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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 [1] 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’). [2] 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. [3] 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. [4] 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. [5] 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. [6]

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. [7] 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. [8] On this basis, the District Could held that the claimant had taken all necessary steps after commencing proceedings, which met the Huawei/ZTE requirements. [9]

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. [10] 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. [5] 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. [11] 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. [12]

The offer needs to include the calculation method in respect of the royalties. [11] However, the CJEU did not elaborate on the level of detail required. [13] 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. [14]

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. [13] 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. [15] The defendant’s counter-offer only included the respective German license, which was deemed by the District Court as insufficient. [15] Further, the defendant had not made an adequate deposit into the court as required under the Huawei/ZTE principles. [16]

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. [13]

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. [17] 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. [18] 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. [18]

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

The Defendants, ZTE Corp. and ZTE Deutschland GmbH, hold themselves several SEPs relating to the LTE standard [21] and also market, inter alia in Germany, LTE-compliant products [22] .

Between November 2010 and March 2011, the parties engaged into discussions concerning the licensing of the Claimant’s portfolio of SEPs [22] . The Claimant indicated the amount it considered as a reasonable royalty; the Defendants, on the other hand, sought to conclude a cross-licence [23] . An offer for a licensing agreement was, however, not finalized [23] .

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 [24] .

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 [25] : 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 [26] . 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 [27] .

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[28] .

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 [29] . 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 [30] 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[31] .

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 [32] .

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 [33] .

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 [34] . 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 [35] . Moreover, an action for the enforcement of an IPR can constitute an abuse of dominant position only in “exceptional circumstances[36] .

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[37] . 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 [37] . 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 [38] .

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 [39] . 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[40] , 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 [41] . 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 [42] .

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’ [29] . Whether this is the case must be established on the basis of ‘objective factors’, which implies, in particular, that there are no ‘delaying tactics[29] .

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 [30] . 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[31] . 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 [31] .

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[43] .

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 [44] .


  • [19] Huawei v ZTE, Court of Justice of the European Union, judgment dated 6 July 2015, para. 22.
  • [20] Ibid, para. 22.
  • [21] Ibid, para. 40.
  • [22] Ibid, para. 24.
  • [23] Ibid, para. 25.
  • [24] Ibid, para. 27.
  • [25] Ibid, paras. 29 et seqq.
  • [26] Ibid, paras. 30 et seqq
  • [27] Ibid, paras. 34 et seqq
  • [28] Ibid, para. 77.
  • [29] Ibid, para. 65.
  • [30] Ibid, para. 66.
  • [31] Ibid, para. 67.
  • [32] Ibid, paras. 72 et seqq
  • [33] Ibid, para. 42.
  • [34] Ibid, para. 43.
  • [35] Ibid, para. 46.
  • [36] Ibid, para. 47.
  • [37] Ibid, para. 53.
  • [38] Ibid, paras. 53 et seqq
  • [39] Ibid, paras. 58 et seqq
  • [40] Ibid, para. 61.
  • [41] Ibid, para. 63.
  • [42] Ibid, para. 64.
  • [43] Ibid, para. 68.
  • [44] Ibid, para. 69.

Updated 26 January 2017

Saint Lawrence v Vodafone

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

  1. Facts
    Since 28 August 2014 Claimant, a non-practicing entity, is the proprietor of the European patent EP 1 125 276 B1 “J”, originally granted to applicants “Voiceage, and allegedly covering part of the AMR-WB standard. Defendant is a company active in the telecommunications sector and which markets AMR-WB-based devices, inter alia devices produced by the Intervener in this case. After the adoption (“freeze”) of AMR-WB by ETSI on 10 April 2001, Claimant (who was not an ETSI member during the setting of the AMR-WB standard) made, on 29 May 2001, a commitment towards ETSI to grant licenses on FRAND terms inter alia for patent EP J. Claimant and its parent company “O” offer the SEP and all other patents of the same family to third parties by means of a portfolio license. Licensing conditions are accessible on the Internet and various producers in the sector have taken a license under these conditions. Prior to the submission of the patent infringement action on 23 July 2014 and to the advance payments on costs on 29 July 2014, Claimant alerted neither Defendant nor the manufacturer of the contested embodiments, who acted as an intervener in the present proceedings and became aware of the lawsuit in August 2014. By e-mails on 31 July and (as a reminder) on 9 December 2014, the first of which included a copy of the statement of claims and reached the defendant before it was formally served with the statement, Claimant notified the alleged patent violation to Defendant. After Defendant’s reply as of 12 January 2015, Claimant presented a draft licensing agreement to Defendant by letter as of 22 April 2015. On 9 December 2014, the Intervener (HTC) declared willingness to take a license for that patent, inter alia for the patent-in-suit, provided infringement was found in Mannheim’s District Court. It further declared that it would accept royalties determined by a court or arbitration tribunal. Claimant, in turn, offered a licensing agreement by letters as of 12 January 2015 and 25 March 2015 respectively. In the course of meetings taking place since 23 January 2014, [45] Claimant offered a license to the Intervener. On 23 February 2015 and on 2 April 2015 respectively, the Intervener made two licensing offers, including third party determination (arbitration panel or English court) of the amount of royalty, for the whole German patent portfolio of Claimant. An additional offer for a licensing agreement, limited to Germany and implementing a royalty of USD 0.0055 per patent by reference to the “WCDMA Patent Pools”, was made by the Intervener on 6 March 2015 and 24 September 2015 respectively, but it was finally refused by Claimant on 4 October 2015. Moreover, the Intervener provided a bank “guarantee of payment” as of 3 September 2015, being modified by letter as of 10 November 2015, and also rendered account of past and prospective sales in Germany since 2011.
  2. Court’s reasoning
    1. Market power and notice of infringement
      The court leaves open the question of whether the SEP conferred market power to Claimant since it did, in any case, find no abuse of such potential market power. [46] The court declared the Huawei rules applicable to claims for the recall of products. [47] As regards the Huawei requirement to alert the standard user of the infringement, the decision arrived at various findings of interest: Firstly, the judges found that—in “non-transitional” cases where the lawsuit was brought after the Huawei decision—the infringement notification has to take place before the action is filed, or the latest before the advance payment on costs is made. In transitional cases, such as the present case, a delayed infringement notification, taking place after the advance payment on costs as well as the submission of the court action, but before the statement of claims is served, is admissible. [48] Moreover, an infringement notification could possibly be omitted (in particular) if—as in the present case—the patent user already disposes of all necessary information and lacks willingness to license. [49] In non-transitional cases, however, the court doubts whether it is possible to rectify an omitted infringement notification without withdrawing the action. [50] Secondly, the court specified the minimum content of the infringement notification which has to indicate at least the number of the patent, the contested embodiments and the alleged acts of use performed by the standard implementer. The court did not decide whether additional information has to be provided, in particular regarding the interpretation of the patent claims or on which part of the standard the patent reads, but it stated that such additional information is not harmful to the patent proprietor. [51] Lastly, the court detailed on the particular situation of the Intervener, being Defendant’s manufacturer and supplier in the present case: Even though a FRAND defense successfully raised by the Intervener would in general also cover subsequent levels of the distribution chain, the Huawei requirements apply only indirectly to suppliers of contested embodiments which have not been sued themselves. Accordingly, the SEP proprietor is not obliged to notify the patent infringement to third parties, but as soon as a request to grant a license on FRAND terms is submitted the (adapted) Huawei procedure applies. [52] In casu, no separate infringement notice vis-à-vis the Intervener was required since the Intervener was, since August 2014, aware of the action having been brought.
    2. The SEP owner’s licensing offer
      Since the patent user did not express its willingness to conclude a licensing agreement in due time, the court found Claimant to comply with the Huawei requirement to submit a licensing offer on FRAND terms even though the offer was made in the course of the ongoing litigation. For transitional cases, as the present one, this holds true even if infringement notification and court action take place at the same time. [53] Besides, the court analyzed under which circumstances licensing conditions can be considered as FRAND according to Huawei. In the opinion of the judges, the more licensing agreements implementing comparable terms the SEP proprietor has already concluded, the stronger is the presumption that these conditions are FRAND, unless factual reasons—which are to be demonstrated by the patent user—justify modified terms. Recognized commercial practice in the relevant sector has to be considered when defining the admissible scope of the licensing agreement. If patent portfolios are usually covered by group or worldwide licenses in the relevant market, a (worldwide) portfolio license will be FRAND unless the circumstances of the specific case, e.g. the SEP proprietor’s market activity being limited to one geographic market, require a modification. [54] Accordingly, Claimant’s (worldwide) licensing offer to Defendant for the whole AMR-WB pool, demanding royalties of USD 0.26 per mobile device that implemented the standard and was produced or marketed in countries in which the SEP was in force, and complying with Claimants existing licensing practice (accessible on the Internet and already implemented in 12 licensing agreements) was declared FRAND. While the court considered that comparable licensing agreements “represent an important indicator of the adequacy of the license terms offered” it clarified that the significance of a patent pool as an indication of FRAND conformity is “limited”. Defendant and the Intervener failed to show that the portfolio comprised (non-used) non-SEPs as well. [55] They further failed to show that the pre-concluded licensing agreements provided no valid basis for comparison as they were concluded under the threat of pending litigation. [56] In order to fulfill the Huawei obligation of specifying the calculation of royalties, the SEP proprietor only has to provide the information necessary to determine the amount of royalties to be paid, e.g. the royalty per unit and the products covered by the license. While the court left undecided whether additional indications, e.g. concerning the FRAND character of the licensing offer, are necessary to comply with Huawei, it found that the SEP proprietor’s duty to inform should not be interpreted too strictly as FRAND does regularly encompass a range of values that will be fair, reasonable, and non-discriminatory. [57] Claimant’s licensing offer presented to the Intervener was considered as being FRAND for the same reasons. Furthermore, the court emphasized that the contractual clause allowing for judicial review of the royalties offered could be a possible way to avoid abusive practices and to ensure that licensing offers correspond to FRAND terms. [58]
    3. The standard implementer’s reaction
      The court found that the more details the infringement notification contains, the less time remains for the standard user to examine the patent(s) at issue and to express its willingness to conclude a licensing agreement on FRAND terms. In the present case, Defendant did not comply with Huawei because it took more than five months to react and then only asked for proof of the alleged infringement. Given this excessive delay, the court did not decide whether Defendant’s reaction satisfied the Huawei requirements in terms of content. It denied the possibility to remedy a belated reaction by a subsequent declaration of willingness to license. On the contrary, and as a consequence of the patent user’s non-compliance, the SEP proprietor may continue the infringement action without violating Article 102 TFEU, but it still has to grant licenses on FRAND terms. [59] Whether the Intervener satisfied the ECJ criteria was left undecided. [60] The court made some further remarks of interest as to the Huawei requirements concerning the standard implementer: Firstly, it left undecided whether the obligation of the patent user to diligently respond is caused also by a (potentially) non-FRAND licensing offer. [61] Secondly, a standard user who has taken a license is not prevented from challenging validity and essentiality of the SEP afterwards, nor is the SEP proprietor entitled to terminate the license if such a challenge takes place. However, the standard implementer may not delay the (unconditional) conclusion of the licensing agreement until a final court decision on these issues has been rendered. While validity and standard-essentiality is litigated, the licensee remains obliged to pay royalties and it cannot request to insert into the licensing contract a clause entitling it to reclaim paid royalties in case of its success in court. [62] Thirdly, as, in the present case, no specific counter-offers satisfying FRAND terms were submitted and Defendant could not establish that Claimant had waived this requirement the court did not decide on whether a SEP proprietor is obliged to negotiate further although itself and the patent user have submitted FRAND offers. [63] None of the counter-offers of the Intervener were FRAND in terms of content. They were either inadmissibly limited to Germany, contained no precise royalty, were not submitted “promptly” because the standard user had waited until the oral pleadings in the parallel procedure, or they proposed royalties per device which the court considered as too low. [64] While it was therefore held to be irrelevant whether, in the first place, the Intervener duly declared its willingness to license, the court emphasized that the Intervener’s readiness to take a license only after the SEP infringement was determined in court did not satisfy the Huawei standard of conduct. [65] Moreover, the obligation imposed by Huawei to provide appropriate security and to render account was not fulfilled. While Defendant refrained from taking any of these actions, the Intervener waited several months after the counter-offers were refused in order to submit its bank “guarantee of payment”, which was not recognized as “appropriate security” due to its amount and its limitation to acts of use in Germany. [66] Neither was the Intervener’s initial proposal to have the security—if requested by Claimant—determined by an arbitration tribunal or by an English court accepted as an appropriate way to provide security. [67]
  3. Other important issues
    According to the court, the Huawei requirements apply to both non-practicing entities and other market participants. [68] Suing a network operator instead of the undertakings producing devices operating in the network constitutes (at least under the circumstances of this case and absent selective enforcement) no violation of competition law even though this strategy might aim at using the action against the network operator as a “lever” to obtain licensing commitments from the device suppliers. On the other hand, device manufacturers are entitled to a FRAND license as well and can raise the FRAND defense if such a license is not granted. In consequence, the court perceives a fair balance of interests as the SEP proprietor can choose on which level of the chain of production to sue while the undertakings in the chain of production can choose on which level to take a license. [69] Furthermore, no patent ambush-defense based on § 242 BGB could be raised because, firstly, Defendant and the Intervener could not substantiate the alleged patent ambush by “Y” and “C”, being the original SEP proprietors; secondly, they could not show that a different patent declaration conduct would have resulted in a different version of the standard excluding the patent-in-suit; thirdly, the alleged patent ambush would, arguably, have resulted only in a FRAND-licensing obligation and, fourthly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [70]
  • [45] This is the date mentioned by the Court although “23 January 2015” may seem more plausible and the date given by the Court may result from a scrivener’s error.
  • [46] Case No. 4a O 73/14, para. 184
  • [47] Case No. 4a O 73/14, para. 187
  • [48] Case No. 4a O 73/14, para. 195 et seq.
  • [49] Case No. 4a O 73/14, para. 208-210
  • [50] Case No. 4a O 126/14, para. IV, 3, a, bb, 2, c
  • [51] Case No. 4a O 73/14, para. 193
  • [52] Case No. 4a O 73/14, para. 270 et seq.
  • [53] Case No. 4a O 73/14, para. 222 et seq.
  • [54] Case No. 4a O 73/14, para. 225 et seq.
  • [55] Case No. 4a O 73/14, para. 225 et seq. On the relevance of the SIPRO-pool royalty rates, cf. LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 245-248. On the facts indicating that a worldwide license was appropriate LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 249-255.
  • [56] Case No. 4a O 73/14, para. 234-242. The court argued that it is questionable in principle how much the threat of a claim for injunctive relief can (inadmissibly) affect license agreement negotiations, since the Orange Book case law of the BGH (German Federal Court of Justice), the Motorola decision of the European Commission, and now the CJEU judgment in the Huawei Technologies/ZTE Case could be and can be invoked against inappropriate demands that are in breach of antitrust law.
  • [57] Case No. 4a O 73/14, para. 256 et seq.
  • [58] Case No. 4a O 73/14, para. 279 et seq.
  • [59] Case No. 4a O 73/14, para. 214-220
  • [60] Case No. 4a O 73/14, para. 214-220; 278
  • [61] Case No. 4a O 73/14, para. 266
  • [62] Case No. 4a O 73/14, para. 185 et seq.; 262 et seq.
  • [63] Case No. 4a O 73/14, para. 264
  • [64] Case No. 4a O 73/14, para. 291 et seq.
  • [65] Case No. 4a O 73/14, para. 278
  • [66] Case No. 4a O 73/14, para. 267 et seq.; 299 et seq.
  • [67] Case No. 4a O 73/14, para. 304
  • [68] Case No. 4a O 73/14, para. 189
  • [69] Case No. 4a O 73/14, para. 309-313
  • [70] Case No. 4a O 73/14, para. 317 et seq.

