Case Law post CJEU ruling Huawei v ZTE

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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. [100]
    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. [101] 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. [102] Claims for information and the rendering of accounts must, in this event, be limited to what is necessary for determining FRAND-based damages. [103]
    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. [103]
  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. [104] 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. [105]
    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. [106] 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. [107]
  • [100] Case No. 4b O 120/14, para. VII, 6, a
  • [101] Case No. 4b O 120/14, para. VII, 6, b, aa, bb
  • [102] Case No. 4b O 120/14, para. VII, 6, b, dd
  • [103] Case No. 4b O 120/14, para. VII, 6, b, ee
  • [104] Case No. 4b O 120/14, para. VII, 4
  • [105] Case No. 4b O 120/14, para. VII, 5
  • [106] Case No. 4b O 120/14, para. I, 4, b, aa
  • [107] Cf. for details LG Düsseldorf, 19 January 2016 - Case No. 4b O 120/14, para. I, 4, b, bb

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) [91] . 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 [92] .

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 [93] . The Defendant filed an action for invalidity against the Claimant’s SEP in Germany [93] .

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 [93] . Subsequently, several licensing offers and counter-offers were made by the Claimant and the parent company respectively [93] . 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 [94] . In response, the parent company confirmed that it is willing to obtain a licence, among others, by letter dated 7 September 2016 [95] . 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 [96] .

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 [97] . 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) [97] . This deadline was extended for almost three weeks until 7 May 2018 [97] .

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) [97] .

With the present judgment the Court ruled that the Defendant is liable for damages arising from the infringement of the SEP in suit [98] . The Court also ordered the Defendant to render accounts and to provide relevant information to the Claimant [98] . 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 [99] .


B. Court’s reasoning

The Court held that the products sold by the Defendant in Germany infringe Claimant’s SEP [100] . Thus, the Defendant is obliged to compensate the damages suffered by the Claimant and the previous holder of the patent in suit [98] . 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) [98] .

In the Court’s view, the Defendant cannot raise a defence based on a so-called “patent ambush” against these claims [101] . 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 [102] . 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” [102] . The Court held that the Defendant failed to establish such fact [101] . 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?) [101] .

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 [103] .

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 [104] . The wording of Article 6.1. ETSI IPR Policy establishes a respective assumption [104] . 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 [94] . 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 [94] . 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 [105] .

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 [103] . 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 [103] .

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 [103] . 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 [107] .

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 [108] .

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) [109] .

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 [94] . 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) [94] .

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) [110] .

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) [95] .

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 [95] .

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) [111] . 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 [95] .

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 [112] . Only then, the SEP user’s consequent obligation under the Huawei framework to make a FRAND counter-offer to the SEP holder is triggered [112] . 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 [112] . For the assessment of the non-discriminatory character of the offer, information on comparable agreements is needed [112] .

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 [113] . 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 [113] . 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”) [113] . 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 [114] . Otherwise, the initiation of the infringement proceedings shall be considered as abusive in terms of antitrust law [114] . In the present case, the Claimant chose to not ask for a stay in the proceedings, ignoring the Court’s respective indication [114] .


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 [115] . On the other hand, it does not define the ownership of the patent in material legal terms [116] . Nevertheless, the patent registration establishes an assumption of ownership which must be rebutted by the defendant in infringement proceedings based on concrete indications [117] .

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 [118] . As a rule, it must be expected with a sufficient degree of probability that the patent(s) in suit will be invalidated [118] . The Defendant failed convince the Court that this was the case with the SEP in suit [118] .

  • [91] District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, page 2 and 23.
  • [92] Ibid, page 23 et seq.
  • [93] Ibid, page 5.
  • [94] Ibid, page 25.
  • [95] Ibid, page 26.
  • [96] Ibid, pages 5 et seq.
  • [97] Ibid, page 6.
  • [98] Ibid, page 19.
  • [99] Ibid,page 23.
  • [100] Ibid, pages 16 et seqq.
  • [101] Ibid, page 20.
  • [102] Ibid, page 21.
  • [103] Ibid, page 22.
  • [104] Ibid, page 24.
  • [105] Ibid, pages 24 et seq.
  • [106] Huawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-130/13.
  • [107] District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, pages 22.
  • [108] Ibid,pages 23 and 25.
  • [109] Ibid, page 23.
  • [110] Ibid, pages 23 and 25 et seq.
  • [111] Ibid, pages 26 et seqq.
  • [112] Ibid, page 27.
  • [113] Ibid, page 28.
  • [114] Ibid, page 29.
  • [115] Ibid, page 10.
  • [116] Ibid, pages 10 et seq.
  • [117] Ibid, page 11.
  • [118] Ibid, page 30.

