Case Law post CJEU ruling Huawei v ZTE
gb jp cn

Back to main 4iP Council site

Case law search


Updated 23 January 2018

LG Mannheim

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

A. Facts

Case No. 7 O 24/14 [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 10 April 2019

Huawei v ZTE

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

A. Facts

The Claimant, Huawei Technologies Co. Ltd., holds a patent declared as essential to the practice of the LTE wireless telecommunication standard (Standard Essential Patent, or SEP) developed by the European Telecommunications Standards Institute (ETSI) [33] . In March 2009, the Claimant committed towards ETSI to make the patent in question accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [34] .

The Defendants, ZTE Corp. and ZTE Deutschland GmbH, hold themselves several SEPs relating to the LTE standard [35] and also market, inter alia in Germany, LTE-compliant products [36] .

Between November 2010 and March 2011, the parties engaged into discussions concerning the licensing of the Claimant’s portfolio of SEPs [36] . The Claimant indicated the amount it considered as a reasonable royalty; the Defendants, on the other hand, sought to conclude a cross-licence [37] . An offer for a licensing agreement was, however, not finalized [37] .

In April 2011, the Claimant brought an action against the Defendants before the District Court (Landgericht) of Düsseldorf (District Court), seeking for injunctive relief, the rendering of accounts for past uses, the recall of products and an award for damages for patent infringement [38] .

The District Court stayed its proceedings and submitted a reference for a preliminary ruling under Article 267 of the Treaty on the Functioning of the European Union (TFEU) to the Court of Justice of the European Union (CJEU). In brief, the District Court noted that the German Federal Court of Justice (Bundesgerichtshof) and the European Commission appeared to have adopted conflicting positions on the question under which conditions an action for a prohibitory injunction brought by a SEP holder against a SEP user constitutes an abuse of dominant position in violation of Article 102 TFEU [39] : In its Orange Book ruling, the German Federal Court of Justice held that, in infringement proceedings concerning SEPs, the defendant is entitled to raise a defence under Article 102 TFEU (and thus avoid an injunction), only and insofar as it submits an unconditional, fair offer to conclude a licence to the patent holder, accounts for past acts of use and also makes a deposit on the royalty payments resulting thereof [40] . The European Commission, on the other hand, in proceedings relating to enforcement actions taken by Samsung against Apple in a number of EU member states, took the view that an action for injunctive relief concerning a SEP may, in principle, infringe Article 102 TFEU to the extent to which the defendant has demonstrated his willingness to negotiate a licence on FRAND terms in accordance with the patent holder’s FRAND commitments [41] .

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

  • firstly, notified the user about the infringement of its patent ‘by designating that patent and specifying the way in which it has been infringed’, and
  • secondly, if the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, presented to that infringer a specific, written offer for a licence on such terms, specifying, in particular, the royalty and the way in which it is to be calculated[42] .

By contrast, the SEP user may invoke the abusive nature of a patent holder’s action for a prohibitory injunction and/or for the recall of products, only if it responds to SEP holder’s offer without delay [43] . In case that the patent user rejects that offer, it has to

  • submit ‘promptly and in writing, a specific counter-offer that corresponds to FRAND terms’ to the patent holder [44] and
  • if its counter-offer is rejected, provide appropriate security for the use of the patent(s), ‘for example by providing a bank guarantee or by placing the amounts necessary on deposit[45] .

The CJEU made clear that the above framework does not apply to SEP holders’ claims for damages and/or the rendering of accounts in relation to past acts of use; actions concerning these claims cannot infringe Article 102 TFEU, since they have no impact on whether standard compliant products can appear or remain on the market [46] .

B. Court’s Reasoning

The CJEU stressed the need to balance, on the one hand, the effective judicial protection of SEP holders’ fundamental intellectual property rights (IPRs) and, on the other hand, the public interest in free undistorted competition [47] .

Since the parties had not contested that the Claimant held a dominant market position, the Court’s analysis focused on the existence of an ‘abuse’ in terms of Article 102 TFEU [48] . According to the CJEU, the exercise of an IPR cannot ‘in itself’ be abusive, even if it is the act of an undertaking holding a dominant position [49] . Moreover, an action for the enforcement of an IPR can constitute an abuse of dominant position only in “exceptional circumstances[50] .

Cases, in which SEPs are involved, distinguish themselves from other IPR-related cases: First, the fact that the patent has obtained SEP status means that the patent holder can ‘prevent products manufactured by competitors from appearing or remaining on the market and, thereby, reserve to itself the manufacture of the products in question[51] . Besides that, by making a FRAND commitment, the patent holder has created ‘legitimate expectations’ to third parties implementing the standard that the SEP will be accessible on FRAND terms [51] . Having regard to the ‘legitimate expectations’ created, the patent user sued in infringement proceedings can, in principle, defend himself by invoking Article 102 TFEU, in case that the SEP holder refused to grant him a FRAND licence [52] .

Although the SEP holder cannot be deprived of its rights to have recourse to legal proceedings for the protection of its IPRs, the CJEU found that the FRAND undertaking justifies the imposition of an obligation on the SEP holder to comply with specific requirements, when seeking for injunctive relief [53] . In particular, in order to avoid a violation of Article 102 TFEU, the SEP holder should meet the following conditions: (a) prior to the filing of an action for a prohibitory injunction, it must notify the user about the infringement ‘by designating that SEP and specifying the way in which it has been infringed[54] , and (b) submit a specific written offer for a licence on FRAND terms to the user, particularly specifying ‘the royalty and the way in which it is to be calculated’, if the latter has expressed its willingness to enter into such a licence [55] . In this context, the CJEU observed that the SEP holder can be expected to make such an offer, since it is ‘better placed to check whether its offer complies with the condition of non-discrimination than is the alleged infringer’, because, as a rule, no public standard licensing agreement exists and the terms of existing agreements entered by the SEP holder with third parties are not made public [56] .

On the other hand, the (alleged) infringer must diligently respond to the SEP holder’s offer, ‘in accordance with recognised commercial practices in the field and in good faith’ [43] . Whether this is the case must be established on the basis of ‘objective factors’, which implies, in particular, that there are no ‘delaying tactics[43] .

In case that the infringer finds the proposed terms as falling short of the patent holder’s FRAND commitment and chooses to reject the SEP holder’s licensing offer, it must submit a specific written counter-offer on FRAND terms to the SEP holder [44] . If the counter-offer is rejected and the (alleged) infringer already used the SEP in question without a licence, it is obliged to provide ‘appropriate security, in accordance with recognised commercial practices in the field, for example by providing a bank guarantee or by placing the amounts necessary on deposit[45] . The calculation of that security must include, inter alia, ‘the number of the past acts of use of the SEP’, and the alleged infringer must be able to render accounts in respect of those acts of use [45] .

When no agreement is reached following the counter-offer by the (alleged) infringer, the CJEU pointed out that the parties have the option, to request ‘by common agreement’ that the amount of the royalty be determined ‘by an independent third party, by decision without delay[57] .

Finally, the CJEU made clear that the (alleged) infringer is allowed to challenge the validity and/or the essentiality and/or the actual use of SEP holder’s patents in parallel to the licensing negotiations, or to reserve the right to do so in the future [58] .


  • [33] Huawei v ZTE, Court of Justice of the European Union, judgment dated 6 July 2015, para. 22.
  • [34] Ibid, para. 22.
  • [35] Ibid, para. 40.
  • [36] Ibid, para. 24.
  • [37] Ibid, para. 25.
  • [38] Ibid, para. 27.
  • [39] Ibid, paras. 29 et seqq.
  • [40] Ibid, paras. 30 et seqq
  • [41] Ibid, paras. 34 et seqq
  • [42] Ibid, para. 77.
  • [43] Ibid, para. 65.
  • [44] Ibid, para. 66.
  • [45] Ibid, para. 67.
  • [46] Ibid, paras. 72 et seqq
  • [47] Ibid, para. 42.
  • [48] Ibid, para. 43.
  • [49] Ibid, para. 46.
  • [50] Ibid, para. 47.
  • [51] Ibid, para. 53.
  • [52] Ibid, paras. 53 et seqq
  • [53] Ibid, paras. 58 et seqq
  • [54] Ibid, para. 61.
  • [55] Ibid, para. 63.
  • [56] Ibid, para. 64.
  • [57] Ibid, para. 68.
  • [58] Ibid, para. 69.

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 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 26 January 2017

