holder has not made 'sufficient efforts' to facilitate the signing of an agreement in line with the 'particular responsibility' attached to its dominant position [119] .

Notification of infringement

Consequently, the Court took the view that the SEP holder has an obligation to notify the implementer about the infringing use of the patent in suit prior to filing an infringement action [120] . The FCJ seems to suggest that this obligation arises, only when the implementer is not already aware of the infringementIbid, para. 73. According to the Court, the patent holder has to notify the standards user about the infringement of the patent, if the latter 'is not aware of the fact' that by implementing the standard the teaching of the patent is used without permission..

The Court explained that technology implementers are, in principle, obliged to make sure that no third party rights are infringed, before assuming the manufacturing or sales of products [122] . However, this task is often significantly challenging, especially in the Information and Communication Technology (ICT) sector, in which a product might be affected by numerous patent rights [122] . The patent holder, who will regularly have already examined infringement, should, therefore, inform the implementer about the use of the patent before initiating court proceedings, allowing the latter to assess the need to obtain a licence on FRAND terms and, consequently, avoid an injunction [123] .

In the eyes of the Court, it will usually be sufficient to address a respective notification of infringement to the parent company within a group of companies [124] . In terms of content, the notification must name the patent(s) infringed and describe the specific infringing use and the attacked embodiments [125] . A detailed technical and legal analysis of the infringement is not required: the implementer should only be placed in a position to evaluate the infringement allegation, eventually by taking recourse to expert and/or legal advice [125] . As a rule, presenting claim charts, as it is often the case in practice, will be sufficient (but not mandatory) [125] .

Furthermore, the FCJ added that a patent holder which has provided information about the patent infringed and the standard affected can expect that the implementer will indicate within a short period of time that the information received is not sufficient for the assessment of infringement [126] . This applies also to cases, in which a number of patents and standards are involved [126] .

Taking the above into consideration, the Court found that Sisvel had given proper notification of infringement to Haier. The letter dated 20 December 2012 and the following correspondence met the relevant requirements [127] .

Willingness

Considering Haier's conduct, on the other hand, the Court found that Haier did not act as a licensee willing to obtain a FRAND licence from Sisvel [128] . In this respect, the FCJ disagreed with the respective assessment of the Appeal Court which had reached the opposite conclusion.

The Court observed that the first response of Haier China to Sisvel's notification was belated, since Haier had waited for almost one year (December 2012 – December 2013) to react [129] . An implementer taking several months to respond to a notification of infringement typically sends a signal that there is no interest in taking a licence [129] . The fact that Sisvel made a FRAND commitment towards ETSI covering the patent in suit only after the first notification to Haier in December 2012 did not change anything in the assessment of timeliness: in its letter dated 20 December 2012, Sisvel had already declared that it is prepared to offer a FRAND licence to Haier [129] . The question, whether a late response made prior to the start of infringement proceedings (as it was the case with Haier's response from December 2013) shall, nevertheless, be taken into account, when assessing parties' compliance with the Huawei judgment (as the Appeal Court had assumed) was left undecided by the FCJ [130] . In the present case, this question was not relevant, since –in terms of content – none of Haier's responses could be seen as a sufficient declaration of willingness to obtain a licence [131] .

In the Court's eyes, the implementer has to 'clearly' and 'unambiguously' declare that it is willing to sign a licence with the SEP holder 'on whatever terms are in fact FRAND' (citing High Court of Justice of England and Wales, judgment dated 5 April 2017, [2017] EWHC 711(Pat) - Unwired Planet v Huawei) [132] . The implementer is, subsequently, obliged to engage in licensing negotiations in a 'target-oriented' manner [132] . On the contrary, it is not sufficient, in response to a notification of infringement, to just demonstrate willingness to consider signing a licensing agreement or to enter into negotiations about whether and under which conditions taking a licence comes into question [132] .

On this basis, the Court found that Haier's response in December 2013, in which only the hope to have a 'formal negotiation' was expressed, was not a sufficient declaration of willingness: This declaration was neither clear not unambiguous in the above sense [133] .

Similarly, Haier's letter dated 16 January 2016 did not contain a sufficient declaration of willingness, since Haier had made the signing of a licence subject to the prior confirmation of the validity and infringement of the patent in suit by German courts [134] . Although the implementer is, in principle, allowed to preserve the right to contest the validity of a licensed patent after conclusion of a licensing agreement, the Court held that a declaration of willingness cannot be placed under a respective condition [134] .

Furthermore, the FCJ found that Haier did not sufficiently express its willingness by the letter dated 23 March 2016 either. Apart from the fact that Haier had not withdrawn the above unacceptable condition, the Court took the view that requesting the production of claim charts for all of Sisvel's patents almost three years after the receipt of the notification of infringement was an indication that Haier was only interested in delaying the negotiations until the expiration of the patent in suit [135] .

Since no adequate declaration of willingness by Haier was in place, the Court did not answer the question, whether it is possible for the implementer to fulfil this obligation after infringement proceedings have been initiated [136] .

  • [95] Sisvel v Haier, District Court of Duesseldorf, judgment dated 3 November 2015, Case No. 4a O 93/14.
  • [96] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 13 January 2016, Case No. I-15 U 66/15.
  • [97] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [98] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 30 March 2017, Case No. I-15 U 66/15.
  • [99] Federal Patent Court, judgment dated 6 October 2017, Case No. 6 Ni 10/15 (EP).
  • [100] Federal Court of Justice, judgment dated 10 March 2020, Case No. X ZR 44/18.
  • [101] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17.
  • [102] Ibid, paras. 9 et seqq. and 59.
  • [103] Ibid, para. 52.
  • [104] Ibid, para. 54.
  • [105] Ibid, para. 56.
  • [106] Ibid, paras. 57 et seqq.
  • [107] Ibid, para. 58.
  • [108] Ibid, paras. 59 et seq.
  • [109] Ibid, para. 61.
  • [110] Ibid, para. 63.
  • [111] Ibid, para. 62.
  • [112] Ibid, paras. 61 et seqq. According to the FCJ, market entry barriers are created already by the fact that the respective legal obstacles make it unreasonable for any company to enter a market, without having taken a licence before, see para. 63.
  • [113] Ibid, para. 64.
  • [114] Ibid, para. 65.
  • [115] Ibid, paras. 67 et seqq.
  • [116] Ibid, para. 69.
  • [117] Ibid, para. 70.
  • [118] Ibid, para. 71.
  • [119] Ibid, para. 72.
  • [120] Ibid, paras. 73 et seqq.
  • [121] Ibid, para. 73. According to the Court, the patent holder has to notify the standards user about the infringement of the patent, if the latter 'is not aware of the fact' that by implementing the standard the teaching of the patent is used without permission.
  • [122] Ibid, para. 74.
  • [123] Ibid, para. 74 and 85.
  • [124] Ibid, para. 89.
  • [125] Ibid, para. 85.
  • [126] Ibid, para. 87.
  • [127] Ibid, paras. 86 et seqq.
  • [128] Ibid, paras. 91 et seqq.
  • [129] Ibid, para. 92.
  • [130] Ibid, paras. 93 et seq.
  • [131] Ibid, para. 94.
  • [132] Ibid, para. 83.
  • [133] Ibid, para. 95.
  • [134] Ibid, para. 96.
  • [135] Ibid, para. 98.
  • [136] Ibid, para. 97.

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. [1] Most were part of a large patent portfolio that the claimant had acquired from a major telecommunications company in 2013. [2] 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. [3]

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. [4] 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. [5] Between August and October 2016 the parties exchanged further offers without reaching an agreement. [6]

The Patents Court (Birrs J) held that the claimant was in a dominant position, but did not abuse this position. [7] 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. [8]

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. [9] European case law indicated that owning an SEP could be a rebuttable presumption for the existence of a dominant position. [10] 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. [11]

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. [12] 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, [13] 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. [14] 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. [14]

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. [15] 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. [16] This approach also means that the SEP proprietor is under an obligation to make a FRAND offer and to enter into FRAND license agreements. [17]

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’). [18] This eliminates the so-called Vringo-problem, [19] 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. [20]

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. [21] 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, [23] 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. [23]

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. [24] 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. [25] 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. [26]

Second, the ‘hard-edged’ non-discrimination obligation, which takes into account the nature of the potential licensee, [25] 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. [27] 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. [26]

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. [28] 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. [28] This was illustrated by the fact that the vast majority of licenses introduced in the trial were worldwide licenses. [29] 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. [30] 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. [31]

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. [32] Other freely-negotiated license agreements might be used as comparables. [33] This may be compared with a top down approach [34] 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. [35] 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. [32] License agreements must meet certain criteria to be comparable. [36] 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. [36] 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%). [37]

2. Principles derived from Huawei v. ZTE

The court also provided a compiled overview of its interpretation of the Huawei v. ZTE ruling. [38] 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.
  • [1] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 2.
  • [2] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 54 et seqq.
  • [3] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 3.
  • [4] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 5.
  • [5] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 7-8.
  • [6] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 11-14.
  • [7] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 807.
  • [8] Unwired Planet v Huawei, EWHC 1304 (Pat).
  • [9] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 631.
  • [10] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 634.
  • [11] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 636-646.
  • [12] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 656.
  • [13] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 108-145.
  • [14] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 146.
  • [15] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 162.
  • [16] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 163.
  • [17] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 159.
  • [18] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 164.
  • [19] See Vringo v ZTE [2013] EWHC 1591 (Pat) and [2015] EWHC 214 (Pat).
  • [20] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 158.
  • [21] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 152.
  • [22] 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.
  • [23] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153.
  • [24] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 176.
  • [25] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 177.
  • [26] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 503.
  • [27] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 501.
  • [28] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 544.
  • [29] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 534.
  • [30] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 546.
  • [31] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 572.
  • [32] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 171.
  • [33] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 170
  • [34] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 178
  • [35] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 806 (10)
  • [36] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 175.
  • [37] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 476.
  • [38] Unwired Planet v. Huawei [2017] EWHC 711(Pat), 744.