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. [119] 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. [120]

B. Court’s Reasoning

The Court of Appeal dismissed Asus’s invalidity challenge, upholding the novelty and inventiveness of the EP 511 patent. [121] Moreover, the Court of Appeal found the patent essential and infringed. [122]

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) [123] . 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. [124] Rather, the purpose of the declaration obligation was to reduce the risk of SEPs being ex post unavailable to users. [125]

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. [126] 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. [127]

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. [128] 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. [129] 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. [130] 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. [131] 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.”’ [132]

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. [133] 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. [134] 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. [135]

  • [119] Koninklijke Philips N.V. v. Asustek Computers INC, District Court of the Hague, 2017, Case No. C 09 512839 /HA ZA 16-712.
  • [120] 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.
  • [121] ibid, paras 4.63, 4.68, 4.75, 4.80, 4.82, 4.93, 4.100, and 4.117.
  • [122] ibid, paras 4.118 et seq.
  • [123] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case-No. C-170/13.
  • [124] 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.
  • [125] ibid, paras 4.155 and 4.157.
  • [126] ibid, para 4.159.
  • [127] ibid, para 4.164.
  • [128] ibid, para 4.171.
  • [129] ibid, para 4.172.
  • [130] ibid.
  • [131] ibid, paras 4.172-4.179.
  • [132] ibid, para 4.179.
  • [133] ibid, para 4.183.
  • [134] ibid, para 4.185.
  • [135] 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 [1] . In 2012, Sisvel acquired EP 1 129 536 B1 (EP 536) [2] . EP 536 relates to the EGPRS technology, which forms part of a GSM telecommunications standard that implements EDGE [3] .

Xiaomi is a manufacturer of mobile phones with headquarters in China [4] .

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) [5] .

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

In an article dated 29 March 2019 published on nu.nl [6] and ad.nl [6] , Xiaomi announced that it would enter the Dutch market with online shops and physical stores [7] .

On 23 April 2019, Sisvel initiated legal proceedings against Xiaomi before the English High Court of Justice in London (English proceedings) [8] . 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 [9] , are FRAND or alternatively, to determine FRAND licensing terms and conditions and find three patents (including EP 536) to be valid and infringed [8] .

On 30 August 2019, Xiaomi filed two legal actions against Sisvel in Beijing [10] . 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 [3] .

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 [11] . 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 [12] .

Sisvel appealed the first instance decision on 29 August 2019 [13] . During the course of the appeal proceedings, on 22 January 2020, Xiaomi deposited funds [14] on an escrow account held by Intertrust [15] . With the present judgment, the Court of Appeal of The Hague (Court) rejected Sisvel’s appeal and sentenced Sisvel to higher process costs [16] .

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 [17] . 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 [18] . Therefore, only financial damages could incur which the Court considers to be relatively simply compensated at a later point in time [19] . Additionally, Xiaomi had provided security [19] . The security addresses the problem raised by Sisvel, i.e. Xiaomi becoming insolvent and unable to pay damages for patent infringement [3] .

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 [20] . The consequences would thus be severe and could hardly be undone, even if Xiaomi could resume sales again after the expiration of EP 536 [3] . 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 [21] . By accepting a licence Xiaomi would be irrevocably bound to comply with it, including with its rate [22] . The stop of sales in the Netherlands would create loss of profits for Xiaomi and worsen its relationships with its customers [3] . 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 [3] .

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 [23] . 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 [3] . 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 [3] . 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 [23] .

The Court also rejected Sisvel’s claim that Xiaomi was an unwilling licensee [24] . 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 [3] .

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 [25] .

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 [26] . 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 [3] . 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 [3] .

Sisvel’s claim that the lack of an injunction would create an unfair playing field between market participants was also rejected by the Court [27] . 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 [3] . 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 [28] . 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 [3] .