Updated 26 January 2017

NTT DoCoMo v HTC

LG Mannheim
29 January 2016 - Case No. 7 O 66/15

  1. Facts
    Claimant owns the patent EP 1 914 945, declared to be essential with regard to ETSI’s UMTS standard. Defendant markets devices implementing the UMTS standard (in particular the HSUPA/EUL technology). On 19 March 2014 Claimant sent to Defendant’s group parent a detailed licensing offer and explained its conditions at several instances before filing suit in April 2015. As of 7 April 2014 and 15 July 2014, Claimant communicated to Defendant’s group parent company claim charts in order to demonstrate standard-essentiality of its patent and further explained the issue in a presentation on 8 July 2014. Defendant submitted its first counter-offer on 30 October 2015. The counter-offer envisaged a 3 year-license limited to some of the countries in which Defendant markets its products. Claimant rejected the counter-offer on 12 November 2015. Defendant did not provide security but merely promised to do so, based on a calculation including sales of relevant devices in Germany only. Claimant rejected this and demanded security based on worldwide sales.
  2. Court’s reasoning
    1. General meaning of the Huawei framework
      Prior to discussing specific conduct requirements established by the Huawei ruling, the court sketches its approach in a general manner. [71] According to the court the Huawei decision establishes a set of rules of due conduct in SEP licensing negotiations. Based on whether the parties comply with these rules the respective court can determine whether an SEP owner’s seeking of an injunction and a recall of products constitutes an abuse of a position of market dominance or a justified reaction to a standard implementer’s delaying tactics. In consequence, the respective court does not—unless it has to decide a claim for the payment of licensing fees and not claims for injunction and recall of products—have to rule on the substance of the offered licensing conditions or their being FRAND. [72] This is in line with recognized commercial practice according to which reasonable parties will not usually want courts to determine their licensing conditions. Furthermore, the ECJ has—from the perspective of the Mannheim District court—stressed that the exercise of the exclusive rights conveyed by a patent will be barred only in very exceptional circumstances. As a result, it is up to the standard implementer to show that such exceptional circumstances are present. [73]
    2. Market power and notice of infringement
      The court does not elaborate on the market power issue. As part of the notice of infringement [74] the court deems it necessary for the proprietor to identify the (allegedly) violated patent, including the patent number, and to inform that the patent has been declared standard-essential. Furthermore, the proprietor has not only to name the standard but to specify the pertinent part of the standard and the infringing element of the implementer’s products in a way that enables the standard implementer to assess whether its use of the standard infringes on the patent-in-suit. The level of detail required must be determined on a case-by-case basis, depending mainly on the expertise of – or available to – the implementer. Presenting claim charts corresponding to recognized commercial practice for licensing negotiations is, in principle, an acceptable way to give notice of the alleged infringement. In casu the court considered the proprietor’s notice as sufficient. [75] In particular, notice was given before the bringing of an action for infringement and the proprietor had submitted claim charts not only with regard to the patent-in-suit but also with regard to six other patents from the portfolio offered for license, a sample which the court deemed in accordance with recognized commercial practice. Sufficient notice having taken place, the court left open the question whether, (1) the Huawei rules applied at all in spite of the action being brought before the ECJ’s decision, and whether (2) the proprietor was obliged to submit claim charts for other patents than the patent-in-suit.
    3. The SEP proprietor’s licensing offer
      The court’s general understanding of the Huawei rules of conduct (cf. above) has a considerable impact on the way it intends to react to a SEP proprietor’s licensing offer: [76] The offer must specify the relevant conditions in a way that, in order to conclude a licensing agreement, the standard implementer has merely to state his acceptance of the offer. The calculation of the license fee, in particular, must be explained in a manner that enables the standard implementer to objectively assess its FRAND conformity. Even if the standard implementer disputes the FRAND character of the offer it is not the court’s business to determine whether the licensing conditions are actually FRAND. Neither is the SEP proprietor prohibited from offering conditions slightly above the FRAND threshold. A differing view of the parties on what constitutes FRAND is to be expected and provides no reason for cartel law-based intervention. An exploitative abuse of market power can, however, be present where the proprietor, after having made a FRAND declaration, offers conditions that are, under the circumstances of the case and without objective justification, manifestly less favorable (in an economic sense) than the conditions offered to other licensees. Correspondingly, the respective court is only required to determine, based on a summary assessment, whether the proprietor’s licensing offer evidently violates the FRAND concept. In casu the court accepted the Huawei compliance of the licensing offer, [77] in particular because the proprietor had explained its calculation of the licensing fee based on the percentage of patents in the WCMA/SIPRO and the VIA patent pools held by the proprietor. The proprietor was not required to prove its share in the patent pools. The parties disagreed over whether the smallest saleable unit forms an appropriate basis for royalty calculation and whether it is acceptable to look only at the size, not the quality of a proprietor’s share in a relevant patent pool. The court, however, considered these issues as not decisive for the Huawei-conformity of the licensing offer.
    4. The standard implementer’s reaction
      As a further consequence of the court’s general approach, the standard implementer’s duty to diligently react to the proprietor’s licensing offer is not removed only because the offer does not fully comply with FRAND. [78] . An exception applies only where it can be established by a mere summary assessment that the offer evidently violates FRAND. If a reaction of the alleged infringer is due, the “diligence”, i.e. timeliness, of this offer has to be determined cases-by-case, based on the principles of good faith and recognized commercial practice. In casu the standard implementer’s reaction was insufficient (1) because a counter-offer was made only 1.5 years after receiving the licensing offer and 0.5 years after the bringing of the proprietor’s action, (2) because security was merely promised, not provided, and (3) because the amount of security offered fell short of the court’s suggestions.
  3. Other important issues
    The court underlines that a SEP proprietor has to respect the Huawei rules of conduct only with regard to an action for prohibitory injunction or the recall of products. It is, however, free from their grip when bringing an action seeking the rendering of accounts in relation to past acts of use or an award of damages in respect of those acts of use.
  • [71] Case No. 7 O 66/15, para. 53 et seq.
  • [72] Case No. 7 O 66/15, para. 56
  • [73] Case No. 7 O 66/15, para. 53
  • [74] Case No. 7 O 66/15, para. 57
  • [75] Case No. 7 O 66/15, para. 65-69
  • [76] Case No. 7 O 66/15, para. 58
  • [77] Case No. 7 O 66/15, para. 70-72
  • [78] Case No. 7 O 66/15, para. 59 et seq

Updated 9 November 2020

Sharp v Daimler

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

A. Facts

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

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

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

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

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

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

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

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

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

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

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

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

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

With the present judgment [79] (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 [80] and infringed [81] . For this reason, Sharp was entitled -among other claims- to injunctive relief [82] .

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 [83] (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 [84] .

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' [85] . 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 [86] . The Court explained that it cannot be requested by the SEP holder to 'impose' a licence to any standards user [86] .

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 [87] . The Court did not establish whether Sharp had a dominant market position, but just assumed that this was the case [87] 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 [88] .

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) [86] .

This means that the implementer should not delay licensing negotiations [89] . 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 [89] .

Having said that, the Court found that Daimler did not behave as a 'willing' licensee [88] .

Looking at Daimler's behaviour before the counteroffer to Sharp was made, the Court held that a 'clear' declaration of willingness is missing [90] . 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 [91] . 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 [92] . 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 [93] . 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 [94] . 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 [94] .

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 [95] . 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 [96] . 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 [97] . 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 [98] . 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 [99] .

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 [100] . 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 [101] . 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 [102] .

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' [103] . 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' [104] .

In this context, the Court made clear that for the assessment of willingness only the behaviour of Daimler was relevant [105] . 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 [106] . Accordingly, the Court did not examine whether Daimler's suppliers had indeed acted as 'willing licensees' [106] .

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 [107] .

The Court took the view that Sharp was not obliged to license Daimler's suppliers [108] . 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 [109] . 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 [109] .

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 [110] . The patent holders' commitment towards ETSI creates an obligation to license SEPs to third parties [111] . The Court highlighted that this does not entail, however, an obligation to grant licences at all levels of the value chain [112] . Such an obligation does not arise either from competition nor from patent or contract law in conjunction with the FRAND undertaking towards ETSI [112] .

In particular, EU competition law does not establish an obligation to license SEPs at all levels of the value chain [113] . According to the Court, patent holders are, in principle, free to choose the level of the value chain for licensing [114] . 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' [114] .

The Court also explained that neither patent law dictates the level of the value chain, at which SEP licences must be granted [115] . 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) [116] .

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 [117] . 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 [118] . However, by referring to 'equipment', this provision addresses only end-device manufacturers, since not all components necessarily implement the standard as a whole [119] . 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 [120]

FRAND defence raised by suppliers

The Court further found that Daimler cannot profit from a FRAND defence raised by suppliers [121] . 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 [121] .

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 [122] .


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 [123] . 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 [124] . 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 [125] .

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' [126] . 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 [126] . The Court explained that only hardships going beyond the usual consequences of an injunction can be taken into account [126] . 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 [126] .

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) [127] . 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 [128] . Finally, the Court also criticized the fact that Daimler did not make serious efforts for signing a licence with Sharp or Avanci [129] .

  • [79] Sharp v Daimler, District Court of Munich, judgment dated 10 September 2020, Case-No. 7 O 8818/19
  • [80] Ibid, paras. 68 et seqq
  • [81] Ibid, paras. 25 et seqq
  • [82] Ibid, para. 90
  • [83]  Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13
  • [84] Sharp v Daimler, District Court of Munich, judgment dated 10 September 2020, Case-No. 7 O 8818/19, para. 121
  • [85] Ibid, para. 124
  • [86] Ibid, para. 125
  • [87] Ibid, para. 128
  • [88] Ibid, paras. 130 et seqq
  • [89] Ibid, para. 126
  • [90] Ibid, paras. 132 et seqq
  • [91] Ibid, paras. 134 et seq
  • [92] Ibid, paras. 136 et seq
  • [93] Ibid, paras. 138 et seqq
  • [94] Ibid, para. 140
  • [95] Ibid, para. 141
  • [96] Ibid, paras. 142 et seq
  • [97] Ibid, paras. 143 et seq
  • [98] Ibid, para. 144
  • [99] Ibid, paras. 146-149
  • [100] Ibid, para. 150
  • [101] Ibid, paras. 151 and 153
  • [102] Ibid, para. 152
  • [103] Ibid, para. 154
  • [104] Ibid, paras. 154 et seqq
  • [105] Ibid, paras. 158 and 159
  • [106] Ibid, para. 158
  • [107] Ibid, paras. 161 et seqq
  • [108] Ibid, para. 162
  • [109] Ibid, para. 164
  • [110] Ibid, para. 165
  • [111] Ibid, para. 168
  • [112] Ibid, para. 169
  • [113] Ibid, paras. 170 et seqq
  • [114] Ibid, para. 171
  • [115] Ibid, paras. 173 et seq
  • [116] Ibid, para. 174
  • [117] Ibid, paras. 175 et seqq
  • [118] Ibid, paras. 177 et seqq
  • [119] Ibid, para. 178
  • [120] 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.
  • [121] Ibid, para. 167
  • [122] Ibid, para. 185
  • [123] Ibid, paras. 92-102
  • [124] Ibid, para. 93
  • [125] Ibid, para. 94
  • [126] Ibid, para. 95
  • [127] Ibid, paras. 97 et seq
  • [128] Ibid, paras. 100 et seq
  • [129] Ibid, para. 99

Updated 16 June 2021

Conversant v Daimler, District Court (Landgericht) of Munich I

LG Munich
30 October 2020 - Case No. 21 O 11384/19

A. Facts

The claimant, Conversant, holds patents declared as (potentially) essential to the practice of several wireless telecommunications standards (standard essential patents, or SEPs). Conversant has made a commitment towards the European Telecommunications Standards Institute (ETSI) to make patents essential to a standard accessible to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions.