Updated 26 January 2017

Saint Lawrence v Vodafone

LG Düsseldorf
31 March 2016 - Case No. 4a O 126/14

  1. Facts
    Since 28 August 2014 Claimant, a non-practicing entity, is the proprietor of the European patent EP J, originally granted to applicants “Y” and “C”, and allegedly covering part of the AMR-WB standard. Defendant is a company active in the telecommunications sector and which markets AMR-WB-based devices, inter alia devices produced by the Intervener in this case. After the adoption (“freeze”) of AMR-WB by ETSI on 10 April 2001, Claimant (who was not an ETSI member during the setting of the AMR-WB standard) made, on 29 May 2001, a commitment towards ETSI to grant licenses on FRAND terms inter alia for patent EP J. Claimant and its parent company “O” offer the SEP and all other patents of the same family to third parties by means of a portfolio license. Licensing conditions are accessible on the Internet and various producers in the sector have taken a license under these conditions.
    Prior to the submission of the patent infringement action on 23 July 2014 and to the advance payments on costs on 29 July 2014, Claimant alerted neither Defendant nor the manufacturer of the contested embodiments, who acted as an intervener in the present proceedings and became aware of the lawsuit in August 2014. By e-mails on 31 July and (as a reminder) on 9 December 2014, the first of which included a copy of the statement of claims and reached the defendant before it was formally served with the statement, Claimant notified the alleged patent violation to Defendant. After Defendant’s reply as of 12 January 2015, Claimant presented a draft licensing agreement to Defendant by letter as of 22 April 2015.
    On 9 December 2014, the Intervener declared willingness to take a license, inter alia for the patent-in-suit, provided infringement was found in court. It further declared that it would accept royalties determined by a court or arbitration tribunal. Claimant, in turn, offered a licensing agreement by letters as of 12 January 2015 and 25 March 2015 respectively. In the course of meetings taking place since 23 January 2014, [183] Claimant offered a license to the Intervener. On 23 February 2015 and on 2 April 2015 respectively, the Intervener made two licensing offers, including third party determination (arbitration panel or English court) of the amount of royalty, for the whole German patent portfolio of Claimant. An additional offer for a licensing agreement, limited to Germany and implementing a royalty of USD 0.0055 per patent by reference to the “WCDMA Patent Pools”, was made by the Intervener on 6 March 2015 and 24 September 2015 respectively, but it was finally refused by Claimant on 4 October 2015. Moreover, the Intervener provided a bank “guarantee of payment” as of 3 September 2015, being modified by letter as of 10 November 2015, and also rendered account of past and prospective sales in Germany since 2011.
  2. Court’s reasoning
    The considerations of the court are almost exactly the same as those in the case LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14.
    1. Market power and notice of infringement
      The court leaves open the question of whether the SEP conferred market power to Claimant since it did, in any case, find no abuse of such potential market power. [184] The court declared the Huawei rules applicable to claims for the recall of products. [185]
      As regards the Huawei requirement to alert the standard user of the infringement, the decision arrived at various findings of interest: Firstly, the judges found that—in “non-transitional” cases where the lawsuit was brought after the Huawei decision—the infringement notification has to take place before the action is filed, or the latest before the advance payment on costs is made. In transitional cases, such as the present case, a delayed infringement notification, taking place after the advance payment on costs as well as the submission of the court action, but before the statement of claims is served, is admissible. [186] Moreover, an infringement notification could possibly be omitted (in particular) if—as in the present case—the patent user already disposes of all necessary information and lacks willingness to license. [187] In non-transitional cases, however, the court doubts whether it is possible to rectify an omitted infringement notification without withdrawing the action. [188]
      Secondly, the court specified the minimum content of the infringement notification which has to indicate at least the number of the patent, the contested embodiments and the alleged acts of use performed by the standard implementer. The court did not decide whether additional information has to be provided, in particular regarding the interpretation of the patent claims or on which part of the standard the patent reads, but it stated that such additional information is not harmful to the patent proprietor. [189]
      Lastly, the court detailed on the particular situation of the Intervener, being Defendant’s manufacturer and supplier in the present case: Even though a FRAND defense successfully raised by the Intervener would in general also cover subsequent levels of the distribution chain, the Huawei requirements apply only indirectly to suppliers of contested embodiments which have not been sued themselves. Accordingly, the SEP proprietor is not obliged to notify the patent infringement to third parties, but as soon as a request to grant a license on FRAND terms is submitted the (adapted) Huawei procedure applies. [190] In casu, no separate infringement notice vis-à-vis the Intervener was required since the Intervener was, since August 2014, aware of the action having been brought.
    2. The SEP owner’s licensing offer
      Since the patent user did not express its willingness to conclude a licensing agreement in due time, the court found Claimant to comply with the Huawei requirement to submit a licensing offer on FRAND terms even though the offer was made in the course of the ongoing litigation. For transitional cases, as the present one, this holds true even if infringement notification and court action take place at the same time. [191]
      Besides, the court analyzed under which circumstances licensing conditions can be considered as FRAND according to Huawei. In the opinion of the judges, the more licensing agreements implementing comparable terms the SEP proprietor has already concluded, the stronger is the presumption that these conditions are FRAND, unless factual reasons—which are to be demonstrated by the patent user—justify modified terms. Recognized commercial practice in the relevant sector has to be considered when defining the admissible scope of the licensing agreement. If patent portfolios are usually covered by group or worldwide licenses in the relevant market, a (worldwide) portfolio license will be FRAND unless the circumstances of the specific case, e.g. the SEP proprietor’s market activity being limited to one geographic market, require a modification. [192] Accordingly, Claimant’s (worldwide) licensing offer to Defendant for the whole AMR-WB pool, demanding royalties of USD 0.26 per mobile device that implemented the standard and was produced or marketed in countries in which the SEP was in force, and complying with Claimants existing licensing practice (accessible on the Internet and already implemented in 12 licensing agreements) was declared FRAND. While the court considered that comparable licensing agreements “represent an important indicator of the adequacy of the license terms offered” it clarified that the significance of a patent pool as an indication of FRAND conformity is “limited”. Defendant and the Intervener failed to show that the portfolio comprised (non-used) non-SEPs as well. [193] They further failed to show that the pre-concluded licensing agreements provided no valid basis for comparison as they were concluded under the threat of pending litigation. [194]
      In order to fulfill the Huawei obligation of specifying the calculation of royalties, the SEP proprietor only has to provide the information necessary to determine the amount of royalties to be paid, e.g. the royalty per unit and the products covered by the license. While the court left undecided whether additional indications, e.g. concerning the FRAND character of the licensing offer, are necessary to comply with Huawei, it found that the SEP proprietor’s duty to inform should not be interpreted too strictly as FRAND does regularly encompass a range of values that will be fair, reasonable, and non-discriminatory. [195]
      Claimant’s licensing offer presented to the Intervener was considered as being FRAND for the same reasons. Furthermore, the court emphasized that the contractual clause allowing for judicial review of the royalties offered could be a possible way to avoid abusive practices and to ensure that licensing offers correspond to FRAND terms. [196]
    3. The standard implementer’s reaction
      The court found that the more details the infringement notification contains, the less time remains for the standard user to examine the patent(s) at issue and to express its willingness to conclude a licensing agreement on FRAND terms. In the present case, Defendant did not comply with Huawei because it took more than five months to react and then only asked for proof of the alleged infringement. Given this excessive delay, the court did not decide whether Defendant’s reaction satisfied the Huawei requirements in terms of content. It denied the possibility to remedy a belated reaction by a subsequent declaration of willingness to license. On the contrary, and as a consequence of the patent user’s non-compliance, the SEP proprietor may continue the infringement action without violating Article 102 TFEU, but it still has to grant licenses on FRAND terms. [197] Whether the Intervener satisfied the ECJ criteria was left undecided. [198]
      The court made some further remarks of interest as to the Huawei requirements concerning the standard implementer: Firstly, it left undecided whether the obligation of the patent user to diligently respond is caused also by a (potentially) non-FRAND licensing offer. [199] Secondly, a standard user who has taken a license is not prevented from challenging validity and essentiality of the SEP afterwards, nor is the SEP proprietor entitled to terminate the license if such a challenge takes place. However, the standard implementer may not delay the (unconditional) conclusion of the licensing agreement until a final court decision on these issues has been rendered. While validity and standard-essentiality is litigated, the licensee remains obliged to pay royalties and it cannot request to insert into the licensing contract a clause entitling it to reclaim paid royalties in case of its success in court. [200] Thirdly, as, in the present case, no specific counter-offers satisfying FRAND terms were submitted and Defendant could not establish that Claimant had waived this requirement the court did not decide on whether a SEP proprietor is obliged to negotiate further although itself and the patent user have submitted FRAND offers. [201]
      None of the counter-offers of the Intervener were FRAND in terms of content. They were either inadmissibly limited to Germany, contained no precise royalty, were not submitted “promptly” because the standard user had waited until the oral pleadings in the parallel procedure, or they proposed royalties per device which the court considered as too low. [202] While it was therefore held to be irrelevant whether, in the first place, the Intervener duly declared its willingness to license, the court emphasized that the Intervener’s readiness to take a license only after the SEP infringement was determined in court did not satisfy the Huawei standard of conduct. [203]
      Moreover, the obligation imposed by Huawei to provide appropriate security and to render account was not fulfilled. While Defendant refrained from taking any of these actions, the Intervener waited several months after the counter-offers were refused in order to submit its bank “guarantee of payment”, which was not recognized as “appropriate security” due to its amount and its limitation to acts of use in Germany. [204] Neither was the Intervener’s initial proposal to have the security—if requested by Claimant—determined by an arbitration tribunal or by an English court accepted as an appropriate way to provide security. [205]
  3. Other important issues
    According to the court, the Huawei requirements apply to both non-practicing entities and other market participants. [206]
    Suing a network operator instead of the undertakings producing devices operating in the network constitutes (at least under the circumstances of this case and absent selective enforcement) no violation of competition law even though this strategy might aim at using the action against the network operator as a “lever” to obtain licensing commitments from the device suppliers. On the other hand, device manufacturers are entitled to a FRAND license as well and can raise the FRAND defense if such a license is not granted. In consequence, the court perceives a fair balance of interests as the SEP proprietor can choose on which level of the chain of production to sue while the undertakings in the chain of production can choose on which level to take a license. [207]
    Furthermore, no patent ambush-defense based on § 242 BGB could be raised because, firstly, Defendant and the Intervener could not substantiate the alleged patent ambush by “Y” and “C”, being the original SEP proprietors; secondly, they could not show that a different patent declaration conduct would have resulted in a different version of the standard excluding the patent-in-suit; thirdly, the alleged patent ambush would, arguably, have resulted only in a FRAND-licensing obligation and, fourthly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [208]
  • [183] This is the date mentioned by the court although “23 January 2015” may seem more plausible and the date given by the court may result from a scrivener’s error.
  • [184] Case No. 4a O 73/14, para. 184
  • [185] Case No. 4a O 73/14, para. 187
  • [186] Case No. 4a O 73/14, para. 195 et seq.
  • [187] Case No. 4a O 73/14, para. 208-210
  • [188] Case No. 4a O 126/14, para. IV, 3, a, bb, 2, c
  • [189] Case No. 4a O 73/14, para. 193
  • [190] Case No. 4a O 73/14, para. 270 et seq.
  • [191] Case No. 4a O 73/14, para. 222 et seq.
  • [192] Case No. 4a O 73/14, para. 225 et seq.
  • [193] Case No. 4a O 73/14, para. 225 et seq. On the relevance of the SIPRO-pool royalty rates, cf. LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 245-248. On the facts indicating that a worldwide license was appropriate LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 249-255.
  • [194] Case No. 4a O 73/14, para. 234-242. The court argued that it is questionable in principle how much the threat of a claim for injunctive relief can (inadmissibly) affect license agreement negotiations, since the Orange Book case law of the BGH (German Federal Court of Justice), the Motorola decision of the European Commission, and now the CJEU judgment in the Huawei Technologies/ZTE Case could be and can be invoked against inappropriate demands that are in breach of antitrust law.
  • [195] Case No. 4a O 73/14, para. 256 et seq.
  • [196] Case No. 4a O 73/14, para. 279 et seq.
  • [197] Case No. 4a O 73/14, para. 214-220
  • [198] Case No. 4a O 73/14, para. 214-220; 278
  • [199] Case No. 4a O 73/14, para. 266
  • [200] Case No. 4a O 73/14, para. 185 et seq.; 262 et seq.
  • [201] Case No. 4a O 73/14, para. 264.
  • [202] Case No. 4a O 73/14, para. 291 et seq.
  • [203] Case No. 4a O 73/14, para. 278
  • [204] Case No. 4a O 73/14, para. 267 et seq.; 299 et seq.
  • [205] Case No. 4a O 73/14, para. 304
  • [206] Case No. 4a O 73/14, para. 189
  • [207] Case No. 4a O 73/14, para. 309-313
  • [208] Case No. 4a O 73/14, para. 317 et seq.

Updated 7 April 2021

Sisvel v Wiko

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

A. Facts

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

The defendants are two companies that are part of the Wiko group (Wiko). [250] Wiko sells mobile phones complying with the LTE standard - among other markets- in Germany.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

With the present judgment [251] (cited by http://lrbw.juris.de/cgi-bin/laender_rechtsprechung/list.py?Gericht=bw&GerichtAuswahl=Oberlandesgerichte&Art=en&sid=2b226ea73cc9637362d8e1af04a34d05), the Higher District Court (Oberlandesgericht) of Karlsruhe (Court) predominantly upheld the judgment of the District Court [252] .
 

B. Court's reasoning

The Court found that Wiko could not successfully raise a so-called 'FRAND-defence' based on an alleged abuse of market dominance (Article 102 TFEU) against the claims for injunctive relief and the recall and destruction of infringing products asserted by Sisvel. [253]

This question was still decisive in the present case, despite the fact that the patent-in-suit expired before the start of the appeal proceedings. The Court explained that the expiration of a patent affects only future acts of use (which, then, no longer constitute infringement): On the contrary, claims that had arisen prior to expiration based on acts of use during the lifetime of the patent are not impaired. [254] Whether claims were given before the expiration of the patent-in-suit is of particular importance, especially when the patent holder has enforced a (first-instance) judgment delivered in proceedings conducted within the term of protection of the patent, as it was the case here. [255]
 

Dominant market position

Having said that, the Court agreed with the finding of the District Court that Sisvel had a market dominant position in terms of Article 102 TFEU with respect to the patent-in-suit in the relevant time period prior to its expiration. [256]

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

Notification of infringement

In the eyes of the Court, Sisvel had sufficiently notified Wiko about the infringement of the patent-in-suit prior to filing a court action. [257] The purpose of the notification of infringement is to draw the implementer's attention to the infringement and the necessity of taking a license on FRAND terms and conditions. [258] In terms of content, the notification must identify the patent infringed, the form of infringement and also designate the infringing embodiments. [258] Detailed technical or legal analysis of the infringement allegation is not required. [258] The production of so-called 'claim charts', which is common in practice, will, as a rule, suffice, but is not mandatory. [258] If the patent holder offers a portfolio licence, respective extended information duties occur. [258]

In the present case, it was not disputed that Sisvel had notified Wiko about the patent-in-suit prior to litigation. [259] As far as Wiko complained that no claim charts were presented before trial, the Court reiterated that no respective obligation of Sisvel existed. [260] What is more, the Court held that the court action initially filed by Sisvel, which did not include claims for injunctive relief and the recall and destruction of infringing products, could also be seen as an adequate notification of infringement. [259]
 

Willingness to obtain a licence

The Court then found that Wiko behaved as an unwilling (potential) licensee both prior and during the infringement proceedings [261] . The Court agreed with the assessment of the District Court that Wiko delayed the licensing negotiations between the parties with the goal to avoid taking a licence for as long as possible, in order to gain economic benefits. [262]

According to the Court, the 'expression of a general willingness to license' is not sufficient for assuming that an implementer is a 'willing licensee'. [263] Moreover, the implementer must 'clearly and unambiguously' declare willingness to conclude a license agreement on FRAND terms, 'whatever FRAND terms may actually look like" [263] . The respective declaration must be 'serious and unconditional'. [263]

The Court highlighted that for the assessment of willingness the overall facts and the particular conduct of the implementer shall be taken into account. [263] Willingness is not 'static': the finding that an implementer was willing (or unwilling) at a certain moment in time does not remain unchanged henceforth. [263]

The implementer must always be willing to obtain a licence and participate in negotiations in a 'target-oriented manner'; since implementers might be inclined to delay negotiations until the expiration of the patent-in-suit, there is a need to make sure that their behaviour in negotiations will not lead to delays. [264] Moreover, it should be expected that a willing implementer would seek a license as soon as possible, in order to shorten the period, in which it makes use of the patent-in-suit or the SEP holder's portfolio without authorisation and without paying licensing fees. [265] Accordingly, a willing licensee would not consider the 'negotiation obligations' of the SEP holder primarily as a means to defend itself against a court action, but as a means to utilize in order to reach a FRAND agreement, if needed. [265]

In the view of the Court, the above requirements are in line with the Huawei v ZTE judgment (Huawei judgment or Huawei) [266] of the Court of Justice of the EU (CJEU). [267] In Huawei, CJEU focused on the will of the infringer to conclude a license agreement on FRAND terms and emphasized that the latter must not pursue 'delaying tactics'. The Court explained that, although in Huawei the requirement to refrain from 'delaying tactics' is expressly mentioned only with respect to the duty of the implementer to react to a licensing offer of the SEP holder, it applies 'at all times' as long as the implementer uses the patents without a licence; otherwise, the suspension of SEP holder's right to the injunctive relief cannot be justified. [268]

In this context, the Court pointed out that not every 'reluctant involvement' of the implementer in licensing discussions will necessarily allow for the assumption of unwillingness. [269] Such behaviour could be justified in individual cases, especially when the SEP holder does not act in a 'target-oriented' manner itself. [269] Nevertheless, implementers must, as a rule, react timely even to a belated action of the SEP holder. [269] Furthermore, implementers must, in principle, inform the SEP holder of any objections at an early stage and should not wait to raise those much later in court proceedings. [269]

Looking at Wiko's conduct, the Court criticized especially the fact that it became active mostly as a reaction to new developments in the pending infringement proceedings. [270] A willing implementer would have, however, sought a licence independently of the initiation of legal steps and independently of the course of litigation. [271] As an example, the Court highlighted the fact that Wiko's counteroffer dated 11 November 2016 was made only shortly after Sisvel extended the infringement suit by adding a claim for injunctive relief. [272] Wiko also provided information on past acts of infringement only a few days prior to the first oral hearing in February 2017 (and refrained from constantly updating this information afterwards, as it would be expected by a willing licensee). [273]

The Court identified also further facts that indicate that Wiko engaged in delaying tactics. [274] Wiko reacted to Sisvel's licensing offers made during the course of the proceedings always belatedly and only after a reminder by Sisvel (for instance, it took Wiko more than three months to react to the 2018 offer) [275] . It also demanded further claim charts in February 2018, years after the action was filed. [276]

Wiko's refusal to sign the NDA offered by Sisvel -despite multiple reminders of the latter- without providing any reasons was also considered as a sign of unwillingness. [277] According to the Court, it should be expected by a willing licensee, who is not interested in delaying negotiations, to swiftly raise any criticisms regarding an NDA proposed by the SEP holder in writing or by e-mail, and not wait to raise any concerns several months later in the infringement proceedings, as Wiko had done here. [278] The Court also considered the fact that Wiko did not access the electronic data room set up by Sisvel containing redacted versions of Sisvel's third party agreements as an additional indication of unwillingness. [279]

Furthermore, the Court clarified that -contrary to Wiko's view- school holidays and/or staff shortages cannot provide sufficient justification for delays in negotiations. [280] Even if such circumstances occur, a willing implementer would have communicated any obstacles immediately. [280] Wiko failed to do so.
 