Unwired Planet v Samsung

LG Düsseldorf
19 January 2016 - Case No. 4b O 120/14

  1. Facts
    Since 7 March 2014 Claimant, a non-practicing entity, is the proprietor of European patent EP D, allegedly covering a feature of the GSM standard, originally granted to the Intervener, and subsequently transferred to company “I”. Defendants, belonging to the K-group, produce and market GSM- and UMTS-based devices.
    In an agreement as of 26 October 2011, the Intervener granted a worldwide non-exclusive license to Qualcomm Inc., being, in turn, allowed to grant sub-licenses to its customers. Furthermore, by agreement as of 1 February 2014 one of the Defendants was granted a worldwide, non-exclusive license to patents owned by the Intervener.
    On 10 January 2013, the Intervener concluded a so-called “Master Sales Agreement” (MSA), concerning the exploitation of a portfolio of more than two thousand patents, with “E”, “F” and its subsidiaries. Claimant became a party to the MSA later on. After its accession to the MSA, “I”, by assuming the existing FRAND obligation of the Intervener in accordance with the MSA, made a separate FRAND commitment towards ETSI on 14 June 2013 and declared, in an agreement as of 13 February 2013, to ensure that subsequent acquirers equally assume this obligation. Accordingly, after the transfer of patent EP D to Claimant the latter made, on 6 March 2014, a separate commitment towards ETSI declaring to be willing to grant licenses on FRAND terms with regard to, inter alia, patent EP D.
    In order to implement the MSA the parties concluded three transfer agreements. Claimant argues that the Intervener validly transferred a part of its patent portfolio, including patent EP D, by agreement as of 11 February 2013 to undertaking “B”. On 13 February 2013, “B”, in turn, transferred the patent portfolio, including patent EP D, to “I”. After successfully requesting, on 3 September 2013, an amendment of the patent register, being performed on 24 October 2013, “I” transferred, on 27 February 2014, the patent portfolio, including patent EP D, to Claimant. Claimant successfully requested, on 7 March 2014, an amendment of the patent register which was performed on 3 July 2014.
    As a reaction to Claimant’s public license proposal including a royalty of USD 0.75 per mobile device Defendants allegedly submitted a counter-offer but no licensing agreement was concluded.
  2. Court’s reasoning
    1. Market power
      The court stressed that an application of Article 102 TFEU does not automatically result from SEP ownership but that it requires proof of a dominant position on the relevant market being conveyed by the SEP in question. Due to the fact that products not implementing the patent-in-suit could not effectively compete on the relevant market because of GSM being a key feature for such products market power of Claimant was affirmed. [70]
    2. Applicability of the Huawei rules to damages and the rendering of accounts
      While the Huawei rules of conduct apply to actions for injunction, recall and destruction of products they are, in principle, not directly applicable to claims for damages and the rendering of accounts. [71] Nor is it necessarily abusive for a SEP proprietor to bring an action for damages and the rendering of accounts without having notified the standard implementer of an infringement and without having offered a FRAND license beforehand. The Huawei obligations do, however, have an indirect impact on the extent to which damages and the rendering of accounts are due: Where the SEP proprietor fails to grant a FRAND license although he has made a FRAND commitment and the standard implementer has expressed its readiness to take a license, damages are limited to the FRAND royalty level but only for the period after the SEP proprietor’s abusive refusal to license. [72] Claims for information and the rendering of accounts must, in this event, be limited to what is necessary for determining FRAND-based damages. [73]
    3. Cap on damages/rendering of accounts in casu
      In casu Defendant could not show that he had complied with its Huawei obligation to sufficiently express its willingness to take a FRAND license. In consequence, no cap on Claimant’s claim for damages was deemed appropriate. [73]
  3. Other important issues
    Whether a SEP proprietor is free to enforce its patent in court or whether the proprietor is obliged to grant a FRAND license has to be determined under Art. 102 TFEU, not Art. 101 TFEU. [74] A FRAND declaration is not an unconditional offer made by the patent proprietor to enter into a licensing agreement with anyone willing to take a license, it merely expresses that the proprietor is, in principle, ready to grant a FRAND license if the patent in question conveys market dominance. As such, the FRAND commitment merely specifies a duty to license which competition law would impose anyway but it has an impact on the patent owner’s obligations under Art. 102 TFEU. [75]
    As regards the transfer of a SEP from the original patent proprietor to a non-practicing entity, registration in the patent register in accordance with § 30 (3) PatG establishes—also with regard to claims for damages and the rendering of accounts—presumption of ownership, allowing the proprietor to enforce all rights derived from the SEP as long as the presumption has not been successfully rebutted by Defendants. The non-registration of “B” as an interim owner was considered irrelevant under the circumstances of the present case (but not generally). Case No. 4b O 120/14, para. I, 1-2
    The MSA and the subsequent transfer agreements neither violate the German provisions on merger control (§§ 35-43 GWB) since, in any case, merger control thresholds are not reached.
    Nor was a violation of the European provisions on anticompetitive agreements (Article 101 TFEU) or on the abuse of a dominant position (Article 102 TFEU) found. Case No. 4b O 120/14, para. I, 4, a-c In particular, the transactions did not aim at enforcing non-FRAND royalties or at discriminating between licensees and the agreements framing the transactions ensured that the acquirers of the relevant patents were bound by (the initial) FRAND commitments. [76] The acquirer of a SEP is neither obliged to continue the transferor’s licensing practice in an unmodified manner nor to implement exactly the same conditions in all licensing agreements, provided the conditions are FRAND and no unjustified discrimination takes place. It is not abusive in itself for a (former) SEP proprietor to split its portfolio and to transfer the parts to several acquirers, thereby trying to arrive at higher overall royalties being paid for the portfolio. Nor is a resulting increase in the number of licenses a standard implementer has to take per se inacceptable. However, licensing conditions are FRAND only if the cumulative royalty level resulting from the licensing of all pertinent SEPs is not excessive. Putting it differently, where the royalty level for the entire portfolio was below or at the lower end of the FRAND range, it is not abusive to arrive, by way of splitting the portfolio and licensing its parts separately, at a higher overall royalty level within the FRAND range. Furthermore, the transaction agreements did not amount to price fixing. [77]
  • [70] Case No. 4b O 120/14, para. VII, 6, a
  • [71] Case No. 4b O 120/14, para. VII, 6, b, aa, bb
  • [72] Case No. 4b O 120/14, para. VII, 6, b, dd
  • [73] Case No. 4b O 120/14, para. VII, 6, b, ee
  • [74] Case No. 4b O 120/14, para. VII, 4
  • [75] Case No. 4b O 120/14, para. VII, 5
  • [76] Case No. 4b O 120/14, para. I, 4, b, aa
  • [77] Cf. for details LG Düsseldorf, 19 January 2016 - Case No. 4b O 120/14, para. I, 4, b, bb

Updated 3 February 2020

Philips v Wiko

OLG Karlsruhe
30 October 2019 - Case No. 6 U 183/16

A. Facts

The Claimant, Philips, holds patents declared as (potentially) essential to the practice of wireless telecommunications standards (Standard Essential Patents or SEPs) developed by the European Telecommunications Standards Institute (ETSI), including SEPs reading on the UMTS and LTE standards. Philips committed towards ETSI to make its SEPs accessible to standard users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions.

The Defendant is the German subsidiary of the Wiko group of companies, which has its headquarters in France (Wiko). Wiko sells mobile phones implementing the LTE standard in Germany.

In October 2014, Philips informed the parent company of the Wiko group about its SEP portfolio, but did not receive a response. In July 2015, Philips shared a draft licensing agreement for its SEP portfolio as well as claim charts referring to several of its SEPs with the parent company of the Wiko group, which again did not react at all. In September 2015, Philips shared further technical details regarding its SEPs.

On 19 October 2015, Philips brought an infringement action against Wiko before the District Court of Mannheim based on one of its SEPs, requesting for injunctive relief, information and rendering of accounts, destruction and recall of infringing products from the market as well as a declaratory judgment confirming Wiko’s liability for damages on the merits.

On the next day, 20 October 2015, Wiko sent a letter to Philips, in which it declared its willingness to enter into negotiations with the latter for a licence covering ‘valuable’ patents. In August 2016, during the course of the pending infringement proceedings, Wiko made a counteroffer to Philips. Philips did not accept this offer. Subsequently, Wiko provided security to Philips for the use of its patents, calculated on basis of its counteroffer.

By judgment dated 25 November 2016 [209] , the District Court of Mannheim granted Philips’ claims almost to the full extent. Wiko appealed the District Court’s judgement. In addition, by way of a counterclaim, Wiko requested disclosure of existing licensing agreements signed by Philips with similarly situated licensees (comparable agreements).

With the present judgment [210] , the Higher District Court of Karlsruhe (Court) overturned the ruling of the District Court in part. In detail, the Court confirmed Philips’ claims for information and the rendering of accounts as well as Wiko’s liability for damages on the merits. The Court, however, rejected Philips’ claims for injunctive relief, destruction and recall of infringing products from the market.

Apart from that, the Court also rejected Wiko’s counterclaim regarding the production of comparable agreements in the proceedings.


B. Court’s reasoning

The Court confirmed that Wiko’s products infringe the patent in suit [211] .

Contrary to the view taken previously by the District Court, the Court found, however, that Article 102 of the Treaty for the Functioning of the EU (TFEU) prevents Philips from enforcing the claims for injunctive relief as well as the recall and destruction of infringing products asserted in the infringement proceedings for the time being [212] . In the Court’s eyes, Philips had failed to meet the conduct obligations established by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [213] (Huawei framework or obligations) [214] .

Huawei framework

The Court explained that SEP holder’s failure to meet its Huawei obligations will – as a rule – render an infringement action resulting in an exclusion of the implementer from a downstream market (action for injunctive relief and/or recall and destruction of products) abusive in terms of Article 102 TFEU [215] . This will, however, not be the case, when the implementer himself fails to fulfil its duties under the Huawei framework; if the implementer acts in bad faith as an ‘unwilling’ licensee, then SEP holder’s Huawei obligations are ‘suspended’ [215] . As a result, asserting the rights to injunctive relief and/or the destruction and recall of infringing products in court could then be considered as a justified reaction of the SEP holder to the implementer’s unwillingness to enter into a FRAND licence [215] .

Having said that, the Court expressed the view that the parties can remedy potential flaws in their conduct under the Huawei judgment and/or even fulfil their Huawei obligations for the first time during the course of pending infringement proceedings [216] . The Court noted that in Huawei v ZTE, the CJEU did not require that the parties fulfil all conduct obligations established prior to the initiation of court proceedings [217] . In the Court’s eyes, denying the parties such possibility is not compatible either with the general principle of proportionality known to European law, nor with the German civil procedural law, according to which courts need to consider all facts relevant for their decision-making raised in the proceedings until the end of the oral arguments [218] .

Accordingly, an infringement action that did not give rise to any antitrust concerns at the time it was filed, can be considered as abusive at a later point in time, if the situation significantly changed, e.g. the implementer fulfilled its Huawei obligations in the meantime [219] . Vice versa, an action of an abusive nature can later on be ‘corrected’, if the patent holder performs its duties under the Huawei framework during the course of the pending proceedings [219] .

In the Court’s view, a SEP holder seeking to remedy (or fulfil for the first time) obligations under the Huawei framework after the initiation of infringement proceedings must make sure that pressure-free licensing negotiations between the parties are enabled, as required by the CJEU in Huawei v ZTE [220] . For this, the patent holder must use procedural tools available under German law, particularly a motion for suspension of the trial [220] . The SEP holder can also propose a consensual stay of the proceedings, especially when a parallel nullity action against the patent in suit is pending before the Federal Patent Court [220] . In case such a motion is filed, the Court expects that a ‘willing’ implementer will consent to a suspension of the proceedings [220] .