The defendant, Daimler, is a global car company with headquarters in Germany. Daimler manufactures and sells vehicles with connectivity features complying with the LTE standard developed by ETSI.

In October 2018, Conversant joined the Avanci licensing platform, which offers a patent licensing program tailored to connected cars. On 18 December 2018, Conversant made an offer for a bilateral worldwide licence to Daimler and provided information about its SEP portfolio including claim charts concerning several individual patents to the latter.

On 27 February 2019, following a respective reminder sent by Conversant, Daimler replied that it was willing to sign a FRAND licence, highlighted, however, that in the automotive sector it is common that intellectual property rights (IPRs) are licensed to suppliers. Daimler also requested information about existing licensees to Conversant's portfolio as well as an explanation which patents read on which components and why the terms offered were FRAND. Subsequently, Daimler started negotiations for a pool licence with Avanci.

On 5 July 2019, Conversant sent an e-mail to Daimler suggesting a meeting in person on 15 July 2019, since it had been informed by Avanci that the negotiations with Daimler had not been successful. Conversant also pointed out that the car makers participating in the Avanci-programme are licensed under its SEP portfolio and explained the royalty calculation underlying its own bilateral offer -inter alia- by reference to court cases (especially Unwired Planet v Huawei, UK High Court of Justice, judgment dated 5 April 2017). Conversant also intended to provide a full list of patents included in its portfolio to Daimler, the respective document was, however, not attached by mistake to the e-mail sent to Daimler.

On 29 July 2019, Daimler responded and referred to the ongoing negotiations with Avanci. It repeated the view that licensing at supplier level was more efficient and countered that a meeting in person should take place at a later point in time, since Conversant had not shared all necessary information yet.

On 13 August 2019, Conversant filed an infringement action against Daimler before the District Court of Munich I (Court), which did not include a claim for injunctive relief. On 24 August 2019, Conversant informed Daimler about the case filed in Munich and noted that it assumed that Daimler had no actual interest in obtaining a FRAND licence. Conversant also highlighted that for the calculation of royalties the value generated at end-device level should be taken into account.

On 18 September 2019, Daimler reiterated its willingness to obtain a licence and pointed out for the first time that Conversant's e-mail dated 5 July 2019 had not contained the full list of portfolio patents referred to by Conversant. This list was shared with Daimler on 20 September 2019. At the same time, Conversant suggested a meeting in person in the beginning of October 2019. On 8 October 2019, Daimler responded that a meeting could take place only in the end of October, since information needed was still missing.

On 4 December 2019, the parties met in person in Daimler's headquarters. On 15 January 2020, Conversant sent the presentation held in this meeting to Daimler and pointed out that it was willing to establish a licensing programme for Daimler's tier-1 suppliers and that it was prepared to have a meeting with Daimler and all supplier to that end. Conversant had also offered to take recourse to a neutral third party, e.g. in arbitration proceedings, for the determination of the licensing value. On 24 January 2020, Daimler explained that it had already discussed with its suppliers and was willing to organise a meeting.

On 29 January 2020, Conversant additionally raised claims for injunctive relief and the recall and destruction of infringing products against Daimler in the pending proceedings in Munich.

In February and March 2020, the parties discussed about a meeting with Daimler's tier-1 suppliers. Daimler did, however, not organise a meeting with the participation of all suppliers.

On 8 April 2020, Daimler made a counteroffer to Conversant. The counteroffer was based on the value of the Telematic Control Unit (TCU), which is the component enabling LTE-connectivity in cars.

On 30 June 2020, Conversant made a further offer to Daimler that was not accepted. On 10 August 2020, Daimler provided information to Conversant about past vehicle sales and placed security for past uses.

With the present judgment [130] , the Court found in favour of Conversant and – among other things – granted an injunction against Daimler.
 

B. Court's reasoning

The Court found that the patent in suit is essential to the LTE standard and infringed [131] . Consequently, the claims asserted by Conversant were given. The claims for injunctive relief as well as the recall and destruction of infringing products were also to be granted. By initiating infringement proceedings against Daimler, Conversant neither abused a dominant market position in terms of Article 102 TFEU (competition law defence, cf. item 1), nor violated its contractual obligations under ETSI's IPR Policy (contract law defence, cf. item 2.) [132] .
 

1. Competition law defence
Dominant market position

The Court held that Conversant had a dominant market position within the meaning of Article 102 TFEU [133] .

The exclusivity rights arising from a patent do not establish a dominant market position by themselves. [134] A market dominant position is established, when the patent is technically essential for complying with a standard developed by a standardisation body (or a de facto standard) and technical alternatives are not available for products brought on a (downstream) market [135] . In the Court's eyes, this applied to the patent in suit. [136]

Exceptional circumstances that could exclude Conversant's market dominant position here were not present. According to the Court, the sole fact that Conversant had made a FRAND commitment towards ETSI establishing an obligation to grant FRAND licences did not per se exclude market dominance; decisive is, moreover, whether the SEP holder actually meets this obligation. [137] Furthermore, the additional option to get a license from the patent in suit from Avanci did not limit Conversant's market dominant position. [138]
 

No abuse of market dominance

The Court found, however, that Conversant had not abused its dominance by filing an action for injunctive relief as well as the recall and destruction of infringing products against Daimler.

In cases, in which the implementer already uses protected standardised technology, the assessment of the SEP holder's behaviour requires a comprehensive analysis, in which the constitutionally guaranteed strong protection of IPRs, on the one hand, and the interest of users to access the standard, on the other hand, must be balanced against one another. [139] In this context, not only private interests, but also the public interest must be taken into account. [140] The Court highlighted that the public interest is not to be seen as just the 'sole sum of private interests in using standardised technology', but equally includes the substantial interest of the public to protect the integrity of IPRs and secure effective enforcement. [141]

Considering the 'particular nature' of SEPs especially in the telecommunications field, the Court held -in line with the Huawei v ZTE judgment (Huawei judgment) of the Court of Justice of the EU (CJEU) [142] - that it is justified to impose certain conduct obligations on SEP holders. Reason for this is, basically, that -unlike 'regular' patents- SEPs are established in the market through their inclusion in the standard, without further action by the patent holder. [143] Consequently, the need to secure a competitive advantage for the inventor of a patented technology in the market by granting exclusivity rights for a certain period of time is less compelling in relation to SEPs compared to non-standard-essential patents. [144]

Having said that, the Court made, however, clear that the conduct duties imposed on the SEP holder by the Huawei judgement exist only towards an implementer, who 'seriously and not only in words' wants to sign a licence. [145] Accordingly, a defence based on an alleged abuse of market dominance can be successful, only when the implementer that wants to use, or already uses the patent without authorisation is willing to obtain a FRAND licence and refrain from delaying tactics throughout the licensing negotiations with the SEP holder. [146] The Court noted that the key notion underlying the Huawei judgment that parties are best situated to determine FRAND in fair, balanced and swift negotiations relies on a constructive involvement of both parties which is driven by the actual 'sincere motivation' to reach an agreement. [147]
 

Notification of infringement

Looking at the parties' behaviour, the Court held that Conversant fulfilled the duty to notify Daimler about the infringement of its SEPs by sending the letter dated 18 December 2018, which contained sufficient information about its portfolio, including claim charts covering several patents. [148] Whether Conversant had sufficiently explained the royalty calculation underlying the licensing offer that was also attached to this letter, was not relevant, since, at this stage, Conversant had not even been obliged to make an offer to Daimler. [149]
 

Willingness

On the other hand, the Court found that Daimler had not been willing to take a licence from Conversant: On the contrary, the Court identified a 'particularly clear case of missing willingness'. [150]

In terms of content, the implementer must 'clearly' and 'unambiguously' declare willingness to conclude a licence agreement with the SEP holder on 'whatever terms are in fact FRAND' and, subsequently, engage in negotiations in a 'target-oriented' and 'constructive' manner. [151] By contrast, it is not sufficient, in response to the (first) 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. [151]

The Court explained that the assessment of willingness requires a comprehensive analysis of all facts until the end of the oral hearings in the infringement proceedings. [152] Establishing whether willingness is given cannot be a question answered by a 'formalistic snapshot' of the implementer's conduct; what is more, the implementer cannot remain inactive until -in its view- the SEP holder has met its obligations first. [152]

In addition, the Court highlighted that timing in negotiations is a factor, which must be considered in the assessment of willingness as well. [153] Otherwise, implementers would lack motivation to seriously engage in negotiations in a timely manner. [154] Rigid deadlines cannot be set, a case-by-case assessment is needed. [155] An implementer, who has been notified about the infringement, is, however, obliged to legitimize the -unlawful- use of the patent(s) as soon as possible by signing a FRAND-licence with the SEP holder. [155]

Furthermore, the Court reasoned that whether and at which time the implementer made a counteroffer to the SEP holder can also be an 'important indicator' of (un-)willingness. [156] A counteroffer made after the initiation of infringement proceedings will, as a rule, not be acceptable. [157] According to the Court, implementers should not be allowed to engage in negotiations only 'for appearance's shake' and then pull the 'emergency brake' against a potential conviction in infringement proceedings by making a counteroffer. [154] Exceptionally, a counteroffer made during trial could be considered in the assessment of willingness in cases, in which the implementer was willing from the start of the negotiations and always engaged constructively in the discussions with the patent holder. [158]

In line with the above, the Court pointed out that, in general terms, delaying tactics initially applied by an implementer cannot be 'undone' at a later point in time without more ado. [159] Nevertheless, the belated declaration of willingness does not 'automatically' prevent an implementer from raising a 'FRAND-defence' in infringement proceeding: Whether this will be the case or not, shall be decided on a case-by-case basis on grounds of the overall circumstances of the negotiation history. [160]

Against this backdrop and under consideration of Daimler's overall behaviour, the Court reached the conclusion that -although acting in a FRAND-compliant manner would have actually been possible and reasonable [161] - Daimler had chosen to apply delaying tactics [162] .

The Court found that by directing Conversant to its suppliers, Daimler had not expressed willingness to take a licence on 'whatever terms are in fact FRAND', but rather made clear that it was not prepared to take a licence from Conversant itself. [163] Indemnification clauses regarding third-party IPRs potentially agreed between Daimler and its suppliers played insofar no role, as Daimler infringed Conversant's patents independently and must, therefore, be held accountable for that. [163]

A further indication of Daimler's unwillingness was the fact that it took Daimler more than two months to inform Conversant that it had not received a list of portfolio patents that was unintentionally not attached to the e-mail sent by Conversant on 5 July 2020. [164] The Court equally criticized the fact that Daimler had at no point in time posed questions to Conversant on the claim charts provided by the later, but raised concerns against the quality of the patents only in the pending infringement trial. [165]

The Court saw an additional 'substantial' indication of unwillingness in Daimler's response dated 27 July 2020, in which the latter had expressly limited its willingness to sign a licence to products, which were either not licenced yet or purchased by suppliers unwilling to take a licence from Conversant themselves. [166] The Court particularly objected Daimler's choice to define the 'unwillingness' of its suppliers as a condition for signing an own licence with Conversant. [167]

The fact that Daimler had not responded to the proposal to use alternative dispute resolution methods and particularly arbitration for the determination of FRAND-royalties, which Conversant had made at the parties' meeting on 4 December 2019, was also considered as a sign of unwillingness on the side of Daimler. [168]

An additional 'clear' indication of unwillingness and delaying tactics was -according to the Court- the fact that, following the discussion of 4 December 2019, Daimler did not organise a meeting with all tier-1 suppliers, in order to discuss a potential direct licensing option with Conversant, despite having implied that this option had already been discussed with its suppliers. [169]
 

Counteroffer

Subsequently, the Court noted that Daimler's counteroffer dated 8 April 2020 could not remedy the missing willingness which Daimler had displayed until then. [170] Moreover, it rather served as an 'alibi'. [161]

In the eyes of the Court, the counteroffer was belated, since it was made more than 1 year and 4 months after Conversant's offer. [170] What is more, Daimler made the counteroffer during the pendency of the infringement proceedings, which was not acceptable, given that until that point it had been clearly unwilling to take a licence. [171] The Court also explained that Daimler could not excuse the delay by claiming that Conversant had not provided necessary information, since the counteroffer was based on generally known and available data without an underlying detailed analysis; accordingly, it could have been made earlier, that is shortly after receipt of Conversant's initial offer. [172]

Besides that, the Court found that Daimler's counteroffer was, in terms of content, 'evidently not FRAND'. [173] Based on a summary analysis, the licensing fees offered by Daimler were considered to be evidently too low. [174]

The Court noted that FRAND is a range and that there are several methods for calculating FRAND royalties. [174] The Court relied on the so-called 'top-down'-approach (which both Conversant and Daimler had used). [175] Looking at Daimler's 'top-down'-calculation, the Court held that taking the number of all patents declared as standard-essential towards ETSI as the basis for determining Conversant's share of LTE-related SEPs was not in line with FRAND-principles. [176] Considering that not all declared patents are actually standard-essential (a phenomenon described as 'over-declaration'), the use of the total number of declared patents benefits Daimler: Conversant's share of SEPs would per se be higher, if the (lower) number of actually standard-essential LTE patents would be used as basis for the calculation. [176]