SEP holder's offer

Since Wiko was found to have been an unwilling licensee, the Court explained that the question whether Sisvel fulfilled its duty to make and adequately elaborate a FRAND licensing offer, was no longer decisive. [281] In fact, no such duty had arisen in the present case, due to Wiko's unwillingness to obtain a licence. [281] Notwithstanding the above, the Court provided guidance on the content and extend of the respective obligation of the SEP holder.

The Court first explained that FRAND is a 'range', which leaves room for flexibility. [282] As a rule, FRAND is determined in bilateral good faith negotiations between SEP holders and implementers, taking into account the specific circumstances of each individual case [282] ; indeed, parties are best situated to determine the exact content of FRAND in a specific setting. [282]

In order to meet its obligation, an SEP holder must present an offer to a willing licensee, which 'in general' complies with FRAND requirements and is fair, reasonable and not discriminatory with respect to the 'average licensee'. [283] The SEP holder shall further explain its offer in a way that permits the licensee to understand the assumptions, on which the offered rate and further conditions are based. [284] The rationale behind this obligation is to create a sufficient basis of information for the implementer for assessing the offer and eventually formulating a counteroffer. [285]

In this context, the Court made clear that implementers should not expect that the SEP holder individually adapts its (first) offer to the specific circumstances of each particular case. [286] The SEP holder's FRAND commitment does not give rise to such obligation. [286] The (first) offer is intended to launch the negotiations and provide an adequate information basis to the implementer, who will then be in a position to suggest necessary amendments by means of a counteroffer. [286] Accordingly, it will regularly be acceptable that the SEP holder's offer is 'not clearly and evidently' non-FRAND and sufficient information was provided to the implementer. [287]

The Court dismissed the notion that the implementer is obliged to negotiate (and eventually) make a counteroffer, only when the SEP holder's offer was fully FRAND-compliant. [287] This would bring the negotiations to a stand-still and, therefore, conflict with the spirit of the Huawei judgment, which is to encourage the parties to reach agreement on the licensing terms. [288] Moreover, the Court explained that –irrespective of whether the offer triggers an obligation of the implementer to submit a counter-offer– the latter will be regularly required, at least, to analyse the SEP holder's offer in due course and express any objections and queries without delay. [289]

Against this background, the Court found that none of the offers made to Wiko during the infringement proceedings was 'clearly and evidently' non-FRAND. [290] The fact that the offers did not define the start of the contract or the amount of royalties payable for past uses was not considered problematic. [291] The Court also found that the royalty rates offered were not 'evidently non-FRAND', since they were sufficiently substantiated by reference to existing licensing agreements and calculated on basis of a 'top-down' method. [292] A need to calculate royalties on grounds of the costs that incurred for the creation of the patented invention (cost-based approach) was not given, since this factor was not relevant for establishing value. [293]

In addition, the Court did not raise any concerns against the fact that Sisvel's offer concerned a worldwide portfolio licence: On the one hand, agreements with such scope are common in the telecommunications industry. [294] On the other hand, Wiko had worldwide activities, so that a licence with a limited scope would not provide sufficient coverage. [294]

The fact that some of the patents included in Sisvel's portfolio were -allegedly- not standard-essential did not render the offers 'un-FRAND'. [295] The Court stressed that, for the purpose of licensing negotiations and the conclusion of a licence, it is not necessary to conclusively clarify whether each portfolio patent is standard-essential. [296] Implementers can reserve the right to challenge the validity and essentiality of affected patents even after the conclusion of a licensing agreement. [296]

Similarly, the Court had no objections against a clause placing the burden of proof with regard to the exhaustion of licenced patents on Wiko. [297] This rule corresponds with the common allocation of the burden of proof under German law and does not place unreasonable weight on the licensee, since it will be better situated to trace the licensing chain by engaging with its suppliers. [298]

The question whether an adjustment clause is necessary for an offer to be considered FRAND was left unanswered by the Court. [299] Such clause would allow the implementer to adapt the agreed royalties, in case that patents fall out of the scope of the licence (e.g. due to expiration or invalidation). The Court saw no need for a respective contractual provision, since the licences offered by Sisvel would expire and, therefore, be re-negotiated after five years. [299] The Court did not express any concerns against the term of the offered licence or the termination clauses contained therein, either. [300]

Furthermore, the Court made clear that Sisvel had adequately elaborated the licensing rates offered to Wiko. [301] In the infringement proceedings, Sisvel responded to the 'top-down' calculation of Wiko in detail and made relevant clarifications. [302] According to the Court, Sisvel was under no circumstances obliged to elaborate on a cost-based calculation of royalties, as requested by Wiko; such demand was considered just another means to delay negotiations. [303]
 

Implementers' counteroffer

The Court also found that the counteroffers made by Wiko during the course of the first instance infringement proceedings were not FRAND. [304]

The Court highlighted that the obligation of the implementer to submit a FRAND counteroffer to the SEP holder is already triggered, when the previous licensing offer of the latter is not 'clearly and evidently' non-FRAND and sufficient information was provided, enabling the implementer to formulate its counteroffer. [305]

Having said that, the Court took the view that the royalty rates which Wiko offered were very low and, thus, not FRAND-compliant. [306] The Court criticized especially the fact that the rates were significantly lower than the rates which were considered to be adequate in previous court decisions. [307] Notwithstanding the above, the Court explained that, even if Wiko's counteroffer had been FRAND, this would not change the conclusion that Wiko had acted as an unwilling licensee. [308] According to the Court, a willing licensee would not have submitted a counteroffer around one year after receipt of the SEP holder's offer, as Wiko did. [309]
 

C. Other important issues

The Court stressed that for generating pressure-free licensing negotiations during pending infringement proceedings, it will, as a rule, be sufficient, if the proceedings are stayed with a view to parallel nullity proceedings concerning the patent-in-suit. [310] This is particularly true, when the SEP holder takes the respective initiative, as it was the case here. [310] Nevertheless, even if a pressure-free negotiation situation is not given, the infringers is not released from the obligation to act in good faith and engage in licensing negotiations, for instance by analysing a licensing offer of the SEP holder. [310] The refusal of the infringer to act accordingly could, in the eyes of the Court, allow the conclusion that it is an unwilling licensee. [310]

Apart from that, the Court confirmed that Wiko had no legal ground for requesting full disclosure of Sisvel's third party agreements [311] . Even if one would recognize a duty of the SEP holder to share information about the core content of existing licensing agreements (that are still in force), it is questionable whether this duty would also extend to agreements signed by previous patent holders. [312] The Court expressed particular doubts that this applies in cases in which a portfolio was assembled from patents acquired from different patent holders, since the relevance of bilateral or pool licensing agreements of the former patent holder can be limited in this case. [313]

Furthermore, the Court expressed the view that under German law a so-called 'covenant not to sue' does not have the effect of a (royalty-free) licence: such agreements will, as a rule, have only a procedural effect in terms of a pactum de non petendo, excluding only the initiation of court proceedings. [314]

Finally, the Court denied Wiko's motion to order a stay in the appeal proceedings due to the recent referral of several questions regarding the interpretation of the Huawei framework to the CJEU by the District Court of Düsseldorf in the matter Nokia v Daimler [315] . [316] According to the Court, it appears unlikely that the CJEU will establish criteria, by which SEP-based court actions against implementers engaging in delaying tactics would amount to an abuse of market dominance. [317]
 

  • [250] The action was extended to a third defendant, an individual person, who had served as a managing director for both aforementioned companies.
  • [251] Sisvel v Wiko, Higher Regional Court Karlsruhe, judgment dated 9 December 2020, Case-No. 6 U 103/19
  • [252] The claims for injunctive relief, rendering of accounts and damages asserted against the former managing director of the two Wiko companies were limited to the period of time until the end of its tenure; ibid, paras. 265-288.
  • [253] Ibid, para. 289.
  • [254] Ibid, paras. 284 et seqq.
  • [255] Ibid, para. 287.
  • [256] Ibid, paras. 290 et seq. Insofar, the Court made clear that a market dominant position ceases to exist after the expiration of the relevant patent.
  • [257] Ibid, paras. 292 et seqq.
  • [258] Ibid, para. 293.
  • [259] Ibid, para. 297.
  • [260] Ibid, paras. 297 et seq.
  • [261] Ibid, para. 299.
  • [262] Ibid, para. 299 and paras. 320 et seqq.
  • [263] Ibid, para. 301.
  • [264] Ibid, para. 302.
  • [265] Ibid, para. 303.
  • [266] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case-No. C-170/13.
  • [267] Sisvel v Wiko, Higher Regional Court of Karlsruhe, judgment dated 9 December 2020, para. 304.
  • [268] Ibid, para. 304.
  • [269] Ibid, para. 305.
  • [270] Ibid, paras. 321 et seqq.
  • [271] Ibid, para. 321.
  • [272] Ibid, para. 322.
  • [273] Ibid, paras. 323 et seq.
  • [274] In addition, the Court found that Wiko’s lack of willingness to obtain a license is also manifested in the fact that it (i) attempted to impede the enforcement of the first instance ruling of the District Court by questionable means (para. 335) and (ii) did not accept the offer of the District Court of The Hague, in which proceedings between the parties were pending in parallel, to engage in settlement negotiations (para. 336).
  • [275] Ibid, paras. 325, 328 and 331.
  • [276] Ibid, para. 327.
  • [277] Ibid, paras. 333 et seqq.
  • [278] Ibid, paras. 334 and 338.
  • [279] Ibid, paras. 337 and 341 et seqq.
  • [280] Ibid, para. 330.
  • [281] Ibid, para. 342.
  • [282] Ibid, para. 307.
  • [283] Ibid, para. 308.
  • [284] Ibid, paras. 308 and 310.
  • [285] Ibid, para. 309.
  • [286] Ibid, para. 310.
  • [287] Ibid, paras. 311 et seqq.
  • [288] Ibid, paras. 311 and 313 et seqq.
  • [289] Ibid, paras. 316 et seqq.
  • [290] Ibid, para. 352.
  • [291] Ibid, para. 353.
  • [292] Ibid, paras. 354 et seqq.
  • [293] Ibid, para. 358.
  • [294] Ibid, para. 359.
  • [295] Ibid, para. 360.
  • [296] Ibid, para. 361.
  • [297] Ibid, para. 362.
  • [298] Ibid, para. 363.
  • [299] Ibid, paras. 365 et seqq.
  • [300] Ibid, paras. 367 et seqq.
  • [301] Ibid, para. 366.
  • [302] Ibid, para. 344.
  • [303] Ibid, para. 346.
  • [304] Ibid, paras. 379 et seqq.
  • [305] Ibid, para. 311.
  • [306] Ibid, paras. 379 et seqq.
  • [307] Ibid, para. 380.
  • [308] Ibid, para. 378.
  • [309] Ibid, para. 384.
  • [310] Ibid, para. 348.
  • [311] Ibid, para. 389.
  • [312] Ibid, paras. 389 et seq.
  • [313] Ibid, para. 391.
  • [314] Ibid, paras. 260 et seqq.
  • [315] Nokia v Daimler, District Court of Düsseldorf, order dated 26 November 2020, Case No. 4c O 17/19.
  • [316] Sisvel v Wiko, Higher Regional Court of Karlsruhe, judgment dated 9 December 2020, para. 395.
  • [317] Ibid, para. 395.