On the other hand, the Court pointed out that fulfilment of Huawei obligations by the implementer after the beginning of infringement proceedings does not necessarily lead to a dismissal of the claims asserted by the SEP holder [221] . Indeed, if the implementer meets its Huawei duties at a very late point in time in the proceedings (e.g. shortly before the closing of the oral arguments), the Court could eventually neglect this fact in its decision [222] . This way, delays can be avoided. In this context, the Court also made clear that the implementer is not in a position to cause a unilateral suspension of the proceedings; in contrast to the opposite case (that is cases, in which a stay of the proceedings is suggested by the claimant), the SEP holder will usually not be required to agree to a suspension of the proceedings proposed by the implementer, in order to allow pressure-free negotiations to take place [222] . Insofar, the implementer bears the risk that the fulfilment of its obligations under the Huawei framework in the course of a pending infringement trial will have no impact [222] .

Notification of infringement

Looking at the specific conduct of the parties in the present case, the Court found that Philips had fulfilled its obligation to notify Wiko about the infringement of the SEP in suit prior to the commencement of the infringement proceedings.

The Court confirmed that a notification addressed to the parent company within a group of companies will usually be sufficient under the Huawei framework [223] . In terms of content, the Court was satisfied by the fact that Philips’ letter from July 2015 named the patent in suit as well as the relevant part of standard document implementing the technical teachings of this patent [224] . The Court explained that the notification does not have to contain (further) information required for a final assessment of the validity and essentiality of the patent in suit [224] . Accordingly, the SEP holder is not obliged to share claims charts customarily used in SEP licensing negotiations with the implementer along with the notification of infringement [224] .

Willingness to enter into a licence

The Court further found that Wiko had sufficiently met its obligation to express its willingness to negotiate a licence with Philips [225] .

The Court agreed with the assessment of the District Court that Wiko’s initial reaction to Philips’ notification in July 2015 by letter dated 20 October 2015 was belated. According to the Court, the time available to the implementer for expressing its willingness to enter into negotiations for a licence will – as a rule – not exceed two months [226] . This period of time will usually be sufficient: since by declaring its willingness to enter into negotiations the implementer does not waive any rights (especially the right to contest the validity and/or infringement of the patents in question), it shall not be given more time than the time needed for an ‘initial overview’ of the SEP holder’s claims [226] . Delaying tactics potentially applied by the implementer must be prevented [226] . Against this background, Wiko’s letter dated 20 October 2015 was sent to Philips too late.

Nevertheless, the Court found that Wiko had remedied the belated response after the beginning of the infringement proceedings. On the one hand, Wiko’s letter dated 20 October 2015 had reached Philips at a very early stage of the proceedings, namely just some days after the action was filed [227] . In addition, Wiko had confirmed its willingness to enter into negotiations with Philips expressed in said letter during the course of the proceedings, by making a counteroffer, rendering accounts and providing security to Philips [227] .

SEP holder’s offer

On the other hand, the Court held that Philips had failed to comply with its obligation to make a FRAND licensing offer to Wiko. In particular, the Court took the view that Philips did not provide sufficient information to Wiko with respect to its licensing offer dated July 2015 [228] .

The Court argued that the ‘fairness’ element of the FRAND commitment establishes an ‘information duty’ (‘Informationspflicht’) of the SEP holder with respect to the content of its licensing offer to the implementer [229] . This duty exists besides the patent holder’s duty to make a FRAND licensing offer to the implementer [230] .

In terms of scope, the Court found that the information duty is, basically, not limited to the calculation of the offered royalty but also covers (objective) facts showing that the ‘contractual compensation factors’ (‘vertragliche Vergütungsfaktoren’) are not discriminatory [231] . The extent of the information to be shared depends on the circumstances of the specific ‘licensing situation’ [231] .

In case that the patent holder has already granted licences to third parties, the information duty will extend also towards its ‘licensing practice’, including comparable agreements [232] .

If the SEP holder uses exclusively a standard licensing programme, then it will be sufficient to show that said programme has been accepted in the market and that the offer made to the implementer corresponds with the standard licensing agreement used [232] .

On the other hand, if the SEP holder has concluded individual licensing agreements with third licensees, then it would be obliged to disclose – at least – the content of the key contractual terms in a way that would allow the implementer to identify whether (respectively why) the offer it received is subject to dissimilar conditions [232] . The Court made, however, clear that – contrary to the approach adopted by the Duesseldorf courts – the SEP holder is not obliged in any case to disclose the full content of all existing comparable agreements [232] . In the eyes of the Court, the information duty serves only the purpose of facilitating good will licensing negotiations. A full disclosure of comparable agreement is, however, uncommon in practice [232] .

In this context, the Court pointed out that the patent holder will have to adequately substantiate the content of ‘justified confidentiality interests’ that might hinder the disclosure of comparable agreements [232] . Furthermore, the SEP holder would need to facilitate the conclusion of a Non-Disclosure Agreement which would allow sharing further information with the implementer [232] .

Based on the above considerations, the Court found that Philips had not fulfilled its information duty at any time [233] . In particular, the Court criticized that Philips did not adequately explain the reasons for choosing to agree on a lump sum payment (instead of a running royalty) in an existing agreement with a third licensee [234] . The fact that companies of different size were affected did not relieve Philips from its information duty; according to the Court, the mere fact that two competitors in a downstream market are of different size does not per se offer sufficient ground for different treatment [235] .

Since the Court assumed that Philips had failed to meet its information duties, it did not examine whether Philips’ licensing offer to Wiko was FRAND in terms of content [236] . In this respect, the Court seemed to agree, however, with the notion that FRAND is a range providing parties with a degree of flexibility [237] .

Implementer’s claim for disclosure of comparable agreements

Referring to the counterclaim for full disclosure of Philips’ comparable agreements raised by Wiko in the appeal proceedings, the Court clarified that a respective right of Wiko does not exist [238] .

Such a right does not arise either from German civil law (Articles 809 and 810 German Civil Code) [238] or Article 102 TFEU [239] . Furthermore, a right for disclosure of comparable agreement can neither be extracted by the SEP holder’s FRAND commitment to ETSI [240] . The Court saw no indication that French law (which is applicable to the ETSI FRAND undertaking) establishes such a right in favour of standards implementers [241] .

C. Other important issues

The Court pointed out that the claims for damages as well as information and rendering of accounts also asserted by Philips in the present proceedings are not subject to the Huawei framework [242] . Moreover, the Court explained that the non-fulfilment of the Huawei obligations by the patent holder poses no limitations on these rights in terms of content [243] . This is particularly true with respect to SEP holder’s claim to request information about expenses and profits from the implementer5 [244] .

  • [209] Philips v Wiko, District Court (Landgericht) of Mannheim, judgment dated 25 November 2016, Case No. 7 O 44/16.
  • [210] Philips v Wiko, Higher District Court of Mannheim, judgment dated 25 November 2016, Case No. 7 O 44/16, cited by http://lrbw.juris.de.
  • [211] Ibid, paras. 37-87.
  • [212] Ibid, para. 88.
  • [213] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C 170/13.
  • [214] Philips v Wiko, Higher District Court of Mannheim, judgment dated 25 November 2016, para. 108.
  • [215] Ibid, para. 107.
  • [216] Ibid, paras. 117 et seqq.
  • [217] Ibid, para. 119.
  • [218] Ibid, paras. 120 et seq.
  • [219] Ibid, para. 120.
  • [220] Ibid, para. 125.
  • [221] Ibid, para. 126.
  • [222] Ibid, para. 127.
  • [223] Ibid, para. 111.
  • [224] Ibid, para. 112.
  • [225] Ibid, paras. 115 and 117.
  • [226] Ibid, para. 115.
  • [227] Ibid, para. 129.
  • [228] Ibid, paras. 131 et seqq.
  • [229] Ibid, paras. 132 et seq.
  • [230] Ibid, para. 135.
  • [231] Ibid, para. 133.
  • [232] Ibid, para. 134.
  • [233] Ibid, paras. 136 et seqq.
  • [234] Ibid, para. 136.
  • [235] Ibid, para. 138.
  • [236] Ibid, para. 131.
  • [237] Ibid, para. 106.
  • [238] Ibid, paras. 157 et seqq.
  • [239] Ibid, paras. 162 et seqq.
  • [240] Ibid, paras. 160 et seq.
  • [241] Ibid, para. 161.
  • [242] Ibid, para. 143.
  • [243] Ibid, para. 144.
  • [244] Ibid, paras. 145 et seqq.

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 3 December 2018

IP Bridge v HTC

LG Mannheim
28 September 2018 - Case No. 7 O 165/16

A. Facts

The Claimant, IP Bridge, is a non-practising entity holding a European patent (German part) which was declared essential to the wireless telecommunications standard LTE (Standard Essential Patent or SEP) developed by the European Telecommunications Standards Institute (ETSI) [398] . The previous holder of the SEP in question had made an undertaking towards ETSI according to Article 6.1 of ETSI IPR Policy to make the patent accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [399] .

The Defendant is a German subsidiary of HTC, a company which manufactures and sells electronic devices worldwide, including mobile phones complying with the LTE standard [400] . The Defendant filed an action for invalidity against the Claimant’s SEP in Germany [400] .

In December 2014, the Claimant contacted the Defendant’s parent company (parent company) suggesting that the parties entered into negotiations regarding a licence for Claimant’s patent portfolio which also included the aforementioned SEP [400] . Subsequently, several licensing offers and counter-offers were made by the Claimant and the parent company respectively [400] . On 29 February 2016, the Claimant sent a letter to the parent company explaining how the LTE standard made use of the technology covered by its SEP inter alia under reference to an attached claims chart [401] . In response, the parent company confirmed that it is willing to obtain a licence, among others, by letter dated 7 September 2016 [402] . However, no licensing agreement was concluded.

On 27 September 2016, the Claimant brought an infringement action against the Defendant before the District Court of Mannheim (Court) requesting for a declaratory judgment confirming Defendant’s liability for damages arising from the use of its SEP as well as for information and rendering of accounts [403] .

On 16 February 2018, during the course of the pending proceedings against the Defendant, the Claimant made a further licensing offer to the parent company [404] . On 11 April 2018, after the parent company had signed a Non-Disclosure Agreement, the Claimant presented existing licensing agreements with third parties concerning its relevant patent portfolio (comparable agreements) to the parent company and requested the latter to respond to its last licensing offer of 16 February 2018 within one week (that is until 18 April 2018) [404] . This deadline was extended for almost three weeks until 7 May 2018 [404] .