In addition, the Court pointed out that the average purchase price of the TCU is no adequate royalty base under FRAND principles. [177] The value of a SEP is reflected by a royalty, which is adequately in proportion to the value of the service provided. [178] According to the Court, in the present case, economic value is created by the offering of LTE-enabled functionalities in Daimler's cars and the use of such functionalities by Daimler's customers. [178] As a consequence, relevant is the value, which Daimler's customers attach to the LTE-based features in a car. [178] The purchase price of TCUs paid by Daimler to its suppliers does not mirror this value. [178]
 

FRAND defence raised by suppliers / licensing level

The Court further explained that Daimler could not invoke the (alleged) willingness of its suppliers to take a licence from Conversant for establishing a FRAND defence. [179]

If an implementer, along with its own declaration of willingness, expresses the wish that licensing takes place at supplier level, it is obliged to comprehensively disclose in writing, which standard-compliant components are integrated in its products and which suppliers provide such components. [180] If this information and disclosure duty is not met, as it was the case here, a request for licensing at supplier level contradicts the implementer's declaration that it is willing to sign an own licence with the SEP holder, and is, therefore, a sign of bad faith (Sec. 242 German Civil Code). [181] In this context, the Court made clear that the implementer is obliged to still pursue bilateral negotiations with the SEP holder in a timely and target-oriented manner, even if -after having provided the aforementioned information to the latter- it is in parallel actively engaged towards facilitating the establishment of a licensing regime at supplier level. [182] In the bilateral negotiations with the SEP holder, the implementer could, however, insist that a clause excluding double payments for components already licensed to suppliers is included in the agreement. [182]

In line with the above, the Court confirmed that by seeking to license Daimler, Conversant did not act in an abusive or discriminatory way. [183]

In the view of the Court, the fundamental question whether the so-called 'license-to-all' or 'access-to-all' approach should be followed with respect to SEP licensing in a supply chain, did not need to be answered here. [184] In legal disputes between a SEP holder and an end-device manufacturer it is sufficient from a competition law angle that the objectives pursued by the SEP holder in the proceedings do not exclude suppliers from the market; this is true, when suppliers are granted access to the standardised technology through 'have-made' rights established by the licence signed by the end-device manufacturer, as Conversant had offered. [184] Whether suppliers have individual claims for being granted a licence is a distinct question, that could be potentially raised in separate proceedings between the SEP holder and the supplier. [185]

The Court added that the SEP holder is free to decide against which infringer within a supply chain court proceedings will be initiated. [186] The respective right of choice is derived from the constitutionally guaranteed protection of property as well as the very nature of patents as exclusionary rights. [187]

According to the Court, the common practice in the automotive field that components are sold to car manufacturers free of third-party rights does not render Conversant's pursuit to license Daimler abusive in antitrust terms. [188] Respective agreements between end-device manufacturers and suppliers have only bilateral (contractual) effects and cannot impair the legal position of third parties. [188] In particular, they cannot limit the SEP holder's right to choose the level of the value chain for the assertion of its patents. [189] The Court noted that the need to abandon existing practices in the automotive sector is of no importance from an antitrust angle, given that the integration of additional technologies serves Daimler's economic interest to access new markets and customer groups. [189]

In this context, the Court also explained that the SEP holder is not obliged to perform duties under the Huawei judgment towards suppliers, as far as infringement proceedings are initiated only towards the end-device manufacturer. [190] Accordingly, a supplier joining such proceedings cannot invoke that the SEP holder abused its market dominance e.g. by omitting a separate notification of infringement addressed to the supplier. [191] The Court denied such comprehensive notification duty of SEP holders, since in multi-level supply chains it is neither feasible nor reasonable to identify all suppliers involved. [192]

In the Court's view, the question whether the SEP holder has abused its market dominance by denying a direct licence to a supplier is subject to general competition law principles. [193] In the present case, the Court did not see sufficient grounds for such abuse. [193] It was not convinced that -absent an own bilateral licence- suppliers are left without rights or face legal uncertainty. [194] The fact that an individual bilateral licence would give suppliers broader freedom to operate than 'have-made' rights might serve their commercial interests, is, however, not of relevance with respect to proceedings between SEP holders and end-device manufacturers, as long as adequate access to the standard is provided to suppliers through 'have-made' rights. [195] Insofar, the Court noted that co-operation within a supply chain on basis of 'have-made' rights is wide-spread and common in practice and also supported by EU law (Commission notice of 18 December 1978 concerning its assessment of certain subcontracting agreements in relation to Article 85 (1) of the EEC Treaty, OJ C 1, 3 January 1979). [195]

Finally, the Court dismissed the argument, that Conversant had allegedly colluded with other members of the Avanci platform to specifically discriminate implementers by excluding access to the relevant standards. [196] The Court saw no indication that this was the case here, but rather highlighted the pro-competitive effects which patent pools are generally recognised to have, not least by EU law (para. 245 of the Guidelines on the application of Article 101 TFEU to technology transfer agreements; 2014/C 89/03). [196]
 

2. Contract law defence

The Court further found that Daimler could not defend itself against the claim for injunctive relief by invoking a contractual claim against Conversant for being granted a FRAND licence, since such claim did not exist. [197] Daimler had argued that Conversant's FRAND commitment towards ETSI prevented the latter from asserting claims for injunctive relief before court.

The Court found that the ETSI FRAND undertaking does not establish duties or rights different than those established by European competition law (especially Art. 102 TFEU), which Conversant had met in the present case. [198] In legal terms, the ETSI FRAND undertaking is a contract for the benefit of a third party under French law ('stipulation pour l'autrui'), containing a binding promise of the SEP holder to grant a FRAND licence at a later point in time. [199] The content and the extent of the corresponding obligation to negotiate a licence is, however, to be interpreted in line with the Huawei judgment, which has defined a standard of conduct based on Art. 102 TFEU. [199] The fact that the ETSI FRAND commitment materialises the requirement to provide access to the standard stipulated by Art. 101 TFEU speaks also in favour of applying a uniform standard of conduct. [199] In the eyes of the Court, French law cannot establish further going conduct duties, since it must be interpreted within the spirit of EU law. [199]
 

C. Other important issues

Finally, the Court took the view that there are no grounds for a limitation of Conversant's claim for injunctive relief due to proportionality considerations. [200] Under German law, proportionality is a general principle of constitutional rank to be considered also with respect to injunctive relief, if a respective objection is raised by the defendant in trial. [200] The Federal Court of Justice (Bundesgerichtshof) has also recognised that 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 ('Wärmetauscher'ruling dated 10 May 2016, Case No. X ZR 114/13). [200] In the eyes of the Court, Daimler had, however, not pleaded any relevant facts in the present proceedings. [200]

  • [130] Conversant v Daimler, District Court of Munich I, 30 October 2020, Case-No. 21 O 11384/19 (cited by juris).
  • [131] Ibid, paras.122-265.
  • [132] Ibid, para. 285.
  • [133] Ibid, para.286.
  • [134] Ibid, para.288.
  • [135] Ibid, paras.287 et seqq.
  • [136] Ibid, paras.291 et seqq.
  • [137] Ibid, para.295.
  • [138] Ibid, para.296.
  • [139]  Ibid, para. 299.
  • [140] Ibid, para. 300.
  • [141] Ibid, para.300.
  • [142] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [143] Conversant v Daimler, District Court of Munich I, 30 October 2020, Case-No. 21 O 11384/19, para.301.
  • [144] Ibid, para.301.
  • [145] Ibid, para.307.
  • [146] Ibid, para.308.
  • [147] Ibid, paras.302 and 308.
  • [148] Ibid, paras. 323 et seqq.
  • [149] Ibid, para.324. The Court expressed, nevertheless, doubts that the sole reference to the calculation method used by the UK High Court in Unwired Planet v Huawei would prove sufficient for the explanation of the rates offered by Conversant to Daimler.
  • [150] Ibid, para. 309.
  • [151] Ibid, para. 310.
  • [152] Ibid, para. 316.
  • [153]  Ibid, para. 311.
  • [154] Ibid, para. 312.
  • [155] Ibid, para. 320.
  • [156] Ibid, para. 311.
  • [157] Ibid, paras. 312 and 316.
  • [158] Ibid, para. 315.
  • [159] Ibid, paras.317 et seqq.
  • [160] Ibid, para. 321.
  • [161] Ibid, para.357.
  • [162] Ibid, paras.322 and 358.
  • [163] Ibid, para.328.
  • [164] Ibid, paras.331 and 336.
  • [165] Ibid, para.332.
  • [166] Ibid, paras.334 and 336.
  • [167] Ibid, para.335.
  • [168] Ibid, para.337.
  • [169] Ibid, para.338.
  • [170] Ibid, para.339.
  • [171] Ibid, para.340.
  • [172] Ibid, paras.355 et seq.
  • [173] Ibid, paras.341 and 354.
  • [174] Ibid, para.341.
  • [175] Ibid, paras.341 and 348.
  • [176] Ibid, para.352.
  • [177] Ibid, para.353.
  • [178] Ibid, para.353
  • [179] Ibid, para.360.
  • [180] Ibid, para.362.
  • [181] Ibid, paras.362 and 364.
  • [182] Ibid, para.363.
  • [183] Ibid, para.365.
  • [184] Ibid, para.366.
  • [185] Ibid, para.367.
  • [186] Ibid, paras.368 and 382.
  • [187] Ibid, para.368.
  • [188] Ibid, para.370.
  • [189] Ibid, para.372.
  • [190] Ibid, paras.373 and 376-378.
  • [191] Ibid, para.373.
  • [192] Ibid, paras.373 and382.
  • [193] Ibid, paras.373 and 379.
  • [194] Ibid, para.374.
  • [195] Ibid, para.375.
  • [196] Ibid, para.380.
  • [197] Ibid, para.384.
  • [198] Ibid, paras.384 et seqq.
  • [199] Ibid, para.385.
  • [200] Ibid, para.269.