Updated 6 June 2017

Archos v. Philips, Rechtbank Den Haag

Dutch court decisions
8 February 2017 - Case No. C/09/505587 / HA ZA 16-206 (ECLI:NL:RBDHA:2017:1025)

  1. Facts
    Defendant (Koninklijke Philips N.V.) is the proprietor of a number of patents declared essential to ETSI’s UMTS (3G) and LTE (4G) standards. Defendant made FRAND commitments towards ETSI on 15 January 1998 and 26 November 2009. Claimant (Archos S.A.) markets mobile devices which are alleged to infringe upon Defendant’s patents.
    By letter of 5 June 2014, Defendant brought her UMTS and LTE patent portfolio and her licensing program to the attention of Claimant. In this letter, Defendant made clear that Claimant was infringing her patents by marketing products incorporating the UMTS and LTE standards and explained the possibility of obtaining a FRAND license. On 15 September 2014, a meeting took place to inform Claimant of Defendant’s patent portfolio and to discuss the licensing offer. In another meeting on 25 November 2014, Claimant suggested Defendant to grant her a royalty-free license to all of Defendant’s patents (i.e. not only to the UMTS/LTE patents but also to other patents related to so-called ‘Portable Features’) in exchange for the transfer of certain patents of Claimant to Defendant. Defendant informed Claimant by email of 23 December 2014 that it was not interested in Claimant’s patents because it considered them to represent ‘relatively low value’.
    By letter of 28 July 2015 Defendant sent Claimant an updated list of UMTS/LTE patents as well as a draft licensing agreement in which she confirmed her earlier licensing offer. The proposed royalty amounted to $ 0.75 per product containing UMTS and/or LTE functionality. For products already sold, a royalty of $ 1 would need to be paid. At a next meeting on 3 September 2015, it became clear that Claimant did not wish to obtain the license offered. On behalf of Claimant, it was made clear during the meeting that Defendant would have to take legal action if she wished to obtain a license fee. In October 2015, Defendant started proceedings before the Rechtbank Den Haag for infringement of her European Patents EP 1 440 525, EP 1 685 659 and EP 1 623 511.
    By letter of 12 January 2016, Claimant made a written counter offer of 0.071% of her net revenue from products incorporating the UMTS and/or LTE standards. For a net sale price per product of € 100, the offered royalty would amount to 7 eurocent per product.
  2. Court’s reasoning
    Claimant asked the court to declare that Defendant’s licensing offer of 28 July 2015 is not FRAND and to declare that a royalty fee of € 0.007 for every product sold by Claimant incorporating the UMTS standard and a royalty fee of € 0.020 for every product sold by Claimant incorporating the UMTS and LTE standards is FRAND. In addition, Claimant asked the court to rule that its own licensing offer of 12 January 2016 is higher than what a fair, reasonable and non-discriminatory royalty fee would require.
    1. Market power and notice of infringement
      The court left open whether the SEPs conferred market power to Defendant since it did, in any case, find no abuse of such potential market power. The court argued that it is generally accepted and to be inferred from the system laid down in the Huawei/ZTE judgment that a FRAND license has a certain bandwidth. After all, the Huawei/ZTE judgment contemplates that the SEP holder makes a FRAND offer first and afterwards, if the SEP user does not agree with the offer, makes a counter offer which also has to be FRAND. During this negotiation process, the characteristics of the SEP user as well as its specific objections can be taken account in the license at the discretion of the parties. As such, the court noted that the fact that Defendant’s initial offer would turn out to be unreasonable for Claimant because she finds itself in the low budget segment of the market and her margins are small does not imply that the offer made by Defendant on 28 July 2015 is not FRAND.
      The court also made clear that until the Huawei/ZTE judgment the initiative to obtain a license was incumbent on the SEP user and not on the SEP holder in line with the common interpretation of the judgment of the Rechtbank Den Haag in Philips/SK Kassetten and the Orange Book ruling of the Bundesgerichtshof. In the view of the court the, on this crucial point, contrary Huawei/ZTE judgment that was delivered on 15 July 2015 constituted a new moment for negotiation between the parties. The court noted that, in line with the Huawei/ZTE judgment, Defendant took initiative with its licensing offer of 28 July 2015. Since Claimant made clear in the meeting on 3 September 2015 that Defendant would have to take legal action if she wished to obtain more than a few thousand euros in licensing fees, it seems unfitting that Archos reproaches Philips to have not been open to negotiation, or at least that position is insufficiently substantiated (par. 4.3).
    2. The SEP owner’s licensing offer
      Claimant put forward a number of arguments for its claim that Defendant’s offer of 28 July 2015 is not FRAND. All of these arguments were rejected by the court on the ground that Claimant had not sufficiently substantiated them. The main arguments raised are as follows.
      Claimant argued that Defendant’s rights regarding devices incorporating Qualcomm baseband chips had been exhausted due to the cross-license that Defendant had already concluded with Qualcomm for these chips. Since a number of Claimant’s products rely on Qualcomm baseband chips, the compensation that Defendant had already received from Qualcomm should, in the view of Claimant, at least have been taken into account in the license offer. The court noted that Claimant had not sufficiently contested that the Qualcomm license did not cover production and sales of mobile phones – as Defendant had made clear before the court – and that Claimant could have raised this point during the negotiations (par. 4.4).
      The court continued by stating that the fact that Defendant’s licensing offer covered both UMTS and LTE SEPS could not affect the FRAND-ness of the offer in the case at hand considering that Claimant’s products do not merely require a license under the LTE SEPs but also under the UMTS SEPs (par. 4.5).
      While the parties agreed that the Defendant’s share of the absolute number of SEPs in the UMTS-SEP portfolio is an important factor for assessing the FRAND-character of Defendant’s offer, they each reached different absolute numbers. The court concluded that the calculations in the consultancy reports on which Claimant relied do not lead to accurate results and are rather speculative in nature. As such, the Claimant downplayed the value of Defendant’s SEPs (par. 4.6-4.7).
      With regard to Claimant’s argument that Defendant’s proposed royalty rate would amount to impermissible royalty stacking, the court argued that this was insufficiently substantiated by Claimant (par. 4.8).
      Claimant also argued that the royalty rate should not be based on the total price of a phone but merely on the part in which the technology at issue is incorporated (the Smallest Saleable Patent-Practising Unit, SSPPU). In this context, the court noted that Defendant rightly pointed out that the requested royalty was set at a fixed amount as a result of which there is no relationship with the market value of the phone. Furthermore, since the SSPPU concept is at the very least subject to debate, the court noted that this issue could have been considered in the negotiations. That the royalty rate suggested by Defendant, which was not based on the SSPPU price, would not be FRAND for that mere reason could not be established by the court (par. 4.10).
      The court also dismissed Claimant’s reference to patent hold-up on the ground that a situation of hold-up can only occur in the case of a non-FRAND license which had not been established in the case at issue (par. 4.13).
      In the end, the court dismissed Claimant’s request to make a declaratory statement that Defendant’s offer of 28 July 2015 was not FRAND.
    3. The standard implementer’s reaction
      Considering that Claimant’s counter offer of 12 January 2016 is more than a factor 10 lower than the Defendant’s offer and is based on an inaccurate (at least insufficiently substantiated) share of Defendant’s SEPs in the relevant UMTS standard, the court refused to declare the counter offer to be FRAND, let alone to declare that this counter offer is higher than a FRAND royalty rate as requested by Claimant (par. 4.17-4.18).
  3. Other important issues
    AA defence that Defendant invoked was that Claimant had no interest (anymore) in the requested declaratory statements because its respective FRAND commitments were exhausted due to the unwilling attitude of Claimant. However, as Claimant’s requests for the declaratory statements were found not to be sufficiently substantiated, there was no need for the court to discuss this issue anymore (par. 4.18).

Updated 20 October 2020

Sisvel v Wiko

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

A. Facts

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

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

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

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

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

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

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

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

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

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

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

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

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

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

With the present judgment [426] , the Court granted an injunction against Wiko and ordered the removal and subsequent destruction of infringing products from the market. The Court also confirmed Wiko’s liability for damages on the merits and ordered Wiko to provide Sisvel with information required for the calculation of damages.


B. Court’s reasoning

The Court found that Wiko’s products infringe the patent in suit [427] . The essentiality of the patent in suit was not in dispute between the parties [428] .

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

In the Court’s eyes, this was not the case, since Sisvel had fulfilled the conduct obligations stipulated by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [429] (Huawei framework or obligations). Wiko, on the other hand, had, according to the Court, failed to comply with the Huawei framework.

Huawei framework

In deviation from its earlier case-law, the Court expressed the view that the Huawei obligations can be remedied by the parties during the course of infringement proceedings [430] . This requires, however, that pressure-free negotiations between the parties are enabled, as requested by the CJEU. For this, the parties have to use available procedural instruments for a temporary suspension of the proceedings, such as a motion for suspension of the trial [431] or a consensual stay of the proceedings until the decision of the Federal Patent Court on a parallel nullity action [432] .

Against this background, the Court requested from a SEP holder, who seeks to remedy information obligations under the Huawei framework after the initiation of infringement proceedings, to file a motion for suspension of the trial [432] . In case such a motion is filed, the Court expects that a ‘willing’ implementer will consent to a suspension of the proceedings [432] .

The Court observed that granting the parties the opportunity to remedy shortcomings concerning the Huawei obligations in the course of pending infringement proceedings is in line with the ‘safe harbour’ approach adopted by both the Court of Appeal of England and Wales in Unwired Planet v Huawei [433] and the Court of Appeal of The Hague in Philips v Asus [434] . These courts do not consider the Huawei framework as a mandatory formalistic procedure that needs to be executed strictly; accordingly, deviations from the negotiation framework established by the CJEU do not necessarily amount to abusive behaviour, barring the patent holder from asserting claims for injunctive relief [435] . Moreover, whether this is the case, needs to be assessed on a case by case basis [436] .


Notification of infringement

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

Regarding the content of SEP holder’s respective notification, the Court, basically, applied the same requirements set forth in previous decisions. The Court found that such notification must (1) name the patent in suit, including the patent number, (2) inform that the patent has been declared standard- essential towards the relevant standardisation body, (3) indicate for which standard the patent is essential and (4) explain which technical functionality of the user’s products or services implements the standard [437] . The appropriate level of detail should be determined on a case by case basis [437] . The Court confirmed that the patent holder will, as a rule, meet its notification duty by making claims charts customarily used in SEP licensing negotiations available to the implementer [437] . The Court further affirmed that a notification addressed to the parent company within a group of companies will usually be sufficient under the Huawei framework [437] .


SEP holder’s offer

The Court found that Sisvel had also complied with its Huawei obligation to make a written and specific FRAND licensing offer to Wiko. For the respective assessment, the Court considered only the 2018 offer, the last offer made by Sisvel to Wiko during the stay of the infringement proceedings [438] .

To begin with, the Court reiterated its position that infringement courts are not obliged to determine which concrete licensing fees and further contractual terms and conditions are ‘under objective aspects’ FRAND [439] . Contrary to the view previously taken by the superior Higher District Court of Karlsruhe, the Court maintained that the CJEU did not intend to ‘burden’ the proceedings concerning injunctive relief and the recall of products with the ‘precise mathematical determination’ of FRAND conditions [440] . Moreover, since there is a ‘range’ of potential FRAND conform terms and conditions, a request for injunctive relief could conflict with Article 102 TFEU only in case, in which – under consideration of the specific bargaining situation and market conditions – the SEP holder’s offer would amount to an ‘exploitative abuse’ [439] . Insofar, the Court shared a similar understanding with the Court of Appeal of England and Wales in Unwired Planet v Huawei [433] .

Notwithstanding the above, the Court made clear that infringement courts should go beyond a just ‘superficial’ assessment of the FRAND conformity of SEP holder’s licensing offer. Infringement courts should examine, whether the overall structure of the concrete offer would require from an implementer acting in good faith to respond to that offer, irrespective of the – typical – initial divergence of the bargaining position of the parties [441] . As a rule, such a duty will emerge, when the SEP holder explains the royalty calculation in a way that demonstrates the reasons for which it considers that its offer is FRAND [442] . In case that a pool licensing programme or a standard licensing programme exists, it will usually be enough to demonstrate the acceptance of the respective programme in the market. If a sufficient number of licences has been granted by the pool, the patent holder will just have to outline the composition of the pool by presenting an adequate number of claim charts referring to patents included in the pool [443] .

In this context, the Court pointed out that any allegations raised by the implementer with respect to the FRAND conformity of the patent holder’s offer cannot, in principle, be based on the (alleged) unlawfulness of individual contractual clauses. Moreover, the FRAND compliance of an offer must be assessed based on a general overview of the overall agreement [444] . An exception only applies, when a specific clause has an ‚unacceptable effect’ [444] . In the present case, the Court found that none of the clauses contained in the 2018 offer had such effect [444] .

In particular, the Court held that a clause placing the burden of proof with regard to the exhaustion of patents covered by the offered licence on the licensee (here: Wiko) is acceptable [445] . Contrary to the view taken by the District Court of Duesseldorf in a similar case, the Court argued that it is appropriate to request the licensee to establish the relevant facts, since it will be better situated to trace the licensing chain by engaging with its suppliers [445] .

Furthermore, the Court did not consider that a clause limiting the term of the offered licence to five years had an ‘unacceptable effect’ from an antitrust perspective. The Court found that a term of five years is in line with the prevailing practice in the wireless telecommunications industry, in which rapid technological developments are typical [446] .

The Court further pointed out that a clause establishing a right for the extraordinary termination of the licensing agreement in case of violation of reporting duties by the licensee or a delay of payments exceeding 30 days did not have an ‘unacceptable effect’ in the above sense [446] .

The Court did not raise any objections against the fact that the 2018 offer did not contain a clause stipulating an adjustment of the agreed royalty rates in case of changes in the number of covered patents during the term of the agreement. According to its view, including such a clause in a FRAND licence is not per se required [446] . An exception should be made, however, in cases, in which the pool predominantly consists of patents that will expire soon after the signing of the licence agreement [446] . In general, the absence of an ‘adjustment’ clause will not be problematic, especially when the licensing offer does not limit or exclude the statutory right of the parties to request an adjustment of the licence due to frustration of the contractual base (Sec. 313 para. 1 German Civil Code) [446] .


Non-discrimination / confidentiality

Referring to the non-discriminatory element of a FRAND licensing offer, the Court expressed the view that Art. 102 TFEU establishes a (secondary) duty of the patent holder to show in pending infringement proceedings that its offer to the defendant does not discriminate the latter in relation to similarly situated competitors [443] .

The Court made, nevertheless, clear that this duty does not legally entail ‘full transparency’ in every given case [443] . The antitrust obligations of the SEP holder do not always outweigh confidentiality interests of the latter that are worthy of legal protection; moreover, the special circumstances of the individual case can require protection of confidentiality [443] .

Looking particularly at information contained in existing licensing agreements of the SEP holder with third similarly situated licensees (comparable agreements), the Court took the view that the extent of the patent holder’s obligation to disclose such agreements shall be determined by the infringement court on a case by case basis under consideration of both parties’ pleadings in the proceedings [443] .

According to the Court, the patent holder will have to establish the existence of confidentiality interests worthy of protection; the mere fact that comparable agreements are subject to confidentiality clauses does not per se justify limitations regarding to the extent of patent holder’s disclosure obligations [447] . On the other hand, the defendant will need to explain to the court why the information requested is required for assessing the FRAND conformity of the patent holder’s licensing offer [447] . The defendant will have to establish concrete facts, indicating a potentially discriminatory conduct of the SEP holder [448] .