On 15 May 2018, the Claimant extended its claims in the ongoing proceedings; in addition to its already pending claims, it sought for injunctive relief and also requested the recall and the destruction of products infringing its SEP (claims for injunction) [404] .

With the present judgment the Court ruled that the Defendant is liable for damages arising from the infringement of the SEP in suit [405] . The Court also ordered the Defendant to render accounts and to provide relevant information to the Claimant [405] . On the other hand, the Court dismissed the claim for injunctive relief and the recall and destruction of infringing products as being unenforceable for the time being [406] .


B. Court’s reasoning

The Court held that the products sold by the Defendant in Germany infringe Claimant’s SEP [407] . Thus, the Defendant is obliged to compensate the damages suffered by the Claimant and the previous holder of the patent in suit [405] . Since the Claimant has no knowledge of the details required for the quantification of the damages suffered, the Defendant is obliged to provide information on relevant uses (starting from the publication of the patent grant) and render accounts for such uses (starting from one month after the publication of the patent grant) [405] .

In the Court’s view, the Defendant cannot raise a defence based on a so-called “patent ambush” against these claims [408] . A “patent ambush” requires that the patent holder deliberately – in terms of a willful fraudulent misconduct – misled the participants in the standardisation process and intentionally prevented the adoption of an alternative technology into the standard [409] . Insofar, it needs to be established (by the defendant) that the disclosure of the patent during the standardisation process would have led to an alternative structure of the standard, which would have avoided making use of the teaching of the patent in suit; the mere theoretical possibility of an alternative technical solution does not suffice for supporting the allegation of a “patent ambush” [409] . The Court held that the Defendant failed to establish such fact [408] . Accordingly, the Court left the question regarding the legal consequences of a “patent ambush” open (obligation to licence royalty-free or just an obligation to offer FRAND licences?) [408] .

Furthermore, the Court stressed out that the FRAND undertaking given by the previous holder of the SEP in suit has no impact on both the scope and the enforceability of the above claims [410] .

In the Court’s eyes, the Claimant is bound to the FRAND undertaking made by the previous holder of the SEP in suit towards ETSI [411] . The wording of Article 6.1. ETSI IPR Policy establishes a respective assumption [411] . In any case, the assignee of a SEP abuses its market power, if it is aware of the FRAND-undertaking of its predecessor, but, nevertheless, refuses to fulfil the obligations arising from it [401] . The assignee of an SEP cannot draw benefits from the inclusion of its patent into a standard, without being bound to the FRAND commitment of its predecessor, since the latter enabled the inclusion of the SEP in the standard in the first place [401] . Indeed, antitrust law and particularly Article 101 of the Treaty for the Functioning of the EU (TFEU) obliges standard development organisations to make the inclusion of patented technology into a standard subject to a FRAND commitment of the patent holder, in order to secure that essential technology will be accessible to users [412] .

Having said that, the Court made clear that SEP holder’s claims for information and rendering of accounts are not limited by the FRAND undertaking [410] . Even if one would assume that such undertaking limits the SEP holder’s claims for damages to the amount of the FRAND royalty (which the Court left undecided), the patent holder would, nevertheless, be entitled, in principle, to information regarding the use of its SEP [410] .

In addition, the Court explained that a FRAND undertaking has also no influence on the enforceability of the claims for damages (on the merits), information and rendering of accounts asserted by the Claimant [410] . In particular, these claims are not subject to the conduct requirements set forth by the Court of Justice of the European Union (CJEU) in the matter Huawei v ZTEHuawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-130/13. (Huawei requirements or framework) with respect to dominant undertakings in terms of Article 102 TFEU [414] .

The opposite is, on the other hand, the case with respect to the claims for injunction asserted by the Claimant. These claims are not enforceable for the time being, since the Claimant failed to fully comply with the Huawei requirements [415] .

Regarding to the SEP in suit, the Court ruled that the Claimant has a dominant market position in terms of Article 102 TFEU: The patent is essential to the LTE standard, which, in turn, cannot be substituted by an alternative standard (from the users’ point of view) [416] .

Looking at the negotiations between the parties involved, the Court did not see any flaws in the parties’ conduct with respect to the first two steps of the framework; the Claimant had effectively notified the Defendant about the infringing use of its SEP and the Defendant (in fact, its parent company) had effectively declared its willingness to obtain a licence covering also the SEP in suit [401] . In this context, the Court pointed out that the SEP holder’s obligation to notify the user of the infringing use of its SEP is also met, when the respective notification is addressed to the parent company of the (alleged) infringer (as is was the case here, especially with the Claimant’s letter to the parent company dated 29 February 2016) [401] .

However, the Court held that the Claimant failed to fulfil its consequent obligation under the Huawei framework, namely to make a FRAND licensing offer to the Defendant (respectively its parent company) [417] .

The Court considered only two offers made by the Claimant to the Defendant’s parent company prior to the extension of its claims in the pending proceedings on 15 May 2018 (since the other offers made were either indisputably not FRAND or were not produced by the Claimant in trial) [402] .

An offer made in February 2016 was found not to be FRAND in terms of content, since it contained a clause, according to which the licensee was obliged to pay the full amount of the royalties agreed, even if only one patent of the licensed portfolio was valid and used by the Defendant [402] .

The Court reached the same conclusion also with respect to the further offer made by the Claimant on 11 April 2018 (that is short before the Claimant extended its claims in the proceedings, adding the claims for injunction) [418] . The Court held that this offer did not comply with the Huawei requirements, since the Defendant was not given sufficient time to assess the offer and eventually make a counter-offer to the Claimant, before the latter asserted the claims for injunction against him in the proceedings [402] .

In the Court’s eyes, a licensing offer complying with the Huawei requirements is only given, when the SEP holder provides the SEP user with all information required from assessing the FRAND conformity of the offer [419] . Only then, the SEP user’s consequent obligation under the Huawei framework to make a FRAND counter-offer to the SEP holder is triggered [419] . In particular, the SEP holder must make the requested royalty amount transparent with reference to a standard licensing programme implemented in the market or to rates actually paid by third parties to a patent pool, covering also patents relevant to the standard [419] . For the assessment of the non-discriminatory character of the offer, information on comparable agreements is needed [419] .

Based on the above considerations, the Court held that the period of 22 workdays between the presentation of the comparable agreements to the parent company (11 April 2018) and the assertion of the injunction claims in the proceedings by the Defendant (15 May 2018) was too short for a competent assessment of the Claimant’s licensing offer [420] . The fact that the Defendant (and/or its parent company) would have had sufficient time to react to the Claimant’s offer until the end of the oral hearings in mid-July 2018 was considered irrelevant by the Court in this respect [420] . The Huawei framework aims at preventing the situation, in which the SEP user agrees to unfavourable licensing conditions under the pressure of pending infringement proceedings (defined by the Court as “patent hold-up”) [420] . In case that the SEP holder has not fulfilled the Huawei requirements prior to the initiation of proceedings (as it was the case here), it has to make sure that the parties can again negotiated without the pressure of an ongoing trial, for instance by asking the court to stay its proceedings pursuant to Article 251 of the German Court of Civil Procedure [421] . Otherwise, the initiation of the infringement proceedings shall be considered as abusive in terms of antitrust law [421] . In the present case, the Claimant chose to not ask for a stay in the proceedings, ignoring the Court’s respective indication [421] .


C. Other issues

The Court explained that the registration in the patent register allows the registered patent holder to assert the patent rights in court [422] . On the other hand, it does not define the ownership of the patent in material legal terms [423] . Nevertheless, the patent registration establishes an assumption of ownership which must be rebutted by the defendant in infringement proceedings based on concrete indications [424] .

Besides that, the Court pointed out that a stay in the infringement proceedings (pursuant to Article 148 of the German Code of Civil Procedure) until the end of parallel invalidation proceedings concerning the patent(s) in suit can be considered only under special circumstances [425] . As a rule, it must be expected with a sufficient degree of probability that the patent(s) in suit will be invalidated [425] . The Defendant failed convince the Court that this was the case with the SEP in suit [425] .

  • [398] District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, page 2 and 23.
  • [399] Ibid, page 23 et seq.
  • [400] Ibid, page 5.
  • [401] Ibid, page 25.
  • [402] Ibid, page 26.
  • [403] Ibid, pages 5 et seq.
  • [404] Ibid, page 6.
  • [405] Ibid, page 19.
  • [406] Ibid,page 23.
  • [407] Ibid, pages 16 et seqq.
  • [408] Ibid, page 20.
  • [409] Ibid, page 21.
  • [410] Ibid, page 22.
  • [411] Ibid, page 24.
  • [412] Ibid, pages 24 et seq.
  • [413] Huawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-130/13.
  • [414] District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, pages 22.
  • [415] Ibid,pages 23 and 25.
  • [416] Ibid, page 23.
  • [417] Ibid, pages 23 and 25 et seq.
  • [418] Ibid, pages 26 et seqq.
  • [419] Ibid, page 27.
  • [420] Ibid, page 28.
  • [421] Ibid, page 29.
  • [422] Ibid, page 10.
  • [423] Ibid, pages 10 et seq.
  • [424] Ibid, page 11.
  • [425] Ibid, page 30.

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 6 June 2019

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

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

A. Facts

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

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

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

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

In the Netherlands, Philips had brought an action against Asus before the District Court of The Hague (District Court), requesting inter alia for an injunction. The District Court dismissed Philips’s request for an injunction based on the EP 511 patent. [455] Philips appealed before the Court of Appeal of The Hague (Court of Appeal).

With the present judgment, the Court of Appeal upheld the validity and essentiality of the EP 511, rejected Asus’s FRAND defence based on Article 102 TFEU, and entered an injunction against Asus for its products infringing the patent in suit. [456]

B. Court’s Reasoning

The Court of Appeal dismissed Asus’s invalidity challenge, upholding the novelty and inventiveness of the EP 511 patent. [457] Moreover, the Court of Appeal found the patent essential and infringed. [458]

The Court of Appeal went on to examine the claims put forward by Asus, namely that Philips, in initiating infringement proceedings requesting injunctive relief, had violated its contractual FRAND obligations towards ETSI and infringed Article 102 TFEU, by failing to meet the requirements set forth in the decision of the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE (Huawei requirements) [459] . In particular, Asus argued that Philips (a) failed to properly and timely disclose the EP 511 in accordance with ETSI IPR Policy, and (b) that Philips failed to comply with the Huawei requirements, because it did not clarify why its proposed terms were FRAND.