Updated 26 January 2017

Saint Lawrence v Vodafone

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

  1. Facts
    Since 28 August 2014 Claimant, a non-practicing entity, is the proprietor of the European patent EP J, originally granted to applicants “Y” and “C”, and allegedly covering part of the AMR-WB standard. Defendant is a company active in the telecommunications sector and which markets AMR-WB-based devices, inter alia devices produced by the Intervener in this case. After the adoption (“freeze”) of AMR-WB by ETSI on 10 April 2001, Claimant (who was not an ETSI member during the setting of the AMR-WB standard) made, on 29 May 2001, a commitment towards ETSI to grant licenses on FRAND terms inter alia for patent EP J. Claimant and its parent company “O” offer the SEP and all other patents of the same family to third parties by means of a portfolio license. Licensing conditions are accessible on the Internet and various producers in the sector have taken a license under these conditions.
    Prior to the submission of the patent infringement action on 23 July 2014 and to the advance payments on costs on 29 July 2014, Claimant alerted neither Defendant nor the manufacturer of the contested embodiments, who acted as an intervener in the present proceedings and became aware of the lawsuit in August 2014. By e-mails on 31 July and (as a reminder) on 9 December 2014, the first of which included a copy of the statement of claims and reached the defendant before it was formally served with the statement, Claimant notified the alleged patent violation to Defendant. After Defendant’s reply as of 12 January 2015, Claimant presented a draft licensing agreement to Defendant by letter as of 22 April 2015.
    On 9 December 2014, the Intervener declared willingness to take a license, inter alia for the patent-in-suit, provided infringement was found in court. It further declared that it would accept royalties determined by a court or arbitration tribunal. Claimant, in turn, offered a licensing agreement by letters as of 12 January 2015 and 25 March 2015 respectively. In the course of meetings taking place since 23 January 2014, [201] Claimant offered a license to the Intervener. On 23 February 2015 and on 2 April 2015 respectively, the Intervener made two licensing offers, including third party determination (arbitration panel or English court) of the amount of royalty, for the whole German patent portfolio of Claimant. An additional offer for a licensing agreement, limited to Germany and implementing a royalty of USD 0.0055 per patent by reference to the “WCDMA Patent Pools”, was made by the Intervener on 6 March 2015 and 24 September 2015 respectively, but it was finally refused by Claimant on 4 October 2015. Moreover, the Intervener provided a bank “guarantee of payment” as of 3 September 2015, being modified by letter as of 10 November 2015, and also rendered account of past and prospective sales in Germany since 2011.
  2. Court’s reasoning
    The considerations of the court are almost exactly the same as those in the case LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14.
    1. Market power and notice of infringement
      The court leaves open the question of whether the SEP conferred market power to Claimant since it did, in any case, find no abuse of such potential market power. [202] The court declared the Huawei rules applicable to claims for the recall of products. [203]
      As regards the Huawei requirement to alert the standard user of the infringement, the decision arrived at various findings of interest: Firstly, the judges found that—in “non-transitional” cases where the lawsuit was brought after the Huawei decision—the infringement notification has to take place before the action is filed, or the latest before the advance payment on costs is made. In transitional cases, such as the present case, a delayed infringement notification, taking place after the advance payment on costs as well as the submission of the court action, but before the statement of claims is served, is admissible. [204] Moreover, an infringement notification could possibly be omitted (in particular) if—as in the present case—the patent user already disposes of all necessary information and lacks willingness to license. [205] In non-transitional cases, however, the court doubts whether it is possible to rectify an omitted infringement notification without withdrawing the action. [206]
      Secondly, the court specified the minimum content of the infringement notification which has to indicate at least the number of the patent, the contested embodiments and the alleged acts of use performed by the standard implementer. The court did not decide whether additional information has to be provided, in particular regarding the interpretation of the patent claims or on which part of the standard the patent reads, but it stated that such additional information is not harmful to the patent proprietor. [207]
      Lastly, the court detailed on the particular situation of the Intervener, being Defendant’s manufacturer and supplier in the present case: Even though a FRAND defense successfully raised by the Intervener would in general also cover subsequent levels of the distribution chain, the Huawei requirements apply only indirectly to suppliers of contested embodiments which have not been sued themselves. Accordingly, the SEP proprietor is not obliged to notify the patent infringement to third parties, but as soon as a request to grant a license on FRAND terms is submitted the (adapted) Huawei procedure applies. [208] In casu, no separate infringement notice vis-à-vis the Intervener was required since the Intervener was, since August 2014, aware of the action having been brought.
    2. The SEP owner’s licensing offer
      Since the patent user did not express its willingness to conclude a licensing agreement in due time, the court found Claimant to comply with the Huawei requirement to submit a licensing offer on FRAND terms even though the offer was made in the course of the ongoing litigation. For transitional cases, as the present one, this holds true even if infringement notification and court action take place at the same time. [209]
      Besides, the court analyzed under which circumstances licensing conditions can be considered as FRAND according to Huawei. In the opinion of the judges, the more licensing agreements implementing comparable terms the SEP proprietor has already concluded, the stronger is the presumption that these conditions are FRAND, unless factual reasons—which are to be demonstrated by the patent user—justify modified terms. Recognized commercial practice in the relevant sector has to be considered when defining the admissible scope of the licensing agreement. If patent portfolios are usually covered by group or worldwide licenses in the relevant market, a (worldwide) portfolio license will be FRAND unless the circumstances of the specific case, e.g. the SEP proprietor’s market activity being limited to one geographic market, require a modification. [210] Accordingly, Claimant’s (worldwide) licensing offer to Defendant for the whole AMR-WB pool, demanding royalties of USD 0.26 per mobile device that implemented the standard and was produced or marketed in countries in which the SEP was in force, and complying with Claimants existing licensing practice (accessible on the Internet and already implemented in 12 licensing agreements) was declared FRAND. While the court considered that comparable licensing agreements “represent an important indicator of the adequacy of the license terms offered” it clarified that the significance of a patent pool as an indication of FRAND conformity is “limited”. Defendant and the Intervener failed to show that the portfolio comprised (non-used) non-SEPs as well. [211] They further failed to show that the pre-concluded licensing agreements provided no valid basis for comparison as they were concluded under the threat of pending litigation. [212]
      In order to fulfill the Huawei obligation of specifying the calculation of royalties, the SEP proprietor only has to provide the information necessary to determine the amount of royalties to be paid, e.g. the royalty per unit and the products covered by the license. While the court left undecided whether additional indications, e.g. concerning the FRAND character of the licensing offer, are necessary to comply with Huawei, it found that the SEP proprietor’s duty to inform should not be interpreted too strictly as FRAND does regularly encompass a range of values that will be fair, reasonable, and non-discriminatory. [213]
      Claimant’s licensing offer presented to the Intervener was considered as being FRAND for the same reasons. Furthermore, the court emphasized that the contractual clause allowing for judicial review of the royalties offered could be a possible way to avoid abusive practices and to ensure that licensing offers correspond to FRAND terms. [214]
    3. The standard implementer’s reaction
      The court found that the more details the infringement notification contains, the less time remains for the standard user to examine the patent(s) at issue and to express its willingness to conclude a licensing agreement on FRAND terms. In the present case, Defendant did not comply with Huawei because it took more than five months to react and then only asked for proof of the alleged infringement. Given this excessive delay, the court did not decide whether Defendant’s reaction satisfied the Huawei requirements in terms of content. It denied the possibility to remedy a belated reaction by a subsequent declaration of willingness to license. On the contrary, and as a consequence of the patent user’s non-compliance, the SEP proprietor may continue the infringement action without violating Article 102 TFEU, but it still has to grant licenses on FRAND terms. [215] Whether the Intervener satisfied the ECJ criteria was left undecided. [216]
      The court made some further remarks of interest as to the Huawei requirements concerning the standard implementer: Firstly, it left undecided whether the obligation of the patent user to diligently respond is caused also by a (potentially) non-FRAND licensing offer. [217] Secondly, a standard user who has taken a license is not prevented from challenging validity and essentiality of the SEP afterwards, nor is the SEP proprietor entitled to terminate the license if such a challenge takes place. However, the standard implementer may not delay the (unconditional) conclusion of the licensing agreement until a final court decision on these issues has been rendered. While validity and standard-essentiality is litigated, the licensee remains obliged to pay royalties and it cannot request to insert into the licensing contract a clause entitling it to reclaim paid royalties in case of its success in court. [218] Thirdly, as, in the present case, no specific counter-offers satisfying FRAND terms were submitted and Defendant could not establish that Claimant had waived this requirement the court did not decide on whether a SEP proprietor is obliged to negotiate further although itself and the patent user have submitted FRAND offers. [219]
      None of the counter-offers of the Intervener were FRAND in terms of content. They were either inadmissibly limited to Germany, contained no precise royalty, were not submitted “promptly” because the standard user had waited until the oral pleadings in the parallel procedure, or they proposed royalties per device which the court considered as too low. [220] While it was therefore held to be irrelevant whether, in the first place, the Intervener duly declared its willingness to license, the court emphasized that the Intervener’s readiness to take a license only after the SEP infringement was determined in court did not satisfy the Huawei standard of conduct. [221]
      Moreover, the obligation imposed by Huawei to provide appropriate security and to render account was not fulfilled. While Defendant refrained from taking any of these actions, the Intervener waited several months after the counter-offers were refused in order to submit its bank “guarantee of payment”, which was not recognized as “appropriate security” due to its amount and its limitation to acts of use in Germany. [222] Neither was the Intervener’s initial proposal to have the security—if requested by Claimant—determined by an arbitration tribunal or by an English court accepted as an appropriate way to provide security. [223]
  3. Other important issues
    According to the court, the Huawei requirements apply to both non-practicing entities and other market participants. [224]
    Suing a network operator instead of the undertakings producing devices operating in the network constitutes (at least under the circumstances of this case and absent selective enforcement) no violation of competition law even though this strategy might aim at using the action against the network operator as a “lever” to obtain licensing commitments from the device suppliers. On the other hand, device manufacturers are entitled to a FRAND license as well and can raise the FRAND defense if such a license is not granted. In consequence, the court perceives a fair balance of interests as the SEP proprietor can choose on which level of the chain of production to sue while the undertakings in the chain of production can choose on which level to take a license. [225]
    Furthermore, no patent ambush-defense based on § 242 BGB could be raised because, firstly, Defendant and the Intervener could not substantiate the alleged patent ambush by “Y” and “C”, being the original SEP proprietors; secondly, they could not show that a different patent declaration conduct would have resulted in a different version of the standard excluding the patent-in-suit; thirdly, the alleged patent ambush would, arguably, have resulted only in a FRAND-licensing obligation and, fourthly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [226]
  • [201] This is the date mentioned by the court although “23 January 2015” may seem more plausible and the date given by the court may result from a scrivener’s error.
  • [202] Case No. 4a O 73/14, para. 184
  • [203] Case No. 4a O 73/14, para. 187
  • [204] Case No. 4a O 73/14, para. 195 et seq.
  • [205] Case No. 4a O 73/14, para. 208-210
  • [206] Case No. 4a O 126/14, para. IV, 3, a, bb, 2, c
  • [207] Case No. 4a O 73/14, para. 193
  • [208] Case No. 4a O 73/14, para. 270 et seq.
  • [209] Case No. 4a O 73/14, para. 222 et seq.
  • [210] Case No. 4a O 73/14, para. 225 et seq.
  • [211] Case No. 4a O 73/14, para. 225 et seq. On the relevance of the SIPRO-pool royalty rates, cf. LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 245-248. On the facts indicating that a worldwide license was appropriate LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 249-255.
  • [212] Case No. 4a O 73/14, para. 234-242. The court argued that it is questionable in principle how much the threat of a claim for injunctive relief can (inadmissibly) affect license agreement negotiations, since the Orange Book case law of the BGH (German Federal Court of Justice), the Motorola decision of the European Commission, and now the CJEU judgment in the Huawei Technologies/ZTE Case could be and can be invoked against inappropriate demands that are in breach of antitrust law.
  • [213] Case No. 4a O 73/14, para. 256 et seq.
  • [214] Case No. 4a O 73/14, para. 279 et seq.
  • [215] Case No. 4a O 73/14, para. 214-220
  • [216] Case No. 4a O 73/14, para. 214-220; 278
  • [217] Case No. 4a O 73/14, para. 266
  • [218] Case No. 4a O 73/14, para. 185 et seq.; 262 et seq.
  • [219] Case No. 4a O 73/14, para. 264.
  • [220] Case No. 4a O 73/14, para. 291 et seq.
  • [221] Case No. 4a O 73/14, para. 278
  • [222] Case No. 4a O 73/14, para. 267 et seq.; 299 et seq.
  • [223] Case No. 4a O 73/14, para. 304
  • [224] Case No. 4a O 73/14, para. 189
  • [225] Case No. 4a O 73/14, para. 309-313
  • [226] Case No. 4a O 73/14, para. 317 et seq.

Updated 6 May 2021

Sisvel v Haier

Federal Court of Justice - BGH
24 November 2020 - Case No. KZR 35/17

A. Facts

The claimant, Sisvel, holds patents declared as (potentially) essential to the practice of several wireless telecommunications standards (standard essential patents, or SEPs). Sisvel has made a commitment towards the European Telecommunications Standards Institute (ETSI) to make SEPs accessible to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions.

The defendants are two European subsidiaries of the Haier group (Haier), which has its headquarters in China. The Haier group produces and markets -among other things- mobile phones and tablets complying with various standards, including the GPRS and UMTS standards developed by ETSI.

On 20 December 2012, Sisvel informed the parent company of the Haier group (Haier China) that it offers licences for its SEPs and shared a list of approx. 235 patents included in its portfolio. 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 'hope' to have 'a formal negotiation' with Sisvel and asked for information regarding potential discounts mentioned in previous communi­cations.

In August 2014, Sisvel made an offer for a global portfolio licence to Haier, which was rejected.

Shortly after that, Sisvel filed infringement actions against Haier before the District Court of Duesseldorf (District Court). One of the actions was based on a SEP reading on the UMTS standard (patent in suit). The other action involved a patent reading on the GPRS standard. Haier filed nullity actions against both patents asserted before the German Federal Patent Court.

During the infringement proceedings, Haier made certain counteroffers to Sisvel. These offers had a limited scope, since they covered only the patents (patent families) asserted against Haier in court.

On 3 November 2015, the District Court decided in favour of Sisvel in both cases [227] . It granted injunctions against Haier and ordered the recall and destruction of infringing products. The District Court 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 both decisions.

In the subsequent proceedings before the Higher District Court of Duesseldorf (Appeal Court), 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 Huawei v ZTE ruling [228] (Huawei judgment) rendered after Sisvel had filed the infringement actions.

On 16 January 2016, during the course of the proceedings before the Appeal Court, Haier declared that it 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. Haier also requested claim charts with respect to all patents included in Sisvel's portfolio.

In December 2016, Sisvel made a further licensing offer to Haier, which was also rejected.

On 20 January 2017, that is a few weeks prior to the end of the oral arguments in the appeal proceedings, Haier made a further counteroffer to Sisvel. The licence offered would cover only the two subsidiaries of the Haier group sued in Germany. An agreement was not reached.

By two judgments dated 30 March 2017, the Appeal Court partially granted Haier's appeals in both parallel proceedings [229] . The claims for injunctive relief as well as the recall and destruction of infringing products were dismissed on the grounds that Sisvel had not complied with its obligations under the Huawei judgment, especially by failing to make a FRAND licensing offer to Haier.

Sisvel appealed the decisions of the Appeal Court.

In April 2020, the Federal Court of Justice (FCJ or Court) finally dismissed the invalidity action filed by Haier against the patent in suit [230] .

On 5 May 2020, FCJ rendered a judgment in the parallel proceedings pending between the parties concerning the patent reading on the GPRS standard [231] . The Court decided in favour of Sisvel and reversed the judgment of the Appeal Court. With the present judgmentSisvel v Haier, Federal Court of Justice, judgment dated 24 November 2020, Case No. KZR 35/17 (cited by )., the Court reversed the decision of the Appeal Court also in the case involving the patent in suit.

B. Court's reasoning

The Court found that the patent in suit was essential to the UMTS standard and infringed [233] .

Contrary to the view previously taken by the Appeal Court, FCJ found 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) [234] .

Dominant market position

The Court held that Sisvel had a dominant market position within the meaning of Article 102 TFEU [235] .

FCJ explained that a dominant market position is given, 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 [236] . Even when alternative (technical) options exist, market domi­nance can arise as long as products not using the teaching of the patent cannot compete in a (downstream) market. [236] According to the FCJ, this applied with respect to the patent in suit.

Abuse of market dominance

The Court found, however, that Sisvel had not abused its dominant market position by filing infringement actions against Haier [237] . An abuse of market dominance can occur, when the SEP holder

  • refuses to grant a FRAND licence to an implementer willing to take such licence and brings a court action against the latter, asserting claims for injunctive relief (and/or the recall and destruction of infringing products), or
  • has not made 'sufficient efforts' in line with the 'particular responsibility' attached to its dominant position to facilitate the signing of a licence agreement with an implementer, who is, basically, willing to take a licence [238] .