With this in mind, the Court disagreed with the view expressed by the Duesseldorf courts, according to which the SEP holder is in any case obliged to produce all existing comparable agreements in infringement proceedings [449] . Especially in cases, in which the patent holder has concluded only standard licensing agreements with implementers, the terms and conditions of which are publicly accessible, the Court saw no reason for obliging the patent holder to produce a (large) number of identical contracts in the proceedings. Insofar, it will be sufficient to disclose how many (standard) licensing agreements have been concluded so far [449] .

Accordingly, the Court found that the list of existing licensees produced by Sisvel to Wiko along with the 2018 offer was sufficient for establishing the FRAND conformity of this offer, even though the names of the licensees were redacted. In the Court’s eyes, Wiko had failed to explain the reasons why the identity of the existing licensees was needed to assess the FRAND conformity of the 2018 offer [450] . In addition, the Court also took into account the fact that Wiko had refused to sign the NDA offered by Sisvel during the stay of the proceedings for the purpose of disclosing the identities of the existing licensees [451] . Since it had no objections against the FRAND conformity of the 2018 offer, the Court did not rule on the question whether Wiko’s refusal to enter into an NDA could be considered as a sign of unwillingness to comply with the Huawei framework or not. The Court agreed, however, with the view taken by the Duesseldorf courts in this respect, according to which the implementer’s refusal to sign an adequate NDA is, in principle, a factor that should be considered in connection with the assessment of the SEP holder’s offer [451] .

Besides that, the Court also considered the possibility of facilitating the use of comparable agreements in infringement proceedings through document production orders issued by the competent court pursuant to Sec. 142 of the German Code of Civil Procedure (Zivilprozessordnung, ZPO) [448] . This option should particularly be taken into account by infringement courts in individual cases, in which confidentiality clauses contained in comparable agreements allow for a disclosure of the agreement only upon court order. According to the Court, such confidentiality clauses do not per se violate antitrust law and should, therefore, be respected, unless the patent holder cannot establish a confidentiality interest worthy of protection in the proceedings [448] . If the patent holder, who is bound to a confidentiality clause, is willing to produce comparable agreements in trial, then the infringement court could – based on the concrete circumstances of each case– issue a document production order according to Sec. 142 ZPO [448] . In case that the patent holder refuses to comply with such order, the court could consider the respective behaviour as a signal of bad faith in its overall assessment of the parties’ conduct under the Huawei framework [448] . The same will apply also when the implementer does not agree with a stay of the proceedings, after it was granted access to comparable agreements based on a court order issued pursuant to Sec. 142 ZPO [448] .

Implementer’s counteroffer

The Court found that Wiko had failed to meet its Huawei obligation to make a FRAND counteroffer to Sisvel in due course. For the respective assessment, the Court focused on Wiko’s reaction to the 2018 offer [452] .

The Court made clear that an implementer has a duty to react to a licensing offer of the SEP holder, which is based on concrete facts, irrespective of whether it considers this offer to be FRAND, or not (which will usually be the case) [448] . Furthermore, the implementer must react as soon as possible, considering the facts of each case, the industry practice in the specific sector as well as the principle of good faith [432] .

Taking into account that Wiko did not react at all to the 2018 offer for more than three months, the Court held that it violated the above obligations [428] . In the Court’s eyes, Wiko engaged in delaying tactics [428] . The Court did not accept that French school holidays and/or the fact that – according to Wiko’s own statement– only two employees covered licensing-related matters can provide sufficient justification for the delay in Wiko’s reaction [452] . As a company engaging in international business, Wiko should ensure that it has sufficient staff resources to deal with respective issues in due course [452] .


C. Other important issues

Apart from Sisvel’s claims for injunctive relief and the removal and destruction of infringing products from the market, the Court also rendered a declaratory judgment, recognising Wiko’s liability for damages on the merits [453] .

The Court found that Wiko had culpably infringed the patent in suit. In particular, Wiko had acted, at least, negligently [453] . Wiko had argued that the high complexity of standardised technologies (especially the significant number of patents incorporated into a standard), made it difficult to assess the status regarding intellectual property rights (and, therefore, excluded negligence). The Court made, however, clear that a higher degree of complexity of the underlying technologies generates enhanced due diligence requirements on the implementers’ side [454] .

  • [426] Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16.
  • [427] Ibid, pages 17-31.
  • [428] Ibid, page 46.
  • [429] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case-No. C-170/13.
  • [430] Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16, page 42.
  • [431] Ibid, page 43 and page 51 et seq.
  • [432] Ibid, page 42.
  • [433] Unwired Planet v Huawei, Court of Appeal of England and Wales, judgment dated 23 October 2018, [2018] EWCA Civ 2344, para 282.
  • [434] Philips v Asus, Court of Appeal of The Hague, 7 May 2019, Case-No. 200.221 .250/01.
  • [435] Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16, page 44.
  • [436] Ibid, page 44.
  • [437] Ibid, page 37.
  • [438] Ibid, pages 47 and 53.
  • [439] Ibid, page 38.
  • [440] Ibid, pages 37 et seq.
  • [441] Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16, page 39.
  • [442] Ibid, page 39.
  • [443] Ibid, page 40.
  • [444] Ibid, page 53.
  • [445] Ibid, page 54.
  • [446] Ibid, page 55.
  • [447] Ibid, page 40 and 49.
  • [448] Ibid, page 41.
  • [449] Ibid, page 49.
  • [450] Ibid, page 50.
  • [451] Ibid, page 51.
  • [452] Ibid, page 47.
  • [453] Ibid, page 35.
  • [454] Ibid, page 35 et seq.

Updated 2 August 2019

Philips v Wiko, Court of Appeal of The Hague

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

A. Facts

By letter dated 13 October 2013, the Claimant, Koninklijke Philips N.V. (“Philips”), informed the Defendant, Wiko SAS (“Wiko”), that it holds patents declared essential to the UMTS and LTE mobile telecommunication standards (Standard Essential Patents or “SEPs”) towards the European Telecommunications Standards Institute (“ETSI”). The letter included a list of some of Wiko’s products and invited Wiko to discuss a FRAND licensing agreement [129] . Wiko did not react to the letter [130] .

On 28 July 2015, Philips sent Wiko claim charts and a licensing agreement [131] . The communication remained unanswered by Wiko [130] .

On 19 October 2015, Philips started the present proceedings against Wiko [132] . On 25 August 2016, Wiko made a counteroffer [133] . Since 2016, it has also provided information about worldwide units sold and blocked an amount of EUR 895.000 into an escrow account [130] .

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 [134] . 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 [130] .

With the present judgment, the Court granted Philips’ request for injunctive relief [135] , destruction [136] and the recall of products [137] , but partly invalidated EP 511, insofar it goes beyond the claims of the second auxiliary request [138] .

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 [139] .

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 [140] .

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 [139] .

The Court concluded that recognition of the Mannheim decision would not affect the pending proceedings, as the patents at stake were not the same [141] .

Patent essentiality and infringement

Philips had declared EP 511 as essential to HSUPA (part of UMTS standard) towards ETSI on 26 November 2009 [142] . The fact that EP 511 is essential to HSUPA was not challenged by Wiko [143] .

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 [130] .

FRAND negotiations and application of the Huawei steps

The Court considers that the Huawei decision [144] does not set up strict rules, but rather guidelines for FRAND negotiations in good faith between the parties [145] .

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 [146] , 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 [147] .

Moving on to the next step, the Court found that Wiko had not fulfilled its duty as it did not react to Philips’ notification [148] . The Court, therefore, held that Philips was not obliged to make a licensing offer to Wiko, before starting proceedings against Wiko [130] .

FRAND offer

Nevertheless, Philips had made an offer to Wiko on 28 July 2015 [149] . This offer was for a worldwide licence under Philips’ UMTS and LTE SEPs [150] .

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 [130] .

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 [151] .

Contrary to German courts, the Court held that the Huawei steps do not imply a substantiation duty [152] , but solely the duty to specify the amount of the rate and the way it is calculated [153] . 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 [130] . 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” [130] . 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 [154] .

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 [155] . The Court held, however, that Wiko did not provide any evidence to support its position that Philips’ offer is not FRAND [130] . Additionally, the Court attached importance to the fact that Philips had expressed its willingness to discuss the offer and specific circumstances with Wiko [156] . Philips had even asked Wiko to make a counteroffer, which the latter did not [157] .

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 [158] . 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 [130] .

Wiko’s counteroffer

Wiko GmbH, an entity legally independent from other Wiko entities, had made a counteroffer to Philips [159] . However, the Court did not consider this counteroffer as a counteroffer made by the Defendant of the present proceedings to Philips [130] .

Besides that, the Defendant had also made a counteroffer to Philips after the start of the present proceedings [160] . 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% [161] . Wiko derived a rate of 0.001% per SEP family and made the following counteroffer to Philips [130] :

- 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) [130] .

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 [162] . Consequently, the Court concluded that Philips held a higher percent of SEPs than estimated by Wiko [130] . 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 [162] . 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 [163] . It added that Wiko’s counteroffer did not account for the value of Philips’ SEPs in view of other SEPs for the same standard [164] .

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 [145] . 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 [130] .

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 [165] .

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” [166] .

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.

  • [129] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.1
  • [130] Ibidem
  • [131] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.2
  • [132] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.3
  • [133] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.4
  • [134] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 3.1
  • [135] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.1
  • [136] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.4
  • [137] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.3
  • [138] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.8
  • [139] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.1
  • [140] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.2
  • [141] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.3
  • [142] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraphs 4.5 and 4.6
  • [143] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.5
  • [144] Huawei v ZTE, Court of Justice of the EU, judgement dated 16 July 2015, Case No. C-170/13.
  • [145] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.14
  • [146] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.10
  • [147] 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.
  • [148] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.15
  • [149] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.16
  • [150] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.27
  • [151] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.17
  • [152] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.18 and 4.19
  • [153] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.18
  • [154] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.19
  • [155] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.31
  • [156] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraphs 4.26, 4.31, 4.32, 4.36
  • [157] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.36
  • [158] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.34
  • [159] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.20
  • [160] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.4
  • [161] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.38
  • [162] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.40
  • [163] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.39
  • [164] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.41
  • [165] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.21
  • [166] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.22

Updated 9 November 2020

Nokia v Daimler

LG Mannheim
18 August 2020 - Case No. 2 O 34/19

A. Facts

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

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

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

On 21 June 2016, Nokia informed Daimler about its SEP portfolio by providing a list containing all patents and patent applications which Nokia declared as (potentially) essential towards ETSI. Daimler responded that a licence could be taken under the condition that its products actually infringe Nokia's patents.

On 9 November 2016, Nokia made a first licensing offer to Daimler. On 7 December 2016, Nokia shared further information regarding its patent portfolio with Daimler. On 14 December 2016, Daimler replied that it would be more efficient to license its suppliers manufacturing the so-called 'Telematics Control Units' (TCU), which are built into Daimler's cars. From January 2017 until February 2019, Daimler did not engage in further negotiations with Nokia and also refrained from participating in discussions which Nokia had with Daimler's suppliers.

On 27 February 2019, Nokia made a second licensing offer to Daimler to which further claim-charts mapping its patents to the relevant parts of the affected standards were attached. On 19 March 2019, Daimler rejected this offer as well, basically, by arguing that the royalties for Nokia's portfolio should be calculated on basis of the components provided to Daimler by its suppliers and not the cars produced by Daimler.

Subsequently, Nokia filed several infringement actions against Daimler before the District Courts of Munich, Duesseldorf and Mannheim in Germany.

On 9 May 2019, shortly after the infringement proceedings were initiated, Daimler made a counteroffer to Nokia. Basis for the calculation of the royalties for Nokia's portfolio was the average selling price for TCUs paid by Daimler to its suppliers. Nokia rejected this counteroffer.

On 10 June 2020, Daimler made a second counteroffer to Nokia. Nokia would be able to unilaterally determine the licensing fees (in accordance with Sec. 315 of the German Civil Code). Daimler would, however, have the right to contest the fee determined before court. The second counteroffer was also rejected.

On 18 June 2020, the German Federal Cartel Office (Cartel Office) intervened in the present proceedings before the District Court of Mannheim (Court) and recommended that the Court referred certain questions concerning the nature of the FRAND commitment to the Court of Justice of the EU (CJEU). The Court did not follow the recommendation of the Cartel Office.

With the present judgment [472] (cited by www.juris.de), the Court granted an injunction against Daimler and also recognised Daimler's liability to pay damages on the merits. The Court further ordered Daimler to render accounts and provide information necessary for the calculation of damages to Nokia.


B. Court's reasoning

The Court found that Daimler infringed the patent-in-suit [473] . For this reason, Nokia was entitled -among other claims- to injunctive relief [474] .

Daimler and its suppliers that joined the proceedings asserted so-called 'FRAND-defences', arguing that by filing infringement actions, Nokia had abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) and should, therefore, be denied an injunction. In particular, it was argued that Nokia had failed to comply with the conduct requirements established by the CJEU in the matter Huawei v ZTE [475] (Huawei decision, or framework).

The Court dismissed the FRAND-defences raised by Daimler and its suppliers as unfounded [476] .

Huawei framework

The Court made clear that SEP holders are not per se prevented from enforcing the exclusivity rights arising from their patents Ibid, para. 146. The fact that a patent is standard essential does not mean that the patent holder is obliged to tolerate the use of its technology, unless it has allowed such use or was under an obligation to allow such use, as a consequence of holding a dominant market position Ibid, para. 146.

An abuse of market dominance by the enforcement of patent rights does not occur, if the patent holder complies with its duties under the Huawei framework [478] . These duties presuppose, however, that the implementer, who already uses the protected technology without authorization by the right holder, is willing to take a licence on FRAND terms [479] . The Court explained that it cannot be requested by the patent holder to 'impose' a licence to any standards user, not least because it has no legal claim to request the signing of a licensing agreement [479] . Moreover, the 'particular responsibility' attached to its dominant position requires from the SEP holder to make 'sufficient efforts' to facilitate the signing of an agreement towards a licensee in principle willing to take a licence [480] .

Notification of infringement

According to the Court, these 'efforts' include a duty to notify the implementer about the infringement of the patent(s) involved as well as the possibility and need to take a licence prior to filing an infringement action Ibid, para. 152. Looking at the specific case, the Court found that Nokia met this obligation Ibid, paras. 151-156.