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

Starting with the general purpose underlying the ETSI disclosure obligation, the Court of Appeal found that it was not—as Asus maintained—to allow ETSI participants to choose the technical solutions with the lowest cost, since ETSI standards seek to incorporate the best available technologies. [460] Rather, the purpose of the declaration obligation was to reduce the risk of SEPs being ex post unavailable to users. [461]

Having said that, the Court of Appeal found that the general blanket declaration by Philips was sufficient to fulfil its obligations under the ETSI IPR Policy. In this regard, the Court of Appeal dismissed the argument raised by Asus that Philips’s late declaration of specific SEPs would result in over-declaration: on the contrary, the Court of Appeal held, early disclosure is more likely to include patents that are not in fact essential to ETSI standards. [462] Moreover, the Court of Appeal pointed out that Philips’s blanket declaration did not infringe Article 101 TFEU, as per the Horizontal Guidelines by the EU Commission, blanket declarations are also an acceptable form of declaration of SEPs for the purposes of EU competition law. [463]

Having dismissed Asus’s first ground for a FRAND defence, the Court of Appeal assessed the compliance of both parties with the Huawei requirements in their negotiations. The Court of Appeal noted, as a preliminary point, that the decision of the CJEU in Huawei did not develop a strict set of requirements such that patent holders that failed to abide by they would automatically infringe Article 102 TFEU. [464] For such a finding an overall assessment of the particular circumstances of the case and the parties’ conduct is necessary.

The Court of Appeal then examined Philips’s compliance with the first Huawei requirement, the proper notification to the infringer. According to the Court of Appeal, the case record showed that Philips had clearly discharged its burden to notify Asus, by submitting a list of patents that were allegedly infringed, the standards to which they were essential, and by declaring its willingness to offer a licence on FRAND terms. [465] Moreover, in further technical discussions, Philips provided more technical details on its portfolio and licensing program, including claim charts and its standard licensing royalty rate. [466] However, Asus failed to demonstrate its willingness to obtain a licence on FRAND terms. The Court of Appeal found that talks commenced always at Philips’s initiative, and that Asus was not represented in these talks by technical experts able to evaluate Philips’s portfolio. [467] The technical issues raised by Asus in negotiations were merely pretextual with a view to stall the process, or as the Court of Appeal put it a ‘behaviour also referred to as “hold-out.”’ [468]

Although the Court of Appeal held that at this point Asus was already in breach of its obligations under Huawei and thus Philips was entitled to seek an injunction, the Court went on to discuss compliance with the further steps in the Huawei framework. The Court of Appeal found that Philips’s proposal of its standard licensing agreement fully satisfied the CJEU requirements in that it was specific and explained how the how the proposed rate was calculated. [469] Moreover, the Court of Appeal held that the counteroffer submitted by Asus after the initiation of proceedings in Germany did not in itself alter the conclusion that Philips was compliant with Huawei, and thus entitled to seek an injunction. [470] Finally, the Court rejected the request on behalf of Asus to access comparable licences signed by Philips to assess the latter’s FRAND compliance. According the Court, neither the ETSI IPR Policy nor Article 102 TFEU and the Huawei framework provide a basis for such a request. [471]

  • [455] Koninklijke Philips N.V. v. Asustek Computers INC, District Court of the Hague, 2017, Case No. C 09 512839 /HA ZA 16-712.
  • [456] Koninklijke Philips N.V. v. Asustek Computers INC, Court of Appeal of The Hague, judgment 7 May 2019, dated Case No. 200.221.250/01.
  • [457] ibid, paras 4.63, 4.68, 4.75, 4.80, 4.82, 4.93, 4.100, and 4.117.
  • [458] ibid, paras 4.118 et seq.
  • [459] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case-No. C-170/13.
  • [460] Koninklijke Philips N.V. v. Asustek Computers INC, Court of Appeal of The Hague, judgment 7 May 2019, dated Case No. 200.221.250/01, paras 4.153 et seq.
  • [461] ibid, paras 4.155 and 4.157.
  • [462] ibid, para 4.159.
  • [463] ibid, para 4.164.
  • [464] ibid, para 4.171.
  • [465] ibid, para 4.172.
  • [466] ibid.
  • [467] ibid, paras 4.172-4.179.
  • [468] ibid, para 4.179.
  • [469] ibid, para 4.183.
  • [470] ibid, para 4.185.
  • [471] ibid, paras 4.202 et seq.

Updated 6 April 2020

Sisvel v Sun Cupid, District Court of The Hague

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

This case law summary was also published by The IPKat.

A. Facts

Sisvel International S.A. (Sisvel) licenses patent EP 2 139 272 B1 (EP 272) as part of its LTE/LTE-A Patent Pool [1] . The LTE/LTE-A Patent Pool is a subsection of Sisvel’s MCP licensing program [2] . EP272 has been declared as essential to the 4G-LTE standard [3] .

Sun Cupid Technology (HK) Ltd. develops and sells, through exports from China and imports in European countries, smartphones that implement the LTE technology [4] . On 22 May 2015, Sisvel notified Sun Cupid Technology (HK) Ltd about its licensing program [1] . Sun Cupid did not want to execute a license under the LTE/LTE-A Patent Pool [2] .

Sisvel filed proceedings against Sun Cupid Technology (HK) Ltd., the parent company [5] , and its subsidiaries, Sun Cupid (Shen Zhen) Electronic Ltd., Nuu Limited, Nuu Mobile (HK) Limited , Neotic Inc., Nuu Mobile UK Limited, and Pyramid Ltd. Before the District Court of the Hague (Court). Sisvel sought an injunction against Sun Cupid and its subsidiaries for infringement of EP 272 [6] , as well as the interdiction for Sun Cupid and its subsidiaries to directly or indirectly infringe the patent EP 272 [7] , act unlawfully against Sisvel through direct or indirect infringement [8] , the notification of infringement to resellers [9] , market participants and professional users, the recall and destruction of products [10] , the removal of infringing products from the websites [11] , a notification in Dutch newspapers [12] and on relevant websites [13] , a compensation for damages [14] and the provision of the list of resellers and models as well as their price [15] .

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

B. Court’s reasoning

Injunction and recall of products

To avoid execution issues, the Court determined that infringing products are products that infringe the Dutch part of EP 272 and support or implement the LTE standard [16] . The Court granted the injunction to Sisvel [17] .

But it rejected Sisvel’s claims based on unlawful handling for lack of interest [18] : Sisvel did not demonstrate that those claims would lead to broader measures or interdictions than those based on direct or indirect infringement [2] .

With respect to the notification and recall of products requested by Sisvel, the Court limited it to resellers [19] : Sisvel did not sufficiently indicated who were the market participants who should be notified about the infringement and required to return the products [20] . The Court also highlighted that the recall of products was mostly focused on resellers and measures against customers would not be taken into account [2] .

Compensation for damages, penalty fee and process costs.

Regarding damages, the Court used Sisvel’s notification to Sun Cupid Technology (HK) Ltd. dated 22 May 2015 as the starting point to calculate the compensation for damages [5] . As all defendants cooperate for the commercialisation of infringing products and Sun Cupid Technology (HK) Ltd is the parent company of all other defendants, the Court considered that this date applies to all defendants as starting point for damages calculation [2] . Sisvel’s request to have an independent accountant to calculate the profits made by Sun Cupid was rejected by the Court because it could lead to execution problems, as accountants have to comply with rules that prevent them from drawing conclusions that can confirm the accuracy of their task [21] . Therefore, the Court ordered Sun Cupid to provide Sisvel with the profits on infringing products since 22 May 2015 [22] and either compensate Sisvel for the damages occurred or the profits made on the infringing products, at Sisvel’s choice [23] .

Sisvel asked for a penalty payment of either €10,000 per day where the defendants do not comply with the decision or €1,000 per product, at its choice [24] . The Court decided that the penalty fee per product would be applicable only when the violation of the decision occurs per product and would be capped to the process costs amounts [18] .

Sun Cupid has to pay for the process costs [25] .

Jurisdiction

The Court assessed its competence for Sisvel’s principal claim against defendants not based in the Netherlands [26] on Article 7.2 and 6.1 [27] of the Brussels I Regulation [28] . The competence is limited to the Netherlands [27] .

  • [1] Court of The Hague, judgement dated 2 March 2020, par. 2.4.2
  • [2] Ibidem
  • [3] Court of The Hague, judgement dated 2 March 2020, par. 2.4.1
  • [4] Court of The Hague, judgement dated 2 March 2020, par. 2.4.3
  • [5] Court of The Hague, judgement dated 2 March 2020, par. 5.7
  • [6] Court of The Hague, judgement dated 2 March 2020, par. 2.1 (I) and 2.2. (i)
  • [7] Court of The Hague, judgement dated 2 March 2020, par. 2.2. (ii)
  • [8] Court of The Hague, judgement dated 2 March 2020, par. 2.1 (II) and 2.2. (ii)
  • [9] Court of The Hague, judgement dated 2 March 2020, par. 2.2 (iii)
  • [10] Court of The Hague, judgement dated 2 March 2020, par. 2.2 (iv) and (v)
  • [11] Court of The Hague, judgement dated 2 March 2020, par. 2.2 (vi)
  • [12] Court of The Hague, judgement dated 2 March 2020, par. 2.2 (vii)(a)
  • [13] Court of The Hague, judgement dated 2 March 2020, par. 2.2 (vii)(b) and ( c)
  • [14] Court of The Hague, judgement dated 2 March 2020, par. 2.1 (III) and 2.2 (xiv)
  • [15] Court of The Hague, judgement dated 2 March 2020, par. 2.2 (xv) and (xvi)
  • [16] Court of The Hague, judgement dated 2 March 2020, par. 5.4
  • [17] Court of The Hague, judgement dated 2 March 2020, par. 6.3
  • [18] Court of The Hague, judgement dated 2 March 2020, par. 5.5
  • [19] Court of The Hague, judgement dated 2 March 2020, par. 6.4
  • [20] Court of The Hague, judgement dated 2 March 2020, par. 5.6
  • [21] Court of The Hague, judgement dated 2 March 2020, par. 5.8
  • [22] Court of The Hague, judgement dated 2 March 2020, par. 6.9
  • [23] Court of The Hague, judgement dated 2 March 2020, par. 6.8
  • [24] Court of The Hague, judgement dated 2 March 2020, par. 2.1 (III) and 2.2 (xvii)
  • [25] Court of The Hague, judgement dated 2 March 2020, par. 5.11
  • [26] Court of The Hague, judgement dated 2 March 2020, par. 5.3
  • [27] Court of The Hague, judgement dated 2 March 2020, par. 3.1
  • [28] Regulation (EU)No. 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters

Updated 4 June 2020

Sisvel v Xiaomi, Court of Appeal of The Hague

Dutch court decisions
17 March 2020 - Case No. C/09/573969/ KG ZA 19-462

A. Facts

Sisvel International S.A. (Sisvel) is the parent company of the Sisvel group [183] . In 2012, Sisvel acquired EP 1 129 536 B1 (EP 536) [184] . EP 536 relates to the EGPRS technology, which forms part of a GSM telecommunications standard that implements EDGE [185] .