In the eyes of the Court, in both above scenarios, the filing of an action against a 'willing' implementer amounts to an abuse, only because the latter has a claim to be contractually allowed by the SEP holder to use the teachings of the patent under FRAND conditions [239] . On the other hand, an abuse is regularly not per se established by an offer made by the patent holder at the beginning of negotiations, even when the terms offered would unreasonably impede or discriminate the implementer, if contractually agreed. [239] An abuse would be given, if the SEP holder insisted on such conditions also at the end of licensing negotiations with the imple­menter. [239]

Notification of infringement

The Court explained that the 'particular responsibility' of a market dominant patent holder materializes in an obligation to notify the implementer about the infringement of the patent in suit prior to filing an action, in case that the implementer is (potentially) not aware that by complying with the standard said patent is used [240] .

In the present case, the Court found that by the letter dated 20 December 2012 and the following correspondence Sisvel had given proper notification of infringement to Haier [241] .

Willingness

On the other hand, the Court found that Haier did not act as a licensee willing to obtain a FRAND licence from Sisvel [242] . In this respect, FCJ disagreed with the Appeal Court, which had taken the opposite view.

In the Court's eyes, the implementer must 'clearly' and 'unambiguously' declare willingness to conclude a licence agreement with the SEP holder on FRAND terms and, subsequently, engage in negotiations in a 'target-oriented' manner [243] . By contrast, 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 [243] .

The Court reasoned that the willingness of the implementer to legitimise the unauthorized use of the patent for the future by creating a respective contractual base is a prerequisite for placing the burden on the SEP holder to negotiate a FRAND licence with the implementer. [244] What is more, willingness (on both sides) is essential, because an adequate solution balancing the opposing interests of the parties results, as a rule, from an interest-based negotiation. [245] The fact that a party fails to contribute in negotiations towards a FRAND agreement will regularly be considered to its detriment. [246] An implementer, who has not shown interest in a FRAND-licence over a longer period after receipt of an infringement notification will have to undertake 'additional efforts' to make sure, that despite the delay caused a licence can be signed as soon as possible. [247]

The Court highlighted particularly that implementers should not engage in 'patent hold-out' by exploiting the 'structural disadvantage', which SEP holders face due to the limitation of their right to assert patents in court. [248] Otherwise, competition could be distorted, because the infringer would gain unfair advantages over implementers that have taken a licence in a timely manner. [248]

FCJ took the view that the above interpretation of the requirements related to the implementers' obligation to demonstrate willingness to obtain a FRAND-licence is in line with the Huawei judgment; a new referral of the respective questions to the CJEU, as requested by Haier, was not needed. [249] The Huawei judgment created a 'safe harbour' against antitrust liability in the sense that compliance with the obligations established will regularly suffice to exclude an abuse of market dominance. [250] Under special circumstances, however, stricter or less strict conduct duties of the parties could be justified. [250]

The Court observed that the Huawei judgment supports the notion that the implementer should remain willing to obtain a licence throughout the course of negotiations. [250] The 'continuous' willingness is an 'indispensable condition' for successful negotiations or, in case negotiations fail, for a finding of abuse of market dominance on the side of the SEP holder. [251] The refusal of SEP holder to grant a FRAND licence would, indeed, have no relevance in antitrust terms, when the implementer is not objectively willing and able to obtain such licence. [252]

Accordingly, FCJ explained that willingness shall (still) be in place, also when the SEP holder makes a licensing offer. [253] In this regard, the Court disagreed with the District Court of Duesseldorf, which had expressed the opposite view in the recent referral of certain FRAND-related questions to the CJEU in the matter Nokia v Daimler. [254] According to FCJ, the offer of the SEP holder is just the 'starting point' of negotiations; since FRAND is a range, it is the goal of negotiations to reach a fair and reasonable result considering the interests of both sides. [255] The implementer has, therefore, a duty to examine the FRAND-conformity of the terms of the SEP holder's offer. [256] If the offer is 'obviously' not FRAND, it will be sufficient that the implementer explains the reasons why this is the case. [256]

In this context, the Court made clear that the implementer's duty to examine SEP-holder's licensing offer exists, irrespective of whether the offer is, in terms of content, FRAND-compliant in every respect. [257] If one would require from the SEP holder to make a 'perfect' FRAND offer right away, licensing negotiations would be obsolete. [258] It is also not possible to assess the FRAND-conformity of the offer in the abstract, without reference to the aspects which each side considers relevant. [259] The Court reiterated that an non-FRAND licensing offer does not per se amount to an abuse of market dominance. [260]

Having said that, FCJ noted that for the assessment of the willingness of the implementer its entire conduct (including its reaction to the SEP holder's licensing offer) must be taken into account. [261] Consequently, willingness can change in the course of time: a court action filed by the SEP holder could become abusive at a later point in time, if the implementer adequately raises a request for a FRAND-licence. [262] However, the longer the implementer waits with asserting such request, the higher the threshold for considering it as a willing licensee will be. [263] The Court again noted that the above inter­pretation is in line with the Huawei judgment, so that no additional referral to the CJEU is needed, as Haier had requested. [261]

Against this background, the Court observed that the first response of Haier China to Sisvel's notification almost one year after receipt of the infringement notification was belated [264] . 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 [264] . Besides that, FCJ 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, in terms of content [265] . Since it had reacted belatedly to the notification of infringement, Haier should have undertaken 'additional efforts' to demonstrate willingness, which had been, however, not the case. [266]

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 [267] . Although the implementer is, in principle, allowed to preserve the right to contest the validity of a licensed patent after conclusion of an agreement, the Court held that a declaration of willingness cannot be placed under a respective condition [268] . Besides that, requesting the production of claim charts for all patents of Sisvel's portfolio almost three years after the receipt of the notification of infringement was, according to the Court, an indication that Haier was only interested in delaying the negotiations until the expiration of the patent in suit [269] .

Furthermore, FCJ found that Haier's willingness to enter into a FRAND licence could also not be extracted from the counteroffers made during the infringement proceedings. [270] The fact that these counteroffers were, in terms of scope, limited only to the patents asserted by Sisvel in court indicated that Haier had not seriously addressed Sisvel's request for a worldwide portfolio licence. [271] Given that it had more than sufficient time to examine Sisvel's portfolio, one could expect from Haier to provide substantive grounds for such 'selective licensing'. [271]

What is more, the Court held that the counteroffer dated 20 January 2017, which Haier had made shortly before the end of the appeal proceedings, was no sufficient demonstration of willingness either. [272] The Court focused particularly on the fact that the licence would cover only the two affiliates of the Haier group sued in Germany. [273] According to FCJ, Haier had no 'legitimate interest' on such 'selective licensing'; on the contrary, a limited licence would offer no sufficient protection against infringement by other companies of the Haier group and force Sisvel to a cost-intensive assertion of its SEPs 'patent to patent and country-by-country'. [274]

In addition, the Court also criticised the proposed royalty regime. [275] Haier based the royalty calculation only on a small portion (four patent families) of the SEPs that should be included in the licence, which, in its eyes, were 'probably' essential. [276] The Court reasoned that the scope of the licence must be clarified in negotiations, whereas in the ICT-sector, due to the large number of relevant patents, it is common to rely on estimations regarding both essentiality and validity, which, on the one hand, allow to take 'necessary remaining uncertainties' adequately into account and, on the other hand, help to avoid disproportionate high transaction costs. [277]

Apart from that, the fact that the counteroffer was made only in the 'last minute' of the appeal proceedings allowed the conclusion that Haier was not actually aiming at signing a FRAND licence, but was rather motivated by tactical considerations with respect to the pending proceedings. [278]

SEP holder's licensing offer

Having found that Haier had not sufficiently demonstrated willingness to obtain a FRAND licence, the Court did not examine the FRAND-conformity of Sisvel's licensing offers to Haier in the present case [279] . According to FCJ, this question is not relevant, when the implementer has not adequately expressed willingness to sign a FRAND licence. [280]

The Court highlighted that -apart from the obligation to notify the implementer about the infringement- duties of the SEP holder (including the duty to make a FRAND licensing offer) arise only if the implementer has demonstrated willingness to obtain a licence on FRAND terms. [281] The FRAND-undertaking of the patent holder towards the relevant standardisation body does not change the fact that the user of a patent is, in principle, obliged to seek a licence from the right holder. [281]

C. Other important issues

Patent ambush

The Court dismissed Haier's defence based on the 'patent ambush' argument. [282] Haier argued that the patent in suit was unenforceable, because the initial patent holder, from whom Sisvel had acquired said patent, had failed to disclose the patent towards ETSI in due course during the development of the UMTS standard.

The Court did not examine whether a 'patent ambush' in the above sense indeed occurred in the present case. [283] FCJ took the view that an implementer can assert 'patent ambush' only against the patent holder that actually participated in the standard development process; on the contrary, such defence cannot be raised against its successor (here: Sisvel). [283]

Notwithstanding the above, the Court noted that a 'patent ambush' requires that the decision-making process within the relevant standardisation body was distorted by the withheld information. [284] Insofar, the implementer must establish at least some indication that the standard would have taken a different form, if the information considering the relevant patent application had been disclosed in time. [285] Haier had, however, failed to do so. [285]

Damages

Finally, the Court found that Sisvel's damage claims were given on the merits. Negligence establishing Haier's liability for damages was given: The implementer is, in principle, obliged to make sure that no third party rights are infringed, before starting manufacturing or selling products, which Haier had not done. [286]

What is more, Sisvel's claim for damages was not limited to the amount of a FRAND licensing rate ('licensing analogy'). [287] The SEP holder is entitled to full damages, unless the implementer can assert an own counterclaim, requesting to be placed in the position, in which it would have been, in case that the SEP holder had fulfilled the obligations arising from its dominant market position. [286] An implementer is, however, entitled to such (counter)claim, only when it adequately expressed its willingness to enter into a licence, which had not been the case here. [286]

  • [227] Sisvel v Haier, District Court of Duesseldorf, judgment dated 3 November 2015, Case No. 4a O 144/14 (UMTS-related patent) and Case No. 4a O 93/14 (GPRS-related patent).
  • [228] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [229] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 30 March 2017, Case No. I-15 U 65/15 (UMTS-related patent) and Case No. I-15 U 66/15 (GPRS-related patent).
  • [230] Federal Court of Justice, judgment dated 28 April 2020, Case No. X ZR 35/18.
  • [231] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17.
  • [232] Sisvel v Haier, Federal Court of Justice, judgment dated 24 November 2020, Case No. KZR 35/17 (cited by ).
  • [233] Ibid, paras. 10-43.
  • [234] Ibid, para. 44.
  • [235] Ibid, paras. 48 et seqq.
  • [236] Ibid, para. 49.
  • [237] Ibid, para. 52.
  • [238] Ibid, para. 53.
  • [239] Ibid, para. 54.
  • [240] Ibid, para. 55.
  • [241] Ibid, para. 84.
  • [242] Ibid, paras. 86 et seqq.
  • [243] Ibid, para. 57.
  • [244] Ibid, para. 58.
  • [245] Ibid, para. 59.
  • [246] Ibid, para. 60.
  • [247] Ibid, para. 62.
  • [248] Ibid, para. 61.
  • [249] Ibid, para. 63.
  • [250] Ibid, para. 65.
  • [251] Ibid, para. 68.
  • [252] Ibid, paras. 66 and 68.
  • [253] Ibid, para. 69.
  • [254] Ibid, para. 69. See Nokia v Daimler, District Court of Duesseldorf, order dated 26 November 2020, Case No. 4c O 17/19.
  • [255] Ibid, paras. 70 and 71.
  • [256] Ibid, para. 71.
  • [257] Ibid, para. 72.
  • [258] Ibid, para. 73.
  • [259] Ibid, para. 74.
  • [260] Ibid, para. 76.
  • [261] Ibid, para. 77.
  • [262] Ibid, paras. 79 et seqq.
  • [263] Ibid, para. 83.
  • [264] Ibid, para. 87.
  • [265] Ibid, paras. 88 et seqq.
  • [266] Ibid, para. 89.
  • [267] Ibid, paras. 93 et seqq.
  • [268] Ibid, para. 95.
  • [269] Ibid, paras. 96-99.
  • [270] Ibid, paras. 102 et seqq.
  • [271] Ibid, para. 102.
  • [272] Ibid, paras. 108 et seqq.
  • [273] Ibid, para. 116.
  • [274] Ibid, para. 118.
  • [275] Ibid, paras. 124 et seqq.
  • [276] Ibid, para. 124.
  • [277] Ibid, para. 125.
  • [278] Ibid, para. 126.
  • [279] The Court had, however, undertaken such analysis in its earlier decision between the same parties dated May 2020. See Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17, especially paras. 76-81 and 101 et seqq.
  • [280] Sisvel v Haier, Federal Court of Justice, judgment dated 24 November 2020, Case No. KZR 35/17, para. 107.
  • [281] Ibid, para. 56.
  • [282] Ibid, paras. 127 et seqq.
  • [283] Ibid, para. 130.
  • [284] Ibid, para. 131.
  • [285] Ibid, paras. 131 et seq.
  • [286] Ibid, para. 135.
  • [287] Ibid, paras. 134 et seqq.

Updated 12 March 2019

Fraunhofer-Gesellschaft (MPEG-LA) v ZTE

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

A. Facts

The Claimant, Fraunhofer-Gesellschaft zur Förderung der Angewandten Forschung, holds a patent essential to the practice of the AVC/H.264 standard concerning the compression of video data (Standard Essential Patent of SEP) [288] . The patent holder committed towards the relevant standardization body to make this patent accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions. The Claimant contributed the SEP in question to a patent pool administered by MPEG LA LLC (MPEG LA), comprising more the 5,000 patents referring to the AVC/H.264 standard (MPEG LA pool) [289] .