In terms of content, the notification of infringement must name the patent infringed and describe the specific infringing use and the attacked embodiments [481] . A detailed technical and legal analysis of the infringement is not required: the implementer should only be placed in a position to evaluate the infringement allegation, eventually by taking recourse to expert and/or legal advice [481] . As a rule, presenting claim charts will be sufficient (but not mandatory) [481] . The Court also pointed out that the patent holder is not required to address a separate notification of infringement to each supplier of an end-device manufactures infringing its patents [483] .

In the eyes of the Court, Nokia's e-mails dated 21 June 2016, 9 November 2016 and 7 December 2016 meet the above requirements [484] . The fact that -at least initially- Nokia did not indicate the concrete section of the standards documentation to which the patent-in-suit referred to was not considered harmful, since the notification of infringement is not required to facilitate a final assessment of infringement [485] .

Furthermore, the Court held that it was not necessary for Nokia to identify in the notification of infringement the specific components which generate connectivity according to the relevant standard, e.g. the TCUs built into Daimler's cars [486] . Since Daimler purchases and uses these components in its products, no information deficit could occur [486] .

Willingness

Moreover, the Court found that Daimler did not adequately express its willingness to enter into a FRAND licence with Nokia and could, thus, not rely on a FRAND defence to avoid an injunction Ibid, paras. 157-231.

In the Court's eyes, the implementer has to 'clearly' and 'unambiguously' declare that it is willing to sign a licence with the SEP holder 'on whatever terms are in fact FRAND' and, subsequently, engage in licensing negotiations in a 'target-oriented' manner (citing Federal Court of Justice, judgment dated 5 May 2020 – Sisvel v Haier, Case No. KZR 36/17 and High Court of Justice of England and Wales, judgment dated 5 April 2017, Case No. [2017] EWHC 711(Pat) – Unwired Planet v Huawei) [488] . The 'target-oriented' engagement of the implementer in licensing negotiations is of decisive importance: since implementers, as a rule, already use the patented standardized technology prior to the initiation of licensing negotiations, they could have an interest to delay the signing of a licence until the expiration of the patent, which, however, conflicts with the spirit of the Huawei decision [489] . Accordingly, it is not sufficient, in response to a notification of infringement, to just demonstrate willingness to consider signing a licensing agreement or to enter into negotiations about whether and under which conditions taking a licence comes into question [488] .

The Court further pointed out that making the declaration of willingness subject to conditions was not acceptable [488] . What is more, refusing to discuss about any improvement of a counteroffer made to the patent holder could also be considered as an indication of unwillingness from the side of the implementer [488] .

Based on the above, the Court took the view that by initially making the signing of a licence subject to the condition that its products actually infringe Nokia's patents, Daimler did not adequately express willingness to sign a FRAND licence [490] . The Court added that Daimler's counteroffers could neither be considered as a sufficient sign of willingness: especially the second counteroffer, giving Daimler the right to contest the royalty rates that Nokia would unilaterally set, would just postpone the actual dispute between the parties about the determination of the licensing fees to later court proceedings [491] .

The Court also held that Daimler did not act as an 'willing' licensee, since it did not engage in negotiations with Nokia, but insisted that its suppliers take a direct licence from the latter, instead [492] . Furthermore, the missing willingness of Daimler was also confirmed by its insistence on applying the average selling price of TCUs purchased by Daimler by its suppliers as base for the calculation of the licensing fees for Nokia's SEP portfolio [493] .

Calculation of FRAND fees

The Court found that the use of TCUs as the 'reference value' for the calculation of the royalty fees for Nokia's SEP portfolio was not appropriate Ibid, para. 169.

In general, there is not only a single set of FRAND terms and conditions; usually, there is a range of licensing conditions and fees which are FRAND [495] . Moreover, what can be considered as FRAND may differ from industry sector to industry sector as well as in time [495] .

The Court pointed out, however, that the patent holder must, in principle, 'be given a share' in the 'economic benefits of the technology to the saleable end product at the final stage of the value chain' [496] . Reason for that is, that the use of the protected invention 'creates the chance' to gain an 'economic profit' with the end product, which is based on the invention [496] . The Court did not agree with the notion that by considering the value of the patented technology for the end product SEP holders benefit from innovation taking place at other stages of the value chain [497] . The Court noted that there are several instruments available to make sure that this will not occur [497] .

Accordingly, the Court rejected the notion of using the so-called 'Smallest Saleable Patent Practising Unit' (SSPPU), that is the smallest technical unit integrated in a product, as base for the calculation of FRAND royalty rates [497] . The effects of patent exhaustion would prevent the SEP holder from participating in the value created at the final stage of the value chain [497] . Apart from that, this option would make it more complex to identify and avoid 'double-dipping', meaning licensing the same patent at several stages of the value chain [497] .

Having said that, the Court clarified that the above principle does not necessarily mean that licensing agreements should be signed exclusively with end-device manufacturers [498] . The Court considered that there are various possibilities to factor the value of the patented technology for the saleable end product also at other stages of a supply chain [498] .

Against this background, the Court found that the selling price of TCUs did not sufficiently mirror the value of Nokia's SEPs for the cars produced by Daimler, which are the relevant end devices in the present case [499] . The selling price of TCUs corresponds only to Daimler's respective costs [500] . Connectivity, on the other hand, allows Daimler to generate income from additional services offered to its clients, save costs and optimise R&D expenses [501] . Connectivity secures the chance to create this value [502] . In addition, the Court noted that the acceptance of the licensing model of the Avanci platform (which grants licences exclusively to car manufacturers) by several of Daimler's main competitors serves as a further indication that focusing on the value of the protected technology for the end product is reasonable also in the automotive sector [503] .


Non-discrimination

Furthermore, the Court found that the assertion of patent claims against Daimler by Nokia was not discriminatory and could, therefore, not justify Daimler's insistence that licences must be taken by its suppliers Ibid, paras. 201-212.

The Court explained that the patent holder is, basically, allowed to freely choose the stage of the supply chain, at which it will assert its rights [505] . The same is true with respect to patent holders with a dominant market position, since competition law does not per se limit this possibility [505] . What is more, a dominant patent holder is not obliged to offer all potential licensees a 'standard-rate' [505] . The non-discrimination obligation established by Article 102 TFEU intends to prevent a distortion of competition in upstream or downstream markets, but does not exclude different treatment of licensees, if sufficient justification exists [506] .

In the present case, the Court saw no indication that Nokia's claim to use the end-product as a royalty base could impact competition [507] . Especially the fact that in the automotive sector it is common that suppliers take licences for components sold to car manufacturers, does not require Nokia to change its practice, not least because the licences granted by the Avanci platform to Daimler's competitors show that the respective practice -which is prevailing in the telecommunications sector- has already been applied also in the automotive field [508] . Furthermore, the Court did not consider that the assertion of SEPs against end-device manufacturers could lead to limitations in production, sales and technical development to the detriment of consumers [509] . In this respect, the Court referred to so-called 'have-made-rights' which according to the ETSI IPR Policy should be included in a FRAND licence and allow component manufacturers to produce, sell and develop their products [510] .

SEP holder's offer / information duty

Furthermore, the Court held that Daimler could not justify its unwillingness to obtain a licence by claiming that Nokia had refused to provide sufficient information concerning its licensing offers Ibid, paras. 216 et seqq.

The Court pointed out that the SEP holder can be obliged to substantiate the FRAND conformity of its licensing request [512] . In case that the patent holder has already concluded agreements with third licensees on non-standard terms, it will be, as a rule, under a duty to disclose and present –at least– the content of the key contractual provisions in a way, which would allow the implementer to assess whether it has been offered different commercial conditions [512] . The scope and level of detail of the respective duty shall be determined on a case-by-case basis [512] .

Considering this, the Court expressed the view that Nokia had provided sufficient information to Daimler, by sharing –among other things– a study on the value of connectivity for vehicles and a licensing agreement signed with another major car manufacturer [513] . In this context, the Court denied that Nokia was under a duty to disclose licensing agreements with smartphone manufacturers to Daimler. The Court rejected the notion that the SEP holder's information duty extends to the full content of every licensing agreement previously signed and that the SEP holder is obliged to disclose all existing agreements [514] . Adding to that, the Court noted that licensing agreements from the telecommunications sector are not relevant for the assessment of FRAND conformity of licences in the automotive field [514] .

FRAND defence raised by suppliers

Apart from the above, the Court also highlighted that Daimler could not profit from the FRAND defences raised by its suppliers that joined the proceedings Ibid, paras. 232 et seqq.

The Court left the question open whether an end-device manufacturer that has been sued can, in principle, rely on a FRAND defence raised by one of its suppliers, or not. According to the Court, this would, however, in any case require that the supplier is willing to obtain a licence from the patent holder calculated on basis of the value of the patent(s) in question for the end-product (and not for the component it produces) [516] . This had not been the case in the present proceedings [517] .

The Court did not ignore that it can be challenging for suppliers to pass on the royalty fees paid to the SEP holder to their clients [518] . However, the contractual arrangements of third parties (here: the arrangements between suppliers and end-device manufacturers) should not, in the eyes of the Court, direct the SEP holder towards licencing agreements that do not allow a participation in the value created by the patented technology for the end-product [518] .


C. Other issues

Finally, the Court held that -contrary to the recommendation of the Cartel Office – there was no need to suspend the proceedings and refer certain questions revolving around whether the SEP holders' FRAND commitment establishes a direct claim for everyone within a value chain to be granted a bilateral licence (License-to-all approach), or just a claim to have access to the standardised technology (Access-to-all approach), to the CJEU.

The Court left this question open, since neither Daimler nor its suppliers were willing to obtain a licence on FRAND terms from Nokia based on the value of the protected technology for the cars manufactured by Daimler  Ibid, paras. 253 and 291. The Court also noted that the fact that the patent-in-suit would expire in few years from now would also speak against ordering a stay of the proceedings [520]

  • [472] Nokia v Daimler, District Court of Mannheim, judgment dated 18 August 2020, Case-No. 2 O 34/19
  • [473] Ibid, paras. 49-136
  • [474] Ibid, para. 138
  • [475] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13
  • [476] Nokia v Daimler, District Court of Mannheim, judgment dated 18 August 2020, Case-No. 2 O 34/19, para. 144
  • [477] Ibid, para. 146
  • [478] Ibid, para. 147
  • [479] Ibid, para. 148
  • [480] Ibid, para. 149
  • [481] Ibid, para. 152
  • [482] Ibid, paras. 151-156
  • [483] Ibid, para. 248
  • [484] Ibid, paras. 153 et seq
  • [485] Ibid, para. 154
  • [486] Ibid, para. 155
  • [487] Ibid, paras. 157-231
  • [488] Ibid, para. 158
  • [489] Ibid, para. 159
  • [490] Ibid, para. 161
  • [491] Ibid, para. 197-199
  • [492] Ibid, paras. 157, 160 and 162-164
  • [493] Ibid, paras. 160 and 165-168
  • [494] Ibid, para. 169
  • [495] Ibid, para. 170
  • [496] Ibid, para. 171
  • [497] Ibid, para. 172
  • [498] Ibid, para. 173
  • [499] Ibid, paras. 174 et seqq
  • [500] Ibid, paras. 174
  • [501] Ibid, paras. 177
  • [502] Ibid, para. 180
  • [503] Ibid, paras. 187 et seqq
  • [504] Ibid, paras. 201-212
  • [505] Ibid, para. 202
  • [506] Ibid, para. 203
  • [507] Ibid, para. 205
  • [508] Ibid, para. 210
  • [509] Ibid, para. 213
  • [510] Ibid, para. 215
  • [511] Ibid, paras. 216 et seqq
  • [512] Ibid, para. 217
  • [513] Ibid, para. 218
  • [514] Ibid, para. 230
  • [515] Ibid, paras. 232 et seqq
  • [516] Ibid, paras. 234 and 236 et seqq
  • [517] Ibid, paras. 240 et seqq
  • [518] Ibid, para. 239
  • [519]  Ibid, paras. 253 and 291
  • [520] Ibid, para. 291.

Updated 15 May 2018

Conversant v Huawei and ZTE, [2018] EWHC 808 (Pat)

English court decisions
16 April 2018 - Case No. HP-2017-000048

A. Facts

The claimant, Conversant, is a licensing firm incorporated in Luxembourg. The defendants are two major Chinese telecoms equipment and handset manufacturers, Huawei and ZTE, and their English affiliates. After years of negotiations that failed to result in licenses for claimant’s portfolio of Standard Essential Patents (SEPs) reading on ETSI wireless telecoms standards (and comprising inter alia Chinese and UK patents),Conversant v. Huawei and ZTE[2018] EWHC 808 (Pat) para 5. the claimant filed an action for infringement of four of its UK SEPs before the High Court of Justice (Court), and requested the Court to define Fair, Reasonable and Non-Discriminatory (FRAND) terms for its global SEP portfolio. [53] The defendants in separate proceedings initiated in China disputed the validity, essentiality and infringement of claimant’s Chinese patents. Since the defendants failed to unequivocally commit to conclude licenses on FRAND terms decided by the Court, the plaintiff amended its pleading to include injunctive relief, unless and until the defendants comply with the Court’s FRAND determination. [54]

The judgment at hand involves the defendants’ challenge to the Court’s jurisdiction to decide upon the terms of a global portfolio license. According to the defendants, a UK court has no jurisdiction to decide on the validity and infringement of foreign (in the present case: Chinese) patents. [55] Furthermore, the defendants claim that the jurisdiction most closely connected to the case is China which is the centre of the defendants’ manufacturing activities as well as the jurisdiction where the bulk of their sales takes place. [56]

B. Court’s Reasoning

The court dismissed the defendants’ challenge of jurisdiction. Following the reasoning of Birss J in Unwired Planet,Unwired Planet v. Huawei[2017] EWHC 711 (Pat) paras 565-67 Carr J held that, although issues of validity of patents granted in foreign jurisdictions are not justiciable in the UK, nevertheless the issue of validity should be distinguished from the issue of the determination of a global portfolio license on FRAND terms. According to Carr J, the defendants are free to challenge the validity, essentiality, and infringement of claimant’s Chinese patents in separate proceedings before Chinese courts; the pending issues of validity, essentiality and infringement do not preclude, however, the Court from determining FRAND terms for a global license and providing a mechanism of adjusting the royalty rate according to the validity and infringement decisions of courts in other jurisdictions.Conversant v. Huawei and ZTE(n. 1) paras 17 et seq. Furthermore, the defendants’ justiciability defense, were it to be accepted, would make it impossible for patent holders with a global portfolio of SEPs to obtain relief in the form of court-determined FRAND terms for a global license, since they would need to commence litigation on a country-by-country basis. [59] Forcing the patent holder to seek separate licenses for every individual country where it held SEPs could be characterized as a ‘hold-out chater’, in the eyes of the Court. [59]

Moreover, the Court seized jurisdiction over the case on the ground that the plaintiff’s claim concerns four patents granted in the UK; the issue of relief for patent infringement, and in particular whether such relief will take the form of setting FRAND terms for a global license, is to be decided in the context of a ‘FRAND trial’, after a decision on infringement is reached. [60] Were the defendants’ argument to be accepted, the Court would, in effect, be barred from deciding on the infringement and the proper relief for patents granted in the UK. [56] Besides that, the Court also held that the defendants’ failed to establish that the Chinese courts would be the appropriate forum for the dispute. [61] In this respect, given that royalty rates for telecommunication SEPs are usually lower in China than in other countries, the Court particularly pointed out that no holder of a global SEP portfolio would voluntarily prefer to submit to determination of a FRAND license for the entirety of portfolio in a country, where the rates applied would be lower than the rest of the world. [62]

  • [52] Conversant v. Huawei and ZTE[2018] EWHC 808 (Pat) para 5.
  • [53] ibid, para 7.
  • [54] ibid, para 8.
  • [55] ibid, paras 9, 12 and 13.
  • [56] ibid.
  • [57] Unwired Planet v. Huawei[2017] EWHC 711 (Pat) paras 565-67
  • [58] Conversant v. Huawei and ZTE(n. 1) paras 17 et seq.
  • [59] ibid, para 28.
  • [60] ibid, para 69.
  • [61] ibid, paras 72 et seq.
  • [62] ibid, para 63.