Xiaomi is a manufacturer of mobile phones with headquarters in China [186] .

On 10 April 2013, Sisvel submitted to the European Telecommunication Standards Institute (ETSI) a declaration under which it committed to make a list of patents, including EP 536, accessible to standard users under Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions (FRAND commitment) [187] .

On 15 October 2013, Sisvel notified Xiaomi about its Wireless Patent Portfolio [185] . On 16 July 2014, Sisvel sent a letter to Xiaomi, inviting Xiaomi to contact Sisvel regarding to the conclusion of a licence [185] . Further e-mails were sent to Xiaomi on 3 December 2014, 4 December 2014 and 5 March 2015 [185] .

In an article dated 29 March 2019 published on nu.nl [188] and ad.nl [188] , Xiaomi announced that it would enter the Dutch market with online shops and physical stores [189] .

On 23 April 2019, Sisvel initiated legal proceedings against Xiaomi before the English High Court of Justice in London (English proceedings) [190] . Sisvel requested the court to declare that the terms and conditions of the MCP Pool Licence, under which EP 536 as part of the Wireless Patent Portfolio is licensed [191] , are FRAND or alternatively, to determine FRAND licensing terms and conditions and find three patents (including EP 536) to be valid and infringed [190] .

On 30 August 2019, Xiaomi filed two legal actions against Sisvel in Beijing [192] . Xiaomi asked, in one of the cases, the court to determine FRAND terms and conditions for a licence limited to China and, in the other case, to declare that Sisvel had abused its dominant position [185] .

In the Netherlands, Sisvel requested a preliminary injunction against Xiaomi, until Xiaomi accepts Sisvel’s offer to go to arbitration, as well as the recall and destruction of products, information over profit made and additional documentation with respect to resellers, a penalty fee, and – as a subsidiary motion – the removal of the EGPRS/EDGE extension of the GSM functionality [193] . With judgment dated 1 August 2019, the Court of The Hague rejected Sisvel’s claims in first instance and sentenced Sisvel to the process costs, in view of the balance of interests between the parties and the complexity of the case [194] .

Sisvel appealed the first instance decision on 29 August 2019 [195] . During the course of the appeal proceedings, on 22 January 2020, Xiaomi deposited funds [196] on an escrow account held by Intertrust [197] . With the present judgment, the Court of Appeal of The Hague (Court) rejected Sisvel’s appeal and sentenced Sisvel to higher process costs [198] .

B. Court’s reasoning

The Court focused on the balance of interests between the parties.

Injunction

The Court considered that the harm caused to Sisvel by the infringement of EP 536 was limited, taking into account only infringing uses in the Netherlands, as well as the fact that EP 536 is only one out of many patents held by Sisvel, and almost expired [199] . Considering that Sisvel’s business model is to conclude licences, Sisvel did not have to fear damages caused by free riding on the cellphone market, but only damages resulting from denied profits under a license [200] . Therefore, only financial damages could incur which the Court considers to be relatively simply compensated at a later point in time [201] . Additionally, Xiaomi had provided security [201] . The security addresses the problem raised by Sisvel, i.e. Xiaomi becoming insolvent and unable to pay damages for patent infringement [185] .

With respect to Xiaomi’s interest, the Court noted that an injunction would force Xiaomi to stop sales, close shops in the Netherlands and stop its distribution contracts with customers [202] . The consequences would thus be severe and could hardly be undone, even if Xiaomi could resume sales again after the expiration of EP 536 [185] . The only way for Xiaomi to avoid those consequences would be to take a license, which also brings important consequences. Indeed, the MCP license offered by Sisvel is not only for EP 536 but for more than 1000 patents in all countries worldwide [203] . By accepting a licence Xiaomi would be irrevocably bound to comply with it, including with its rate [204] . The stop of sales in the Netherlands would create loss of profits for Xiaomi and worsen its relationships with its customers [185] . The Court highlighted such damages are difficult to evaluate as Xiaomi is still building its market position and there are many other players on the market [185] .

The Court further argued that the case was complex for a preliminary decision, because it required an opinion on the validity and scope of a patent protecting a complex technology as well as an assessment of Xiaomi’s FRAND defence, for which parties have arguments over many facts and the principles to determine a FRAND rate [205] . Additionally, the court that would be entrusted with the main proceedings could have a different opinion on the validity of the technology and the FRAND defence [185] . Therefore, the Court concluded there was no reason, even if the patent was valid and the FRAND defence had to be rejected, to force Xiaomi to leave the Dutch market or to take a licence from Sisvel [185] . The Court found that Xiaomi’s interest to reject the request for a preliminary injunction was stronger than Sisvel’s interest to stop the continuation of the infringement [205] .

The Court also rejected Sisvel’s claim that Xiaomi was an unwilling licensee [206] . Such claim could be used to invalidate Xiaomi’s FRAND defence, but the Court stated that the examination of Xiaomi’s FRAND defence had to be separated from the balance of interests’ assessment in preliminary proceedings [185] .

Reviewing Sisvel’s request based on the EU enforcement directive 2004/48 and Article 9 of such directive did not lead the Court to another conclusion: in light of the enforcement directive, the injunction would not be proportionate in this case, therefore the Court had no obligation to use Article 9 of the EU enforcement directive [207] .

Even in combining the application of Article 3 of the EU enforcement directive, Article 5, 17 and 47 of the European Charter of Fundamental Rights the Court came to the same interpretation: an injunction for the limited remaining time of EP 536 would not help [208] . The lack of an injunction would not unreasonably delay the case as the Court argued that the effective remedy would be compensation for the damages in main proceedings [185] . Additionally, the Court found this conclusion to be supported by the fact that Sisvel had only initiated main proceedings against other parties in the Netherlands and abroad [185] .

Sisvel’s claim that the lack of an injunction would create an unfair playing field between market participants was also rejected by the Court [209] . The Court stated that Xiaomi’s security and the possibility for Sisvel to get compensation for damages in main proceedings created an equal playing field [185] . Sisvel had relied on a decision of the Dutch Supreme Court, according to which a patent can only be effectively protected if there is a quick stop to further infringement [210] . The Court explained that this is the case only when the damages for patent infringement are difficult to determine; this was, however, not the case here [185] .

Security

The Court rejected Sisvel’s claim that the deposit on the escrow account had been made in such a way that it would be impossible for Sisvel to get paid [211] . Indeed, the Court underlined that Sisvel can unilaterally reclaim payment, especially if a FRAND rate is determined in the English proceedings [185] . Moreover, Xiaomi declared itself to be ready to adapt the amount placed on the escrow account in close cooperation with Sisvel, if Sisvel wishes to do so or has requests about the escrow account [185] . The Court noted it did not seem Sisvel made use of this possibility to adapt the amount [185] .

The amount deposited for fees under Sisvel’s MCP Patent Licence was considered as sufficient by the Court for the products sold in the Netherlands for the lifetime of EP 536 [212] . The Court added that this would still be the case even in the event that Sisvel wanted to increase the licensing rate for non-compliant users or to account for profits based on the infringement [185] . The Court underlined that in the Huawei v. ZTE decision of the CJEU [213] , the security had to be “appropriate”, which depends on the context of the FRAND defence [185] .

Recall and destruction of products

Sisvel’s request to have infringing products recalled and destroyed, as well as all mentions about those products removed, resellers informed and profits provided was rejected by the Court [214] . Sisvel had asserted the same urgent interest as for the preliminary injunction to support this request: stopping and preventing infringement of EP 536. Since the request for a preliminary injunction failed, the further claims asserted by Sisvel had to follow the same fate [185] . The Court stated that there was no urgent interest to have Xiaomi disclosing its profits, or at least that was more important than having Xiaomi keeping this information confidential [185] . Sisvel did also not explain why profits data should be disclosed in advance of the main proceedings [185] .

C. Other important issues

The Court also denied Sisvel’s request to grant a preliminary injunction, as long as Xiaomi did not agree to initiating arbitration procedures [215] . The Court argued that if Xiaomi would be forced to have an arbitration tribunal determining the terms and conditions for all patents of the MCP Patent Licence for the whole world, this would deprive Xiaomi of its fundamental right of access to a court [185] . The acceptance of such arbitration proposal without conditions would have drastic consequences on Xiaomi’s position [185] .