The Defendant, a German subsidiary of a Chinese group of companies, sells – among other things – mobile phones manufactured by its parent company (parent company) which practise the AVC/H.264 standard in Germany [290] .

MPEG LA uses a standard licensing agreement, which is publicly available at its website [291] . It has signed licensing agreements with approx. 1,400 implementers [291] .

By e-mail dated 8 September 2011, MPEG LA sent a copy of its standard licensing agreement to the Defendant’s parent company and informed the latter that its “mobile handset and tablet products” infringe patents included in its “AVC patent portfolio” (without indicating, however, either the concrete patent numbers or the specific infringing products) [292] .

On 15 September 2011, the parent company asked MPEG LA to send any relevant documents by mail to its IPR Manager [293] . A copy of MPEG LA’s standard licensing agreement reached the parent company in late September 2011 [294] .

In 2012, the parent company acquired patents included in the MPEG LA pool [289] .

Since MPEG-LA and the parent company could not reach an agreement on a licence covering the MPEG LA pool [295] , the Claimant brought an action against the Defendant before the District Court of Düsseldorf in Germany (Court), requesting for injunctive relief, information and rendering of accounts, the destruction and the recall of infringing products as well as for a declaratory judgement confirming Defendant’s liability for damages on the merits [296] .

During the proceedings, the Defendant declared its willingness to obtain a licence for the patent in suit and other SEPs of the Claimant referring to the AVC/H.264 standard [297] . Moreover, the Defendant sent to MPEG LA two signed copies of MPEG LA’s standard licensing agreement, along with a statement of accounts of its past sales and a bank guarantee [298] . MPEG LA did not countersign this agreement. It insisted, instead, on a licence that would cover all companies belonging to the same group as the Defendant [299] .

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


B. Court’s reasoning

The Court held that the mobile phones sold by the Defendant in Germany infringe Claimant’s SEP in suit [300] . It also found that by filing the present suit the Claimant did not abuse its dominant market position in violation of Article 102 of the Treaty for the Functioning of the EU (TFEU), since it had fully complied with the conduct obligations stipulated by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [301] (Huawei obligations or framework) with respect to dominant undertakings [302] .

1. Dominant market position

The Court found that the Claimant holds a dominant market position in terms of Article 102 TFEU [303] .

The Court defined the relevant market for the assessment of dominance as the market for licences for any given patent [304] . A dominant market position can further also exist, when the patent holder can hinder competition in downstream markets for standard-compliant products and services [304] .

The Court made, however, clear that ownership of a SEP does not per se establish market dominance [305] . A dominant market position is given, when the use of the SEP is required for entering the market [305] . The same is true, if the patent user could not market competitive products or services, without access to the respective SEP [305] .

Based on these considerations, the Court saw no ‘reasonable’ doubt that the Claimant was a dominant undertaking: It was undisputed that almost all mobile phones available worldwide use the AVC/H.264 standard and that no “realistic” alternative to the MPEG LA pool existed in the licensing market for patents essential to this standard [306] .

2. Huawei framework

The Court found, however, that the Claimant did not abuse its dominant position by suing the Defendant in the present case, since its conduct was in line with the Huawei framework [307] . The Huawei framework establishes mutual conduct obligations for both SEP holders and SEP users, which need to be fulfilled step by step and one after another (meaning that each party’s obligation to act arises only after the other party has fulfilled its own obligation) [308] . Subject to the Huawei framework is not only the patent holder’s claim for injunctive relief, but also the claim for the destruction of infringing products [309] .

In this context, the Court pointed out that the Huawei framework applies, irrespective of whether a ‘well-established’ licensing practice concerning the asserted patents already existed before the CJEU delivered the Huawei judgment, or not [310] . The Claimant had argued that, in the present case, the Court should apply the (German) legal standard that preceded the Huawei framework (which was based on the so-called ‘Orange-Book-Standard’ ruling of the Federal Supreme Court [311] ), since with respect to the SEP in suit a ‘routine’ practice already existed prior to the Huawei judgement [312] . The Court explained that the Huawei judgment does not contain either an explicit or an implicit limitation of its scope of application [313] . Furthermore, even if a ‘well-established’ licensing practice existed, the need to apply the Huawei framework will still be given, in order to bridge the nevertheless existing information gap between patent holder and implementer concerning the (potential) infringement of SEPs [314] . Finally, it would be very challenging for courts to distinguish whether a ‘well-established’ licensing practice excluding the application of the Huawei framework is at hand, or not [315] . Notwithstanding the above, according to the Court, the actual licensing practice of the patent holder could be of ‘particular significance’ when assessing the compliance of the latter with the Huawei obligations: Such practice could, for instance, serve as an indicator of the appropriateness of SEP holder’s licensing offer to the implementer [316] .

Having said that, the Court found no flaws in Claimant’s conduct. In the Court’s view, the Claimant had met its Huawei obligation to notify the Defendant about the infringement of its patent as well as the obligation to present the Defendant with a written licensing offer covering also the patent in suit. The Defendant, on the other hand, adequately expressed its willingness to enter into a licence, failed, however, to make a FRAND counter-offer to the Claimant. Since an adequate counter-offer was missing, the Court did not take up the question whether the bank guarantee provided by the Claimant to MPEG LA constitutes an adequate security in terms of the Huawei framework [317] .

Notification of infringement

The Court ruled that the Claimant had adequately notified the Defendant about the infringement of the SEP in suit through the e-mail sent by MPEG LA to the parent company on 8 September 2011 [318] .

The fact that this e-mail was not addressed to the Defendant, but to the parent company, did not raise any concerns as to the compatibility of the notification with the Huawei framework. The Court explained that a notification of infringement addressed only to the parent company of a group of companies is sufficient, as far as it can be assumed that the notification will be forwarded to the subsidiaries con­cerned [319] . The sole fact that a company belongs to a group justifies such an assumption, unless indications to the contrary exist [319] . This was, however, not the case here.

Besides that, the Court did not consider it inappropriate that the aforementioned e-mail was not sent to the parent company by the Claimant, but by MPEG LA (which is not the holder of the SEP in suit) [320] . The Court held that MPEG LA is entitled to perform legal actions in connection with the licensing of the MPEG LA pool on behalf of the Claimant [321] . The Defendant could not contest that this was not the case, since MPEG LA’s standard licensing agreement, which it is aware of, contains an indication about MPEG LA’s respective capacity [322] . In addition, the Defendant’s parent company was also aware of MPEG LA’s capacity to act on behalf of the Claimant, since it joined the MPEG LA pool as a patent holder in 2012 [323] .

The Court further ruled that, in terms of content, a notification of infringement must – at least – name the patent in suit (including the patent number) and indicate the contested embodiments as well as the (allegedly) infringing acts of use [324] . A detailed (technical and/or legal) explanation of the infringement is not required; the implementer needs just to be put in the position to assess the infringement allegations, if necessary, by seeking expert advice [325] . A notification of infringement is, therefore, not necessary, when it constitutes just a ‘pointless formality’ [325] . This is true, when according to the overall circumstances of the case, one can safely assume that the implementer is aware of the infringement, so that claiming that the SEP holder failed to provide adequate notification prior to the initiation of court proceedings would appear to be abusive [325] . The respective test is, however, subject to strict conditions [325] .

Based on the above considerations, the Court found that MPEG LA’s e-mail to the parent company dated 8 September 2011 should be considered – as an exception – to constitute a sufficient notification of infringement, although it did not contain the minimum information required (particularly the patent number and a reference to the specific infringing embodiments) [326] . The overall circumstances of the case (especially the fact that the parent company acquired patents included in the MPEG LA pool in 2012 and had also previously been in contact with MPEG LA regarding a standard licensing agreement) [327] , give rise to the assumption that the parent company had already been aware of the MPEG LA pool and the fact that AVC/H.264-compliant products need to be licensed [328] .

Willingness to obtain a FRAND-licence

The Court held that the parent company had adequately expressed its willingness to obtain a FRAND-licence through the e-mail sent to MPEG LA on 15 September 2011 [329] .

In the eyes of the Court, this e-mail indicates the parent company’s intention to deal with issues concerning the licensing of patents referring to the AVC/H.264 standard. This is sufficient under the Huawei framework [330] . The implementer is not required to refer to a specific licensing agreement [330] .

SEP holder’s licensing offer

The Court further found that the standard licensing agreement sent by MPEG LA to the parent company presents an offer accountable to the Claimant which is in line with the Huawei framework in terms of both form and content [331] .

The fact that the offer was addressed to the parent company and not to the Defendant was not relevant, since the parties were discussing about a licensing agreement on group level and the parent company had itself requested to receive the draft agreement [332] .

Furthermore, the fact that the draft agreement sent to the parent company did not directly provide for the licensing of all subsidiaries (including the Defendant) was also not considered as harmful [333] . Insofar, the Court held that under the Huawei framework it is, as a rule, acceptable that the patent holder enters into licensing negotiations only with the parent company within a group of companies [334] . Whether subsidiaries can (or should) also be licensed, will be the object of these negotiations [335] . An exception would apply only then, when it is made clear already at the beginning of the licensing negotiations that the offer made to the parent company cannot include its subsidiaries [336] . This was, however, not the case here, since the standard licensing agreement sent to the parent company indicates MPEG LA’s willingness to grant licences also to the subsidiaries of the former [337] .

Besides that, the Court did not consider the fact that the standard licensing agreement sent to the parent company did not cover the sale of licensed products to wholesalers and retailers (but regarded only sales to end users) to be in conflict with the Huawei framework, although the Defendant was engaged also in this business [338] . According to the Court, sales to wholesalers and retailers would be covered by the effects of patent exhaustion, even without an express provision in a potential licensing agreement [339] .

The Court further ruled that the Huawei requirement, according to which the SEP holder’s licensing offer must specify the royalty calculation, was met, although the draft standard licensing agreement sent to the parent company does not contain detailed explanation of the way the royalties were calculated [340] . In the Court’s view, the respective explanation does not require a ‘strict mathematical derivation’ of the royalty; moreover, it will, as a rule, suffice to demonstrate that the (standard) royalty rates offered have been accepted in the market by presenting existing licensing agreements with third parties (comparable agreements) [341] . If a sufficient number of comparable licences is presented, then the SEP holder will usually not be required to provide further information regarding the appropriateness of its licensing offer [341] . It will need, however, to provide information on all essential comparable agreements, in order to rule out the risk that only agreements supporting the offered royalty level are presented [341] . In this context, the Court noted that it cannot be required from the SEP holder to present all comparable agreements along with the licensing offer to the implementer; a respective industry practice does not exist [342] .

Against this background, the Court did not consider it to be harmful that the standard licensing agreement sent to the parent company by MPEG LA did not include a detailed explanation of the royalty calculation in the above sense [343] . On the one hand, the parent company was aware that this (standard) agreement had been accepted in the market by a great number of licensees [343] . On the other hand, the parent company was also adequately aware of the way the offered royalties were calculated, since it held patents included in the MPEG LA pool itself [344] .

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

According to the Court, a licensing offer cannot be considered as fair and reasonable, if the patent holder requests royalties that go significantly beyond the (hypothetical) price that would have been formed in an effectively competitive market, unless there is a commercial justification for the royalty level requested [345] . Particularly in connection with the licensing of SEPs, an offer can lie outside the FRAND-scope, if the cumulative royalty burden imposed on the implementer would not be tenable in commercial terms [345] . The Court made clear that in this context, no exact mathematical derivation of a FRAND-conform royalty rate is required; moreover, an approximate value is to be determined based on assessments and estimations [345] . In this respect, comparable agreements can serve as an ‘important indicator’ of the fair and reasonable character of the offered royalty rates [345] .

Regarding to the non-discriminatory element of FRAND, the Court pointed out that it applied only to similar situated cases; an unequal treatment is allowed, as long as it is objectively justified [346] . Limitations in this context may especially occur, when the implementation of the patent is necessary for entering a downstream market or when a product becomes competitive only when it uses the patent’s teachings [346] . As a rule, the burden of proof with respect to the discriminatory character of a licensing offer rests on the implementer. Since the latter will usually not be aware of the existence or the content of comparable agreements of the patent holder, it may seem appropriate to request the patent holder to provide the implementer with respective details, as far as this is reasonable [347] . The information to be shared should cover all existing licensees and include which (concretely designated) company with which importance in the relevant market has obtained a licence on which conditions [347] .

Looking at the standard licensing agreement sent to the parent company, the Court observed that the fact the MPEG LA sought for a licence covering all companies within the group, to which the Defendant belonged, was not violating FRAND principles [348] . In the electronics and mobile communications industries, licences covering a group of companies are in line with the industry practice [349] . Patent holder have a special interest in concluding such licences particularly in cases, in which – as in the present case – the parent company manufactures products which are sold worldwide by its subsidiaries. This is because licences at group level makes sure that patent holders can enforce their rights effectively, without having to distinguish between licenced and unlicenced products within a group of companies [350] .

In addition, the Court made clear that pool licences, as the one offered to the parent company, are appropriate under the Huawei framework [351] . An offer for a pool licence cannot per se be seen as abusive (Article 101 TFEU) [352] . On the contrary, such licences usually serve the interest of potential licensees to be granted access to the whole standard on uniform conditions under one roof, without having to seek a licence from every single patent holder separately [352] .

Implementer’s counter-offer

The Court found that the Defendant failed to make a FRAND counter-offer [353] .

Sending signed copies of MPEG LA’s standard licensing agreement back to MPEG LA can be regarded as a counter-offer [354] . The fact, however, that this offer concerned a licence limited to the Defendant and, thus, not covering the parent company (and all further companies belonging to the same group) was not FRAND conform [355] . The Court accepted that licences at group level mirror the industry practice in the field in question; accordingly, no objections can be raised when a patent holder contributing its patents to a pool is willing to grant only licences covering all group companies [356] .