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. [521] 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). [522] The Claimant also initiated parallel infringement proceedings against the Defendants in Germany. [523]

The High Court conducted three technical trials first, focusing on the validity and essentiality of four of the SEPs in suit. [524] 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. [524] The parties agreed to postpone further technical trials indefinitely. [524]

In July 2016, Samsung took a licence from the Claimant covering, among other, the SEPs in suit. [525] The Claimant also settled the infringement proceedings with Google. [526]

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. [527]

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) [528] in accordance with the undertaking given by the Claimant towards the European Telecommunications Standards Institute (ETSI). [529] Pending appeal, the High Court stayed the injunction. [530]

Shortly after the High Court delivered its decision, the Defendants began proceedings against the Claimant in China, which are still pending. [531]

With the present judgment, the UK Court of Appeal dismissed the Defendants’ appeal against the decision of the High Court. [532]


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. [533]

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. [534]

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 [535] (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”). [536]

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. [537]


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). [538]

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) [539] . [540]

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. [541] Such an undertaking has international effect. [542] It applies to all SEPs of the patent holder irrespective of the territory in which they subsist. [543] This is necessary for two reasons: first, to protect implementers whose equipment may be sold and used in a number of different jurisdictions. [543] 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. [544]

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. [545] German Courts (in Pioneer Acer [546] and St. Lawrence v Vodafone [547] ) as well as the European Commission in its Communication dated 29 November 2017 [548] had also adopted a similar approach. [549]

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. [544] 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. [550] In this way, the implementer would have an incentive to hold out country-by-country, until it was compelled to pay. [550]

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. [551]

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. [552] The reality is that a number of sets of terms may all be fair and reasonable in a given set of circumstances. [552] Whether there is only one true set of FRAND terms or not, is, therefore, more of a “theoretical problem” than a real one. [553] 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. [553]

Furthermore, the Court of Appeal dismissed Defendants’ claim that imposing a worldwide licence is contrary to public policy and disproportionate. [554] In particular, the Defendants argued that this approach encourages over-declaration of patents [555] and is not compatible with the spirit of the Directive 2004/48/EC on the enforcement of intellectual property rights, [556] which requires relief for patent infringement to be proportionate. [557]

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. [558] 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. [559]


2. Non-discrimination

The Court of Appeal rejected the Defendants’ argument [560] 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. [561]

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. [562] 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 [563] 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. [564]

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). [565] 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. [566] 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. [567]

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. [568]

Conversely, the Court of Appeal followed the notion described by the High Court as the “general” non-discrimination approach: [569] 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. [569] For determining the benchmark rate, prior licences granted by the SEP holder to third parties will likely form the “best comparables”. [570]

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. [571] 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. [571]

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. [572] 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. [572] 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. [573]


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. [574]

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. [575] 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 [576] ) and that the constrains imposed upon the SEP holder’s market power by the limitations attached to the FRAND undertaking [577] and the risk of hold-out that is immanent to the structure of the respective market, [578] can either alone or together rebut the assumption that it most likely holds market power. [579]

Notwithstanding the above, the Court of Appeal held that the Claimant had not abused its market power in the present case. [580]

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. [581] 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. [582] 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. [583]

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. [584] This follows from the clear language used by the CJEU with respect to this obligation. [585] The precise content of such notice will depend upon all the circumstances of the particular case. [585] 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. [586]

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. [587]

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. [588] Insofar the court agreed with the respective approach developed by German courts in co-called “transitional” cases (Pioneer v Acer, [589] St. Lawrence v Vodafone [589] and Sisvel v Haier [590] ) [591] .

  • [521] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, Case-No. A3/2017/1784, [2018] EWCA Civ 2344, para. 233.
  • [522] Ibid, para. 6 et seqq.
  • [523] Ibid, para. 233.
  • [524] Ibid, para. 7.
  • [525] Ibid, paras. 8 and 137 et seqq.
  • [526] Ibid, para. 8.
  • [527] Ibid, para. 9 et seqq.; para. 31 et seqq.
  • [528] Ibid, para 17.
  • [529] Ibid, para 130.
  • [530] Ibid, para 18.
  • [531] Ibid, para 112.
  • [532] Ibid, para 291.
  • [533] Ibid, paras. 19 and 45 et seqq.
  • [534] Ibid, paras. 20 and 132 et seqq.
  • [535] Huawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-170/13.
  • [536] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 21, paras. 211 et seqq and para. 251.
  • [537] Ibid, para. 17.
  • [538] Ibid, paras. 74 and 77 et seq.
  • [539] Ibid, para. 82.
  • [540] Ibid, para. 80.
  • [541] Ibid, para. 79 et seq.
  • [542] Ibid, para. 26.
  • [543] Ibid, para. 53.
  • [544] Ibid, para. 54 et seq., para. 59.
  • [545] Ibid, para. 56.
  • [546] Pioneer v Acer, District Court of Mannheim, judgement dated 8 January 2016, Case No. 7 O 96/14.
  • [547] St. Lawrence v Vodafone, District Court of Düsseldorf, judgement dated 31 March 2016, Case No. 4a O 73/14.
  • [548] 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.
  • [549] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 74.
  • [550] Ibid, para. 111.
  • [551] Ibid, para. 128.
  • [552] Ibid, para. 121.
  • [553] Ibid, para. 125.
  • [554] Ibid, para. 75.
  • [555] Ibid, para. 92
  • [556] 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)
  • [557] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 94.
  • [558] Ibid, para. 96.
  • [559] Ibid, para. 98.
  • [560] Ibid, para. 20 and 132 et seqq.
  • [561] Ibid, paras. 207 and 210.
  • [562] Ibid, para. 176.
  • [563] Ibid, para. 173.
  • [564] Ibid, para. 169 et seq.
  • [565] Ibid, paras. 194 et seqq.
  • [566] Ibid, para. 198.
  • [567] Ibid, para. 198.
  • [568] Ibid, para. 199.
  • [569] Ibid, para. 195.
  • [570] Ibid, para. 202.
  • [571] Ibid, para. 196.
  • [572] Ibid, para. 197.
  • [573] Ibid, para. 200.
  • [574] Ibid, para. 21, paras. 211 et seqq and para. 251.
  • [575] Ibid, para. 212.
  • [576] Ibid, para. 216.
  • [577] Ibid, para. 219.
  • [578] Ibid, para. 220.
  • [579] Ibid, para. 229.
  • [580] Ibid, para. 284.
  • [581] Ibid, para. 269.
  • [582] Ibid, para. 270.
  • [583] Ibid, para. 269 and 282.
  • [584] Ibid, para. 253 and 281.
  • [585] Ibid, para. 271.
  • [586] Ibid, para. 273.
  • [587] Ibid, para. 284
  • [588] Ibid, para. 275
  • [589] See above
  • [590] Sisvel v Haier, Higher District Court of Düsseldorf, judgement dated 30 March 2017, Case No. 15 U 66-15.
  • [591] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 279.

Updated 30 October 2018

­Vodafone v Intellectual Ventures, High Court of Ireland

Irish court decisions
10 March 2017 - Case No. 2016 5102P, [2017] IEHC 160

A. Facts

The Claimant, Vodafone GmbH, is a German company offering communication services in Germany, including DSL internet connections based on the standards ADSL2+ and VDSL2 [1] .

The first Defendant, Intellectual Ventures II LLC (IV LLC), is a US company that holds patents declared as essential to the above standards (Standard Essential Patents or SEPs), including German designations of several European patents [2] . The second Defendant, Intellectual Ventures International Licensing (IV Licensing), is an Irish company engaged in patent licensing [2] . IV LLC granted IV Licensing a sub-licence which allows the latter to grant non-exclusive licences in respect to IV LLC’s portfolio [3] .

In January 2016, IV LLC brought infringement actions against the Claimant before the District Court (Landgericht) of Düsseldorf in Germany (Düsseldorf Court) based on the German designation of two of its SEP relating to the ADSL2+ and VDSL2 standards (German proceedings) [4] . In the German proceedings, IV LLC sought for a declaration that the Claimant is liable for damages arising from the infringement of the SEPs in suit as well as the provision of information and the rendering of accounts [4] .

During the course of the German proceedings, IV Licensing made an offer for a licensing agreement to the Claimant comprising the German designations of sixteen European Patents, including the two patents already asserted before the Düsseldorf Court [5] . The Claimant made a counter-offer which was, however, rejected [6] .

Subsequently, the Claimant filed an action for a declaratory judgement against the Defendants before the Dublin High Court (High Court) in Ireland (Irish proceedings). The Claimant requested the High Court inter alia to declare (1) that IV Licensing’s offer was not Fair, Reasonable and Non-Discriminatory (FRAND) and, therefore, amounted to an abuse of dominant position contrary to Article 102 of the Treaty on the Functioning of the EU (TFEU) and (2) that Claimant’s counter-offer was FRAND [7] . In case that the High Court held that neither IV Licensing’s offer nor Claimant’s counter-offer were FRAND, the Claimant also sought for a declaration as to which terms and conditions would be FRAND [7] .

The Defendants challenged the jurisdiction of the High Court. They requested the High Court – among other motions – to decline jurisdiction in favour of the Düsseldorf Court, or, in the alternative to stay its proceedings [8] .

With the present judgment the High Court refused to decline jurisdiction over the dispute brought before it [9] . The Court ordered, however, a stay in the proceedings, until the Düsseldorf Court delivered its final judgment in the German proceedings [9] .

B. Court’s reasoning

The High Court held that neither Article 24 nor Article 29 of the Recast Brussels Regulation [10] require the court to decline jurisdiction in favour of the Düsseldorf Court, even though the German proceedings were initiated prior to the Irish proceedings.

Pursuant to Article 24 of the Regulation, the Courts of each EU Member State have exclusive jurisdiction in proceedings concerned with the validity of any European Patent granted for that Member State. Both pending proceedings concern German designations of IV LLC’s European patens. However, this fact did not hinder the High Court to assume jurisdiction over the present case: In the High Court’s eyes, no issue as to the validity the patents which ought to be licensed has been placed in issue in the Irish proceedings; moreover, no part of Claimant’s cause of action concerning the (alleged) abuse of dominance depends in any way on the validity of the SEPs in suit [11] .

Furthermore, the High Court found that Article 29 of the Regulation does not apply to the present case, either. The High Court took the view that the Irish proceedings and the German proceedings do not involve the “same cause of action”, as Article 29 of the Regulation requires [12] . Although there are overlapping issues in both proceedings (for instance, Article 102 TFEU is mentioned in parties’ pleadings in both trials), this fact does not suffice to establish a “same cause of action” in terms of Article 29 of the Regulation [12] . In particular, Article 102 TFEU, to the extent that it features in the German proceedings is not concerned with an (alleged) abuse of dominant position by way of the offer made to the Claimant by IV Licensing [12] . Besides that, the High Court also pointed out, that – at least regarding to IV Licensing – it is not presented with proceedings “between the same parties” (since IV Licensing in not party to the German proceedings) which is, however, a further prerequisite for the application of Article 29 of the Regulation [13] .

Notwithstanding the above, the High Court held that some form of relief under Article 30 of the Regulation ought to be granted to the Defendants [14] . Under this provision, a court is allowed (meaning that the power given to the court is discretionary) to either stay its proceedings (Article 30 para. 1) or decline jurisdiction (Article 30 para. 2), in case that a “related action” is already pending before another court [15] . The objective of Article 30 of the Regulation is “to improve co-ordination of the exercise of judicial functions” within the EU and to avoid “irreconcilable judgments” [16] . In the matter at hand, the High Court found that these ob­jectives are served by an order to stay the proceedings according to Article 30 para. 1 of the Regulation [9] .

Looking at the present case, the High Court explained that a risk of “irreconcilable judgments” exists, since at the heart of both the Irish and the German proceedings lies the question whether the parties have complied with their conduct obligations under the judgment of the Court of Justice of the EU in the matter Huawei v ZTE [17] (Huawei requirements), especially with the obligation to exchange licensing offers on FRAND terms [18] .