  • [183] Court of Appeal of The Hague, judgement dated 17 March 2020, page 2, par.2.2.
  • [184] Court of Appeal of The Hague, judgement dated 17 March 2020, page 2, par.2.4.
  • [185] Ibidem
  • [186] Court of Appeal of The Hague, judgement dated 17 March 2020, page 2, par.2.8.
  • [187] Court of Appeal of The Hague, judgement dated 17 March 2020, page 2, par.2.5.
  • [188] Dutch newspaper.
  • [189] Court of Appeal of The Hague, judgement dated 17 March 2020, page 4, par.2.11.
  • [190] Court of Appeal of The Hague, judgement dated 17 March 2020, page 4, par.2.12.
  • [191] Court of Appeal of The Hague, judgement dated 17 March 2020, pages 3 and 4, par.2.7 and 2.12.
  • [192] Court of Appeal of The Hague, judgement dated 17 March 2020, page 4, par.2.13.
  • [193] Court of Appeal of The Hague, judgement dated 17 March 2020, page 4, par.2.14.
  • [194] Court of Appeal of The Hague, judgement dated 17 March 2020, pages 4 and 5, par.3.3.
  • [195] Court of Appeal of The Hague, judgement dated 17 March 2020, page 2, par.1.
  • [196] Amount has been redacted.
  • [197] Court of Appeal of The Hague, judgement dated 17 March 2020, page 5, par.3.5.
  • [198] Court of Appeal of The Hague, judgement dated 17 March 2020, pages 10 and 11, par. 4.24 and following.
  • [199] Court of Appeal of The Hague, judgement dated 17 March 2020, page 5, par.4.3.
  • [200] Court of Appeal of The Hague, judgement dated 17 March 2020, pages 5 and 6, par.4.3.
  • [201] Court of Appeal of The Hague, judgement dated 17 March 2020, page 6, par.4.3.
  • [202] Court of Appeal of The Hague, judgement dated 17 March 2020, page 6, par.4.7.
  • [203] Court of Appeal of The Hague, judgement dated 17 March 2020, pages 6 and 7, par.4.8.
  • [204] Court of Appeal of The Hague, judgement dated 17 March 2020, page 7, par.4.9.
  • [205] Court of Appeal of The Hague, judgement dated 17 March 2020, page 7, par.4.11.
  • [206] Court of Appeal of The Hague, judgement dated 17 March 2020, page 7, par.2.12.
  • [207] Court of Appeal of The Hague, judgement dated 17 March 2020, page 8, par.4.14.
  • [208] Court of Appeal of The Hague, judgement dated 17 March 2020, page 8, par.4.15.
  • [209] Court of Appeal of The Hague, judgement dated 17 March 2020, page 8, par.4.16.
  • [210] Court of Appeal of The Hague, judgement dated 17 March 2020, pages 8 and 9, par.4.17.
  • [211] Court of Appeal of The Hague, judgement dated 17 March 2020, page 6, par. 4.5.
  • [212] Court of Appeal of The Hague, judgement dated 17 March 2020, page 6, par. 4.6.
  • [213] Court of Justice of the European Union, Huawei Technologies Co.Ltd. v. ZTE Corp. and ZTE Deutschland GmbH, 16 July 2015.
  • [214] Court of Appeal of The Hague, judgement dated 17 March 2020, page 9, par. 4.2.1.
  • [215] Court of Appeal of The Hague, judgement dated 17 March 2020, page 9, par.4.18.

Updated 3 February 2021

HEVC (Dolby) v MAS Elektronik

LG Düsseldorf
7 May 2020 - Case No. 4c O 44/18

A. Facts

The claimant, Dolby, operates in the field of audio and video innovation and is the owner of a portfolio of related patents, including a European Patent concerning the encoding and decoding as well as the sequence of digital images. This patent reads on the HEVC standard (Standard Essential Patent, or SEP). Dolby has contributed the patent in question to a pool administered by HEVC Advance, which offers licences to standards users for a significant portfolio of related SEPs of several patent holders.

The Defendant, MAS Elektronik AG (MAS), operates in the home entertainment field and sells articles such as television sets and receivers (set-up boxes, or STBs). These devices are compatible with the DVB-T/T2 standard that, in turn, makes use of the encoding method according to the HEVC standard.

In 2017, HEVC Advance sent a notification informing MAS about the infringement of SEPs included in the pool. On 7 November 2017, HEVC Advanced offered a licence to MAS on basis of its standard licensing agreement.

Since no agreement was reached, Dolby filed a lawsuit against MAS before the District Court of Düsseldorf (Court). Dolby initially moved for a declaratory judgement confirming MAS' liability for damages on the merits and also asserted relevant claims for information. The action was later extended. Additionally, Dolby requested injunctive relief as well as recall and destruction of infringing products.

On 11 July 2018, after the action was filed, Dolby directly approached MAS as well. It shared a list of patents included in its SEP portfolio as well as 'claim charts', mapping a number of patents to the relevant parts of the standard. Dolby also submitted an offer for a bilateral portfolio licence to MAS which the latter did not accept.

In January 2019, MAS presented a counteroffer to HEVC Advance, which included an amount for settlement the past uses. However, MAS did not render accounts for past uses nor provided security.

On 7 May 2020, the Court rendered a decision in favour of Dolby and ordered MAS to (i) refrain from offering or supplying devices and/or means that infringe Dolby's patent in Germany, under penalty up to EUR 250,000 for each case of infringement; (ii) render accounts and information regarding infringing products; (iii) surrender for destruction any infringing product in its possession and (iv) recall infringing products from the market. The Court also recognised MAS' liability to pay for past and future damages.


B. Court's reasoning

The Court found that Dolby was entitled to assert claims arising from the patent-in-suit. The respective patent application was transferred before grant and Dolby was registered as owner in the Patent Register at the moment the patent was granted. MAS did not present any reason to question the validity of the transfer of the patent application to Dolby. [625]

Furthermore, the Court held that the patent-in-suit is essential (and not only optional) to the improvement process of encoding and decoding of images under the HEVC standard and, therefore, infringed by the devices manufactured and sold by MAS. [626]


Abuse of dominant market position

Having said that, the Court explained that by asserting claims for injunctive relief as well as recall and destruction of infringing products before court, Dolby had not abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) [627] .

In the eyes of the Court, Dolby holds a dominant position [628] . The Court highlighted that owning a patent, even a standard-essential patent, does not constitute per se a condition for market dominance [629] . That must be assessed case by case. A dominant position will be, as a rule, given if the use of a SEP is considered a pre-requisite to enter a downstream market. This is true also when the SEP is needed for offering competitive products in the downstream market. [629] In the present case, the implementation of the HEVC was required to make a competitive offering in the STB market [630] .

Notwithstanding the above, the Court found that Dolby had not abused its dominant market position, considering that it had fulfilled the obligations set forth by the Court of Justice the EU (CJEU) in the matter Huawei v ZTE (Huawei judgment or framework) [631] .


Notification of infringement

The required notification of the infringement by the patent holder was properly done. The Court understood that HEVC Advance, as the pool administrator, was entitled to do such notification on behalf of the patent holders that contributed patents to the pool. There is nothing in the Huawei judgment that suggests otherwise. [632]

The Court explained that the notification must, at least, include the publication number of the patent-in-suit and also indicate the infringing products and the infringing act(s) of use. [633] The notification does not need to contain a detailed (technical or legal) analysis, with reference to standards or claim features, but only present sufficient information that enables the other party to assess the infringement accusation made against it. [633]

In this case, the notification initially sent by HEVC Advance to MAS was sufficient in terms of content, since it specified the infringing products, and referred to HEVC Advance's patent portfolio and its website containing additional information. The fact that no patent numbers were mentioned was not considered harmful, since this information is publicly available in the pool's website. [634] Moreover, the Court highlighted that the notification can be a mere formality, if knowledge of the infringement by the implementer can be assumed. In such case, arguing that the notification was flawed, can be considered abusive, as it was the case here. [635]

Besides the notification made by HEVC Advance, the Court found that Dolby had also made a sufficient notification itself by the letter sent to MAS on 11 July 2018. [636] The letter fulfilled all requirements in terms of content. The fact that it was sent only after the action was filed was not harmful, since MAS had been already adequately informed by HEVC Advance before.Ibid, para. 759.

Willingness to obtain a licence

Looking at the conduct of MAS after receipt of the notifications of infringement, the Court reached the conclusion that MAS had sufficiently declared willingness to enter into a pool licence with HEVC Advance. [637] On the contrary, the Court took the view that MAS had not acted as a willing licensee with respect to Dolby's subsequent offer for a bilateral licence. [638]

The Court explained that, in its licensing request towards the SEP holder, the standards implementer must express its 'serious' willingness to conclude a licensing agreement on FRAND terms [639] . For this, no strict requirements apply, in terms of content or form; moreover, also an 'implicit behaviour' can suffice [640] . The implementer is, however, required to react in due course. [641] Furthermore, 'willingness' must still exist when the patent holder makes his licensing offer [639] .

The Court held that MAS had expressed willingness to take a pool license from HEVC Advance –although no express request was made–, since "immediately" after receipt of the notification of infringement, MAS started a correspondence with HEVC Advance with the goal to initiate negotiations. [642]

On the other hand, MAS had not been willing to obtain a bilateral licence from Dolby. [636] The Court emphasized that the whole conduct of the implementer must be assessed; a 'genuine' willingness to obtain a license must be demonstrated. [643] This is not given, when -as it had been the case here- the implementer only poses repetitive questions that do not present any constructive remarks and, therefore, do not lead to any progress in the negotiation. [644] In addition to that, it could be expected that a licensee willing to sign a bilateral agreement with an individual pool member, will have an interest to also engage in discussions with further pool members, especially for assessing the total 'economic burden' for its products, in comparison with a pool licensing agreement. [645] MAS refrained from doing that. What is more, it made clear in the proceedings that it was only interested in a pool licence.Ibid, para. 765.

SEP holder's offer

Since the Court held that MAS had adequately expressed willingness to sign a pool licence with HEVC Advance, it moved on to examine, whether HEVC Advance's licensing offer to MAS based on its standard licensing agreement was in line with the Huawei framework. Since the Court reached the conclusion that MAS had not been willing to enter into a bilateral licence with Dolby, it refrained from examining the compliance of Dolby's offer with the Huawei judgment in detail.