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 [29] . Indeed, the Court underlined that Sisvel can unilaterally reclaim payment, especially if a FRAND rate is determined in the English proceedings [3] . 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 [3] . The Court noted it did not seem Sisvel made use of this possibility to adapt the amount [3] .

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 [30] . 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 [3] . The Court underlined that in the Huawei v. ZTE decision of the CJEU [31] , the security had to be “appropriate”, which depends on the context of the FRAND defence [3] .

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 [32] . 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 [3] . 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 [3] . Sisvel did also not explain why profits data should be disclosed in advance of the main proceedings [3] .

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 [33] . 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 [3] . The acceptance of such arbitration proposal without conditions would have drastic consequences on Xiaomi’s position [3] .

  • [1] Court of Appeal of The Hague, judgement dated 17 March 2020, page 2, par.2.2.
  • [2] Court of Appeal of The Hague, judgement dated 17 March 2020, page 2, par.2.4.
  • [3] Ibidem
  • [4] Court of Appeal of The Hague, judgement dated 17 March 2020, page 2, par.2.8.
  • [5] Court of Appeal of The Hague, judgement dated 17 March 2020, page 2, par.2.5.
  • [6] Dutch newspaper.
  • [7] Court of Appeal of The Hague, judgement dated 17 March 2020, page 4, par.2.11.
  • [8] Court of Appeal of The Hague, judgement dated 17 March 2020, page 4, par.2.12.
  • [9] Court of Appeal of The Hague, judgement dated 17 March 2020, pages 3 and 4, par.2.7 and 2.12.
  • [10] Court of Appeal of The Hague, judgement dated 17 March 2020, page 4, par.2.13.
  • [11] Court of Appeal of The Hague, judgement dated 17 March 2020, page 4, par.2.14.
  • [12] Court of Appeal of The Hague, judgement dated 17 March 2020, pages 4 and 5, par.3.3.
  • [13] Court of Appeal of The Hague, judgement dated 17 March 2020, page 2, par.1.
  • [14] Amount has been redacted.
  • [15] Court of Appeal of The Hague, judgement dated 17 March 2020, page 5, par.3.5.
  • [16] Court of Appeal of The Hague, judgement dated 17 March 2020, pages 10 and 11, par. 4.24 and following.
  • [17] Court of Appeal of The Hague, judgement dated 17 March 2020, page 5, par.4.3.
  • [18] Court of Appeal of The Hague, judgement dated 17 March 2020, pages 5 and 6, par.4.3.
  • [19] Court of Appeal of The Hague, judgement dated 17 March 2020, page 6, par.4.3.
  • [20] Court of Appeal of The Hague, judgement dated 17 March 2020, page 6, par.4.7.
  • [21] Court of Appeal of The Hague, judgement dated 17 March 2020, pages 6 and 7, par.4.8.
  • [22] Court of Appeal of The Hague, judgement dated 17 March 2020, page 7, par.4.9.
  • [23] Court of Appeal of The Hague, judgement dated 17 March 2020, page 7, par.4.11.
  • [24] Court of Appeal of The Hague, judgement dated 17 March 2020, page 7, par.2.12.
  • [25] Court of Appeal of The Hague, judgement dated 17 March 2020, page 8, par.4.14.
  • [26] Court of Appeal of The Hague, judgement dated 17 March 2020, page 8, par.4.15.
  • [27] Court of Appeal of The Hague, judgement dated 17 March 2020, page 8, par.4.16.
  • [28] Court of Appeal of The Hague, judgement dated 17 March 2020, pages 8 and 9, par.4.17.
  • [29] Court of Appeal of The Hague, judgement dated 17 March 2020, page 6, par. 4.5.
  • [30] Court of Appeal of The Hague, judgement dated 17 March 2020, page 6, par. 4.6.
  • [31] Court of Justice of the European Union, Huawei Technologies Co.Ltd. v. ZTE Corp. and ZTE Deutschland GmbH, 16 July 2015.
  • [32] Court of Appeal of The Hague, judgement dated 17 March 2020, page 9, par. 4.2.1.
  • [33] Court of Appeal of The Hague, judgement dated 17 March 2020, page 9, par.4.18.