In the Irish Proceedings, the claims made by the Claimant expressly address this question. In the German Proceedings, the same question will be of “direct relevance” for the nature and scope of the claim for damages and the accessory claim for the rendering of accounts asserted by IV LLC [19] . Although compliance with the Huawei requirements is – in contrast to claims for injunctive relief – no direct prerequisite for the enforcement of SEP holder’s damage claims (including the auxiliary claims for information and the rendering of accounts) [20] , it has an impact on the scope of such claims: according to the case law of the Düsseldorf Courts, if the patent holder does not meet the Huawei requirements or both the patent holder and the potential licensee comply with the Huawei requirements, the patent holder’s damage claim is limited to the FRAND licence fees and the claim for the rendering of accounts is limited to the information needed in order to calculate the respective damages (using the so-called “licence analogy” method) [21] . Accordingly, the Düsseldorf Court would not be able to decide on the merits of the claims raised by IV LLC before it, without first determining whether the parties fulfilled the Huawei requirements [22] .

In addition, the High Court pointed out that setting the FRAND terms and conditions for the patent portfolio offered to the Claimant, as the latter requested in the Irish proceedings, could also lead to “irreconcilable judgments”, particularly if the Düsseldorf Court would be asked by IV LLC at a later point in time to fix the damages for the two SEPs asserted in the German proceedings (since these SEPs were also part of the portfolio offered) [23] . Insofar, the High Court was not convinced by the Claimant’s argument, that fixing of rates for a patent portfolio usually involves different considerations to the fixing of a rate for individual patents [23] . On the contrary, the High Court recognized that within the “longstanding industry practice” of portfolio licensing, the fixing of rates for a portfolio of patents does, in general, involve the same methodology as the fixing of rates for individual patents. Consequently, rates set by the High Court in the Irish proceedings might conflict with any rates determined by the Düsseldorf Court with respect to the damage claims made in the German proceedings [23] .

  • [1] Vodafone v Intellectual Ventures, High Court of Ireland, 10 March 2017, para. 1.
  • [2] Ibid, para. 2.
  • [3] Ibid, para. 3.
  • [4] Ibid, para. 37.
  • [5] Ibid, paras. 10-12 and 93.
  • [6] Ibid, paras. 13-16.
  • [7] Ibid, para. 5.
  • [8] Ibid, para. 7.
  • [9] Ibid, para. 180.
  • [10] Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12th December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast), OJ L 351/1 of 20th December 2012.
  • [11] Vodafone v Intellectual Ventures, High Court of Ireland, 10 March 2017, para. 122.
  • [12] Ibid, para. 146.
  • [13] Ibid, para. 148.
  • [14] Ibid, para. 166.
  • [15] Ibid, para. 119.
  • [16] Ibid, para. 165.
  • [17] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
  • [18] Vodafone v Intellectual Ventures, High Court of Ireland, 10 March 2017, para. 52.
  • [19] Ibid, paras. 52 and 60.
  • [20] Ibid, paras. 55 et seqq.
  • [21] Ibid, para. 61 et seq.
  • [22] Ibid, para. 62.
  • [23] Ibid, para. 93.

Updated 6 October 2020

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

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

A. Facts

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

Unwired Planet v Huawei

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

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

On 5 April 2017, the High Court granted an injunction against Huawei, until such time as it entered into a worldwide licensing agreement with Unwired Planet on the specific terms, which the court determined to be FRAND [592] . Huawei appealed this decision. Pending appeal, the High Court stayed the enforcement of the injunction.

On 23 October 2018, the UK Court of Appeal (Court of Appeal) dismissed Huawei's appeal against the decision of the High Court [593] . Subsequently, Huawei appealed before the Supreme Court for the United Kingdom (Supreme Court or Court).

Conversant v Huawei and ZTE

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

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

On 16 April 2018, the High Court confirmed its jurisdiction over the dispute, including its competence to determine the terms for a global portfolio licence [594] . Huawei and ZTE appealed the decision of the High Court.

On 30 January 2019, the Court of Appeal dismissed the appeal and affirmed the jurisdiction of UK courts to determine FRAND terms for a global licence on the basis of infringement of UK patents [595] . Huawei and ZTE appealed before the Supreme Court.

With the present judgment [596] , the Supreme Court unanimously dismissed the appeals in both cases.


B. Court's reasoning

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

1. Jurisdiction

The Supreme Court confirmed that UK courts have jurisdiction to determine the terms of a global FRAND licence for a multinational SEP portfolio and, accordingly, grant an injunction based on UK SEPs, in case a standards implementer refuses to enter into such licence [597] .

The Court held that under the ETSI IPR Policy SEP holders are not prohibited from seeking an injunction by national courts [598] . On the contrary, the possibility to stop infringement by means of an injunction granted by a national court was considered to be 'a necessary component of the balance which the IPR Policy seeks to strike', by ensuring that implementers are incentivised to negotiate a FRAND licence [598] .

Apart from granting an injunction based on UK patents, English courts can also set the terms of a global FRAND licence. In the view of the Supreme Court, the 'contractual arrangement' established by the ETSI IPR Policy gives UK courts the jurisdiction to exercise the respective power [599] .

According to the Court, the ETSI IPR Policy is 'intended to have an international effect', as it attempts to 'mirror commercial practice in the telecommunications industry' [600] . In the telecommunications industry, it is common practice to sign global licences for a portfolio of patents, 'without knowing precisely how many of the licenced patents are valid or infringed' [601] . On the one hand, the patent holder cannot know at the time of the declaration of a patent as (potentially) essential whether it will be valid and infringed by the still developing standard [601] . The implementer, on the other hand, does not know which patents are valid and infringed when using the standard [601] .

This 'unavoidable uncertainty' is dealt with by the conclusion of portfolio licences covering all declared SEPs of the patent holder worldwide, at a price which 'ought to reflect the untested nature of many patents in the portfolio' [601] . By taking such a licence, the implementer 'buys access' to the standard and 'certainty' that it has authorisation to use all technology needed to comply with the standard [601] .

Since, according to the commercial practice, FRAND licences include 'untested' patents, the Supreme Court took the view that the determination of the terms and conditions of a global licence does not imply an assessment of the validity of all patents covered. Therefore, when setting the terms of a worldwide portfolio licence, English courts do not rule on the validity and infringement of foreign patents, which is, indeed, a question subject to the exclusive jurisdiction of the national courts of the state that granted each patent [602] . Accordingly, it will, as a rule, be 'fair and reasonable' for the implementer to 'reserve the right to challenge those patents or a sample of those patents in the relevant foreign court and to require that the licence provide a mechanism to alter the royalty rates as a result' [603] .

In this context, the Supreme Court highlighted that the above approach is not unique to UK jurisprudence, but is in line with case law delivered in other jurisdictions, particularly in the United States, Germany, China and Japan [604] .


2. Suitable forum (forum conveniens)

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

The Supreme Court found that UK Courts were not obliged to decline jurisdiction in favour of the Chinese courts [605] . The so-called 'forum conveniens' doctrine was not applicable in the present case, since -unlike the courts in England- Chinese courts had currently no jurisdiction to determine the terms of global FRAND portfolio licences in the absence of an agreement of the parties to the dispute [605] . What is more, the Court found that it could reasonably not be expected by Conversant to consent in granting jurisdiction to the Chinese courts in the current setting [605] .

In the eyes of the Supreme Court, the English courts involved in the present dispute were also not obliged to stay their proceedings in expectation of the outcome of the Chinese validity proceedings [606] . The latter concerned only the validity of Conversant's Chinese patents, whereas the proceedings initiated in England referred to the determination of the terms of a FRAND licence for Conversant's global SEP portfolio [606] .


3. Non-discrimination

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

The Supreme Court agreed with both the High Court and the Court of Appeal and found that this was not the case. The Court explained that FRAND does not imply a so-called 'hard-edged' non-discrimination obligation, requiring from the patent holder to offer the same or similar terms to all similarly situated licensees [607] .

Under the ETSI IPR Policy (Article 6.1.), the patent holder must commit to make licences available on FRAND terms. In the eyes of the Supreme Court, this is a 'single, unitary obligation', not three distinct obligations that the licence terms should be fair, and separately, reasonable, and separately, non-discriminatory [608] . Accordingly, the terms and conditions should be 'generally available as a fair market price for any market participant' and reflect the 'true value' of the SEP portfolio, 'without adjustment depending on the individual characteristics' of a particular licensee [609] .

The Supreme Court made further clear, that the FRAND undertaking under the ETSI IPR Policy does not imply a so-called 'most favourable licence' clause, obliging patent holders to grant licences on terms equivalent to the most favourable licence terms to all similarly situated licensees [610] . Looking in detail at the creation of the ETSI IPR Policy, the Court observed that ETSI had previously expressly rejected proposals to include such a clause in the FRAND undertaking [611] .

Furthermore, the Court noted that there is no 'general presumption' that differential pricing is harmful to private or public interests involved [612] . On the contrary, there are circumstances in which the SEP holder's choice to offer lower than the benchmark rates to specific licensees is reasonable in a commercial sense [613] . This applies, for instance, with respect to the so-called 'first mover advantage': The Court recognised that it can be 'economically rational' and 'commercially important' to agree a lower rate with the first ever licensee, because, apart from generating initial income on the SEPs, the licence signed can also 'validate' the portfolio in the market and facilitate licensing in the future [613] . The same is also true with respect to so-called 'fire sales', that is cases, in which the patent holder is forced to licence at lower rates in order to secure its commercial survival, as it has been the case at the time, in which Unwired Planet signed the licensing agreement with Samsung [614] .


4. Abuse of market dominance / Huawei framework

The fourth issue examined by the Supreme Court was whether, by bringing infringement proceedings against Huawei, Unwired Planet had abused a dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) and should, therefore, be denied access to injunctive relief. In particular, Huawei had argued that an injunction should be denied, because Unwired Planet had failed to comply with the conduct requirements established by the Court of Justice of the European Union (CJEU) in the matter Huawei v ZTE (Huawei judgment or scheme) [615] .

The Supreme Court held that this was not the case [616] . In the eyes of the Court, the Huawei judgment establishes an obligation of the patent holder to notify the standards implementer about the infringing use of the SEPs in question, prior to filing an action for injunctive relief, which, if breached, results in abusive behaviour in terms of Article 102 TFEU [617] . The 'nature' of this obligation depends on the circumstances of each individual case [617] . The Court held that Unwired Planet had given adequate notice to Huawei prior to filing the present infringement action [618] .

Considering the further duties established by the Huawei judgment, the Supreme Court confirmed the view previously taken by the High Court and the Court of Appeal that the Huawei scheme is not 'mandatory', but rather establishes a 'route map, which, if followed precisely, will ensure that [the patent holder] can seek an injunction without risking infringing article 102' [619] . Other than that, the Huawei judgment provides 'a number of points of reference to assist in assessing the all-important question of whether each of the parties is willing to enter into a licence on FRAND terms' [618] . Having said that, the Supreme Court found that Unwired Planet had been willing to grant a FRAND licence to Huawei, so that it had not behaved abusively [618] .


5. Damages instead of injunctive relief?

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

The Supreme Court found that there is no basis for substituting an injunction by an award of damages in the present case [620] . On the one hand, neither Unwired Planet nor Conversant could employ the 'threat of an injunction' as a means for imposing 'exorbitant fees' on Huawei or ZTE, since they would be entitled to an injunction, only if they have offered a licence on terms which the court would have already confirmed as FRAND [621] .

Furthermore, the Court took the view that an award of damages is 'unlikely to be an adequate substitute for what would be lost by the withholding of an injunction', since the SEP holder would be required to bring proceedings against an implementer patent-by-patent and country-by-country, which was considered to be 'impractical' [622] . What is more, standards implementers would then have 'an incentive to continue infringing until, patent by patent, and country by country, they were compelled to pay royalties', a fact that would make FRAND licensing more difficult, since, as the Supreme Court pointed out, 'it would not make economic sense' for infringers to voluntarily take a licence [623] .

On the other hand, an injunction 'is likely to be a more effective remedy': By prohibiting infringement altogether, an injunction may give an infringer 'little option' but to accept the FRAND terms offered by the SEP holder, 'if it wishes to remain in the market' [623] . For the above reasons, the Supreme Court highlighted that an injunction is 'necessary in order to do justice' [624] .

  • [592] Unwired Planet v Huawei, High Court of Justice for England and Wales, judgment dated 5 April 2017, Case No. [2017] EWHC 711(Pat).
  • [593] Unwired Planet v Huawei, UK Court of Appeal, judgment dated 23 October 2018, Case No. [2018] EWCA Civ 2344.
  • [594] Conversant v Huawei and ZTE, High Court of Justice for England and Wales, judgment dated 16 April 2018, Case No. [2018] EWHC 808 (Pat).
  • [595] Conversant v Huawei and ZTE, UK Court of Appeal, judgment dated 30 January 2019, Case No. [2019] EWCA Civ 38.
  • [596] Unwired Planet v Huawei and Conversant v Huawei and ZTE, UK Supreme Court, judgment dated 30 January 2019, Case No. [2019] EWCA Civ 38.
  • [597] Ibid, paras. 49 et seqq.
  • [598] Ibid, para. 61.
  • [599] Ibid, para. 58.
  • [600] Ibid, para. 62.
  • [601] Ibid, para. 60.
  • [602] Ibid, para. 63.
  • [603] Ibid, para. 64.
  • [604] Ibid, paras. 68-84.
  • [605] Ibid, para. 97.
  • [606] Ibid, paras. 99 et seqq.
  • [607] Ibid, paras. 112 et seqq.
  • [608] Ibid, para. 113.
  • [609] Ibid, para. 114.
  • [610] Ibid, para. 116.
  • [611] Ibid, paras. 116 et seqq.
  • [612] Ibid, para. 123.
  • [613] Ibid, para. 125.
  • [614] Ibid, para. 126.
  • [615] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [616] Unwired Planet v Huawei and Conversant v Huawei and ZTE, UK Supreme Court, judgment dated 30 January 2019, Case No. [2019] EWCA Civ 38, paras. 149 et seqq.
  • [617] Ibid, para. 150.
  • [618] Ibid, para. 158.
  • [619] Ibid, paras. 157 and 158.
  • [620] Ibid, para. 163.
  • [621] Ibid, para. 164.
  • [622] Ibid, para. 166.
  • [623] Ibid, para. 167.
  • [624] Ibid, para. 169.