The Court found that the offer made by HEVC Advance met the Huawei requirements. In terms of form, the fact that the standard agreement sent to MAS had not been signed did not cause any concerns. [646] In the Court's view, the CJEU requires that the SEP holder's offer contains all usual terms of a licensing agreement, however, no binding offer that could lead to the conclusion of a licence through sole acceptance by the implementer is needed. [647]

Furthermore, HEVC Advance had sufficiently explained the royalty calculation, in line with the Huawei judgment. [648] If the patent holder has previously granted licenses to third parties, it has to give more or less substantiated reasons, depending on the circumstances of the individual case, why the royalty it envisages is Fair, Reasonable and Non-Discriminatory (FRAND). [649] In case that the SEP holder offers licences exclusively based on a standard licensing agreement, it will, as a rule, suffice to establish the adoption of the licensing programme in practice and to show that the specific offer corresponds to the standard licensing agreement. [650] The more standard licensing agreements signed are shared by the patent holder, the stronger the assumption is, that the offered rates are FRAND. [651]

The Court emphasized that is not necessary to present the full content of all the licensing agreements already concluded, but only the relevant ones, considering clearly delineated product categories. [652] Existing licences with cross-licensing-elements, are not relevant in this context, especially, when the implementer does not have any patents himself, as it was the case here. [653] Accordingly, the Court found that the forty third party agreements disclosed by Dolby in the proceedings were enough in the present case. [654]


Fair and reasonable terms

Looking at the content, the Court found that the terms of the standard licensing agreement offered by HEVC Advance are fair and reasonable. [655] As fair and reasonable can be considered terms offered to a willing party, without exploiting a dominant position. [656] Apart from the royalties, the offer must also prove reasonable with regard to the other terms as well (scope, territory etc.). [656]

Having said that, the Court held that the royalties charged by HEVC Advance's standard licensing agreement are fair and reasonable. [657] An indication of that is the fact, that up to January 2020, more than forty licensees selling products in the same category as MAS had taken a license on the same terms, modified sometimes by 'blended rates'. [658] On the other hand, the fact that lower royalties are charged by a competing patent pool (MPEG LA) does not make the HEVC Advance's rate unreasonable, as FRAND is considered rather to be a range than a specific amount. [659]

Furthermore, the Court took the view that the limitation of the offered licence to 'practised claims' only (that is those claims of the licenced patents that are essential to the practice of the HEVC standard), is not unreasonable. [660] This limitation does not present any adverse effect on MAS' business, since the royalty payments correspond to the claims that are actually used by the licensee (and, vice versa, no obligation to pay for claims not used is established). [661]

Also, in the eyes of the Court, MAS was not able to prove that the lack of an adjustment clause is unreasonable [662] . MAS failed to establish that respective clauses are common in industry practice; on the contrary, the fact that at least forty parties had signed a licence with HEVC Advance without such clause indicated the opposite. [663] What is more, the royalty clause is constant. That means that the rate charged will not change if licenced patents expire, but also will remain the same in the case of addition of new patents to the pool that will be automatically covered by the agreement. Insofar, an economic risk for both parties exists. [664]

Regarding the choice of forum clause contained in the standard licensing agreement, establishing the jurisdiction of courts in New York as well as granting HEVC Advance the right to also choose other venues at its discretion, the Court was not able to conclude any unfair disadvantage for MAS. [665] The same clause was agreed in many other licensing agreements signed by HEVC Advance with third parties. [666] In fact, MAS agreed to a similar one in its license agreement with the MPEG LA pool. [666]


Non-discrimination

Besides that, the Court was unable to establish any discrimination against MAS through the licence offered by HEVC Advance. [667] The obligation of equal treatment applies only to aspects that are comparable; even a market dominant undertaking must be allowed to respond differently to different market conditions. [668] An unequal treatment is to be assessed based on the specific circumstances of each individual case under the goals of competition and can be accepted as lawful, if objectively justified. [669] Therefore, not every difference in the terms and conditions of a licence can be seen as abusive. [670] According to the Court, the same principle also applies to the licensing of SEPs. [671]

Against this background, the Court found that the fact that the pool administered by HEVC Advance updated its terms in a way that an 'uniform licensing regime' no longer exists, since for certain licensees the previous version of the agreement still applies, does not mean that the new standard licensing agreement offered to MAS was discriminatory. [672] Although, according to the case-law of the Higher District Court of Düsseldorf, a patent holder (and its assignees) is bound to the 'licensing concept' underlying the first ever licence granted, it is allowed to deviate from such 'concept', if this does not lead to a discrimination of either past nor future licensees. [673] In the Court's view, this was not the case here: The old licensees were offered the possibility to shift to the new terms, and there is no evidence that MAS would be treated worse by the terms of the new standard licensing agreement. [673] On the contrary, the new royalty calculation leads to a lower licensing burden. [673]

The Court also took the view, that there is also no discrimination in the way the patent-in-suit is enforced. [674] MAS argued that it was discriminated, because its competitors or large companies were not sued by members of the HEVC Advance pool for patent infringement. The Court highlighted that refraining from enforcement does not necessarily mean discrimination: the phase of adoption of the relevant standard, the costs and procedural risks involved, the knowledge of the holder regarding the infringement and its extent are factors to be considered. [675] In the case of HEVC Advance, the initial phase of its existence and limitation of resources are relevant for this assessment. [676]

Moreover, no discrimination with respect to the amount of the royalty rate or the scope offered was found. [677] The Court pointed out that the fact that some of the existing licensees have agreed on rates higher than those offered to MAS, could not be used in favour of the latter: as a rule, only those who are treated less favourably can invoke discrimination. [678]

The Court further held that the 'blended rates' agreed with certain other licensees, did not render the offer made to MAS by HEVC Advance discriminatory either. [679] These rates mirrored variations due to the difference in products and implementer's profiles and were either offered to MAS or not applicable to his business model. [680]

Furthermore, the Court found that the 'incentive programme' offered by the HEVC Advance pool, which under specific conditions (especially the signing of a licence at an early point in time) results in discounted rates, is lawful and non-discriminatory. [681] The same is true with respect to discounts offered for past uses prior to the signing a licence, as it is the case for HEVC Advance [682] .

Finally, a 10% discount offered by HEVC Advance when a licensee also takes a trademark licence, allowing for the labelling of products with the HEVC trademark, was equally offered to the MAS, so that the Court could not see a discrimination of MAS by such provision in the standard licensing agreement. [683]


Implementer's counteroffer

The Court found that MAS' counteroffer was not FRAND. [684] The offer made by MAS failed to present sufficiently an explanation of why its terms would be FRAND, in view of the terms offered by HEVC Advance. MAS presented only a royalty rate, without making any reference to the rest of the clauses contained in the offer previously made by HEVC Advance, which it alleged to be discriminatory or unreasonable. [685]

Having found that MAS' counteroffer had not been FRAND, the Court explained that the fact that MAS neither rendered accounts nor provided security did not play any role for its decision. [686]


C. Other issues

By the facts of the case, the Court concluded that MAS acted culpably, or at least negligently, and, therefore, owes compensation for past and future damages caused by its actions. Moreover, damages should not be limited to a FRAND royalty. [687] The quantification of the damages will be possible with the rendering of accounts by MAS. [688]

The lawsuit for revocation of the patent, arguing lack of inventive step, that had not been decided yet, had no likelihood of success, according to the Court's analysis. Therefore, the request for staying the proceedings until a decision on the validity is delivered by the Federal Patent Court was denied. [689]

  • [625] HEVC (Dolby) v MAS Elektronik, District Court (Landgericht) of Düsseldorf, 7 May 2020, Case No. 4c O 44/18 (cited by www.nrwe.de), paras. 75 et seqq.
  • [626] Ibid, paras. 157-184.
  • [627] Ibid, paras. 186 et seqq.
  • [628] Ibid, paras. 189 et seqq.
  • [629] Ibid, paras. 194 et seqq.
  • [630] Ibid, para. 197.
  • [631] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [632] HEVC (Dolby) v MAS Elektronik, District Court (Landgericht) of Düsseldorf, 7 May 2020, Case No. 4c O 44/18, paras. 213 et seqq and paras. 221 et seqq.
  • [633] Ibid, para. 210.
  • [634] Ibid, paras. 229 et seqq.
  • [635] Ibid, para. 233.
  • [636] Ibid, para. 759.
  • [637] Ibid, paras. 236 et seqq.
  • [638] Ibid, paras. 760 et seqq.
  • [639] Ibid, para. 237.
  • [640] Ibid, para. 237 and para. 761.
  • [641] Ibid, para. 760.
  • [642] Ibid, para. 238.
  • [643] Ibid, para. 763.
  • [644] Ibid, para. 764.
  • [645] Ibid, para. 765.
  • [646] Ibid, paras. 241 et seqq.
  • [647] Ibid, para. 242.
  • [648] Ibid, paras. 244 et seqq.
  • [649] Ibid, para. 245.
  • [650] Ibid, para. 248.
  • [651] Ibid, para. 255.
  • [652] Ibid, para. 250.
  • [653] Ibid, para. 253.
  • [654] Ibid, para. 249.
  • [655] Ibid, paras. 257 and 258.
  • [656] Ibid, para. 260.
  • [657] Ibid, paras. 264 et seqq.
  • [658] Ibid, para. 268.
  • [659] Ibid, paras. 271 et seqq.
  • [660] Ibid, paras. 280 et seqq.
  • [661] Ibid, para. 284.
  • [662] Ibid, paras. 286 et seqq.
  • [663] Ibid, para. 295.
  • [664] Ibid, para. 298.
  • [665] Ibid, paras. 301 et seqq.
  • [666] Ibid, para. 304.
  • [667] Ibid, paras. 306 et seqq. and paras. 314 et seqq.
  • [668] Ibid, para. 308.
  • [669] Ibid, paras. 308 et seq.
  • [670] Ibid, para. 310.
  • [671] Ibid, para. 311.
  • [672] Ibid, paras. 314 et seqq.
  • [673] Ibid, para. 318.
  • [674] Ibid, para. 321.
  • [675] Ibid, para. 322.
  • [676] Ibid, para. 323.
  • [677] Ibid, paras. 325 et seqq. as well as paras. 443 et seqq.
  • [678] Ibid, para. 326.
  • [679] Ibid, paras. 328 et seqq.
  • [680] Ibid, paras. 329 et seqq.
  • [681] Ibid, paras. 334 et seqq.
  • [682] Ibid, paras. 526 et seqq.
  • [683] Ibid, paras. 665 et seqq.
  • [684] Ibid, paras. 751 et seqq.
  • [685] Ibid, paras. 754.
  • [686] Ibid, para. 756.
  • [687] Ibid, para. 773.
  • [688] Ibid, para. 774.
  • [689] Ibid, paras. 781 et seqq.