Since the counter-offer was not FRAND in terms of content, the Court did not have to decide, whether it was made in due time, or not [357] .

  • [288] Fraunhofer-Gesellschaft (MPEG-LA) v ZTE, District Court of Düsseldorf, judgement dated 9 November 2018, cited by www.nrwe.de, para. 56.
  • [289] Ibid, para. 58
  • [290] Ibid, para. 57
  • [291] Ibid, para. 59
  • [292] Ibid, paras. 61 et seqq. and 340
  • [293] Ibid, para. 65
  • [294] Ibid, para. 66
  • [295] Ibid, para. 73
  • [296] Ibid, para. 42
  • [297] bid, para. 74
  • [298] Ibid, paras. 75 et seq
  • [299] Ibid, para. 75
  • [300] Ibid, paras. 127 – 254
  • [301] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13
  • [302] Fraunhofer-Gesellschaft (MPEG-LA) v ZTE, District Court of Düsseldorf, judgement dated 9 November 2018, cited by www.nrwe.de, Ibid, para. 280
  • [303] Ibid, para. 283 and paras. 291 et seqq
  • [304] Ibid, para. 286
  • [305] Ibid, para. 287
  • [306] Ibid, paras. 291 et seqq
  • [307] Ibid, para. 296
  • [308] Ibid, para. 300
  • [309] Ibid, para. 302
  • [310] Ibid, para. 308
  • [311] Under the ‘Orange-Book-Standard’ regime, in order to avoid an injunction, the implementer was required to make a licensing offer to the patent holder, which the latter could not refuse without acting in an anticompetitive manner; see Federal Supreme Court (Bundesgerichtshof), judgment dated 6 May 2009, Case No. KZR 39/06
  • [312] Ibid, para. 305
  • [313] Ibid, paras. 306 et seqq
  • [314] Ibid, para. 310
  • [315] Ibid, para. 311
  • [316] Ibid, para. 312
  • [317] Ibid, para. 421
  • [318] Ibid, para. 314
  • [319] Ibid, para. 320
  • [320] Ibid, para. 318
  • [321] Ibid, para. 329
  • [322] Ibid, paras. 336 et seq
  • [323] Ibid, para. 338
  • [324] Ibid, para. 198
  • [325] Ibid, para. 315
  • [326] Ibid, paras. 340 et seq
  • [327] Ibid, paras. 342 et seqq
  • [328] Ibid, para. 344
  • [329] Ibid, para. 346
  • [330] Ibid, para. 348
  • [331] Ibid, para. 352
  • [332] Ibid, para. 367
  • [333] Ibid, para. 369
  • [334] Ibid, para. 370
  • [335] Ibid, para. 378
  • [336] Ibid, para. 371
  • [337] Ibid, para. 374
  • [338] Ibid, para. 376
  • [339] Ibid, para. 377
  • [340] Ibid, para. 380
  • [341] Ibid, para. 381
  • [342] Ibid, para. 386
  • [343] Ibid, para. 382
  • [344] Ibid, para. 387
  • [345] Ibid, para. 391
  • [346] Ibid, para. 392
  • [347] Ibid, para. 393
  • [348] Ibid, para. 397
  • [349] Ibid, para. 398
  • [350] Ibid, para. 399
  • [351] Ibid, para. 402
  • [352] Ibid, para. 404
  • [353] Ibid, para. 410
  • [354] Ibid, para. 413
  • [355] Ibid, para. 416
  • [356] Ibid, para. 417
  • [357] Ibid, para. 411

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. [358] 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. [359]

B. Court’s Reasoning

The Court of Appeal dismissed Asus’s invalidity challenge, upholding the novelty and inventiveness of the EP 511 patent. [360] Moreover, the Court of Appeal found the patent essential and infringed. [361]

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) [362] . 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. [363] Rather, the purpose of the declaration obligation was to reduce the risk of SEPs being ex post unavailable to users. [364]

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. [365] 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. [366]

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. [367] 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. [368] 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. [369] 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. [370] 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.”’ [371]

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. [372] 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. [373] 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. [374]

  • [358] Koninklijke Philips N.V. v. Asustek Computers INC, District Court of the Hague, 2017, Case No. C 09 512839 /HA ZA 16-712.
  • [359] 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.
  • [360] ibid, paras 4.63, 4.68, 4.75, 4.80, 4.82, 4.93, 4.100, and 4.117.
  • [361] ibid, paras 4.118 et seq.
  • [362] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case-No. C-170/13.
  • [363] 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.
  • [364] ibid, paras 4.155 and 4.157.
  • [365] ibid, para 4.159.
  • [366] ibid, para 4.164.
  • [367] ibid, para 4.171.
  • [368] ibid, para 4.172.
  • [369] ibid.
  • [370] ibid, paras 4.172-4.179.
  • [371] ibid, para 4.179.
  • [372] ibid, para 4.183.
  • [373] ibid, para 4.185.
  • [374] ibid, paras 4.202 et seq.

Updated 9 November 2020

Nokia v Daimler

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

A. Facts

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

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

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

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

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

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

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

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

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

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

With the present judgment [375] (cited by www.juris.de), the Court granted an injunction against Daimler and also recognised Daimler's liability to pay damages on the merits. The Court further ordered Daimler to render accounts and provide information necessary for the calculation of damages to Nokia.


B. Court's reasoning

The Court found that Daimler infringed the patent-in-suit [376] . For this reason, Nokia was entitled -among other claims- to injunctive relief [377] .

Daimler and its suppliers that joined the proceedings asserted so-called 'FRAND-defences', arguing that by filing infringement actions, Nokia had abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) and should, therefore, be denied an injunction. In particular, it was argued that Nokia had failed to comply with the conduct requirements established by the CJEU in the matter Huawei v ZTE [378] (Huawei decision, or framework).

The Court dismissed the FRAND-defences raised by Daimler and its suppliers as unfounded [379] .

Huawei framework

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

An abuse of market dominance by the enforcement of patent rights does not occur, if the patent holder complies with its duties under the Huawei framework [381] . These duties presuppose, however, that the implementer, who already uses the protected technology without authorization by the right holder, is willing to take a licence on FRAND terms [382] . The Court explained that it cannot be requested by the patent holder to 'impose' a licence to any standards user, not least because it has no legal claim to request the signing of a licensing agreement [382] . Moreover, the 'particular responsibility' attached to its dominant position requires from the SEP holder to make 'sufficient efforts' to facilitate the signing of an agreement towards a licensee in principle willing to take a licence [383] .

Notification of infringement

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

In terms of content, the notification of infringement must name the patent infringed and describe the specific infringing use and the attacked embodiments [384] . 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 [384] . As a rule, presenting claim charts will be sufficient (but not mandatory) [384] . The Court also pointed out that the patent holder is not required to address a separate notification of infringement to each supplier of an end-device manufactures infringing its patents [386] .

In the eyes of the Court, Nokia's e-mails dated 21 June 2016, 9 November 2016 and 7 December 2016 meet the above requirements [387] . The fact that -at least initially- Nokia did not indicate the concrete section of the standards documentation to which the patent-in-suit referred to was not considered harmful, since the notification of infringement is not required to facilitate a final assessment of infringement [388] .

Furthermore, the Court held that it was not necessary for Nokia to identify in the notification of infringement the specific components which generate connectivity according to the relevant standard, e.g. the TCUs built into Daimler's cars [389] . Since Daimler purchases and uses these components in its products, no information deficit could occur [389] .

Willingness

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

In the Court's eyes, the implementer has to 'clearly' and 'unambiguously' declare that it is willing to sign a licence with the SEP holder 'on whatever terms are in fact FRAND' and, subsequently, engage in licensing negotiations in a 'target-oriented' manner (citing Federal Court of Justice, judgment dated 5 May 2020 – Sisvel v Haier, Case No. KZR 36/17 and High Court of Justice of England and Wales, judgment dated 5 April 2017, Case No. [2017] EWHC 711(Pat) – Unwired Planet v Huawei) [391] . The 'target-oriented' engagement of the implementer in licensing negotiations is of decisive importance: since implementers, as a rule, already use the patented standardized technology prior to the initiation of licensing negotiations, they could have an interest to delay the signing of a licence until the expiration of the patent, which, however, conflicts with the spirit of the Huawei decision [392] . Accordingly, it is not sufficient, in response to a notification of infringement, to just demonstrate willingness to consider signing a licensing agreement or to enter into negotiations about whether and under which conditions taking a licence comes into question [391] .

The Court further pointed out that making the declaration of willingness subject to conditions was not acceptable [391] . What is more, refusing to discuss about any improvement of a counteroffer made to the patent holder could also be considered as an indication of unwillingness from the side of the implementer [391] .

Based on the above, the Court took the view that by initially making the signing of a licence subject to the condition that its products actually infringe Nokia's patents, Daimler did not adequately express willingness to sign a FRAND licence [393] . The Court added that Daimler's counteroffers could neither be considered as a sufficient sign of willingness: especially the second counteroffer, giving Daimler the right to contest the royalty rates that Nokia would unilaterally set, would just postpone the actual dispute between the parties about the determination of the licensing fees to later court proceedings [394] .

The Court also held that Daimler did not act as an 'willing' licensee, since it did not engage in negotiations with Nokia, but insisted that its suppliers take a direct licence from the latter, instead [395] . Furthermore, the missing willingness of Daimler was also confirmed by its insistence on applying the average selling price of TCUs purchased by Daimler by its suppliers as base for the calculation of the licensing fees for Nokia's SEP portfolio [396] .

Calculation of FRAND fees

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

In general, there is not only a single set of FRAND terms and conditions; usually, there is a range of licensing conditions and fees which are FRAND [398] . Moreover, what can be considered as FRAND may differ from industry sector to industry sector as well as in time [398] .

The Court pointed out, however, that the patent holder must, in principle, 'be given a share' in the 'economic benefits of the technology to the saleable end product at the final stage of the value chain' [399] . Reason for that is, that the use of the protected invention 'creates the chance' to gain an 'economic profit' with the end product, which is based on the invention [399] . The Court did not agree with the notion that by considering the value of the patented technology for the end product SEP holders benefit from innovation taking place at other stages of the value chain [400] . The Court noted that there are several instruments available to make sure that this will not occur [400] .

Accordingly, the Court rejected the notion of using the so-called 'Smallest Saleable Patent Practising Unit' (SSPPU), that is the smallest technical unit integrated in a product, as base for the calculation of FRAND royalty rates [400] . The effects of patent exhaustion would prevent the SEP holder from participating in the value created at the final stage of the value chain [400] . Apart from that, this option would make it more complex to identify and avoid 'double-dipping', meaning licensing the same patent at several stages of the value chain [400] .

Having said that, the Court clarified that the above principle does not necessarily mean that licensing agreements should be signed exclusively with end-device manufacturers [401] . The Court considered that there are various possibilities to factor the value of the patented technology for the saleable end product also at other stages of a supply chain [401] .

Against this background, the Court found that the selling price of TCUs did not sufficiently mirror the value of Nokia's SEPs for the cars produced by Daimler, which are the relevant end devices in the present case [402] . The selling price of TCUs corresponds only to Daimler's respective costs [403] . Connectivity, on the other hand, allows Daimler to generate income from additional services offered to its clients, save costs and optimise R&D expenses [404] . Connectivity secures the chance to create this value [405] . In addition, the Court noted that the acceptance of the licensing model of the Avanci platform (which grants licences exclusively to car manufacturers) by several of Daimler's main competitors serves as a further indication that focusing on the value of the protected technology for the end product is reasonable also in the automotive sector [406] .


Non-discrimination

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

The Court explained that the patent holder is, basically, allowed to freely choose the stage of the supply chain, at which it will assert its rights [408] . The same is true with respect to patent holders with a dominant market position, since competition law does not per se limit this possibility [408] . What is more, a dominant patent holder is not obliged to offer all potential licensees a 'standard-rate' [408] . The non-discrimination obligation established by Article 102 TFEU intends to prevent a distortion of competition in upstream or downstream markets, but does not exclude different treatment of licensees, if sufficient justification exists [409] .

In the present case, the Court saw no indication that Nokia's claim to use the end-product as a royalty base could impact competition [410] . Especially the fact that in the automotive sector it is common that suppliers take licences for components sold to car manufacturers, does not require Nokia to change its practice, not least because the licences granted by the Avanci platform to Daimler's competitors show that the respective practice -which is prevailing in the telecommunications sector- has already been applied also in the automotive field [411] . Furthermore, the Court did not consider that the assertion of SEPs against end-device manufacturers could lead to limitations in production, sales and technical development to the detriment of consumers [412] . In this respect, the Court referred to so-called 'have-made-rights' which according to the ETSI IPR Policy should be included in a FRAND licence and allow component manufacturers to produce, sell and develop their products [413] .

SEP holder's offer / information duty

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

The Court pointed out that the SEP holder can be obliged to substantiate the FRAND conformity of its licensing request [415] . In case that the patent holder has already concluded agreements with third licensees on non-standard terms, it will be, as a rule, under a duty to disclose and present –at least– the content of the key contractual provisions in a way, which would allow the implementer to assess whether it has been offered different commercial conditions [415] . The scope and level of detail of the respective duty shall be determined on a case-by-case basis [415] .

Considering this, the Court expressed the view that Nokia had provided sufficient information to Daimler, by sharing –among other things– a study on the value of connectivity for vehicles and a licensing agreement signed with another major car manufacturer [416] . In this context, the Court denied that Nokia was under a duty to disclose licensing agreements with smartphone manufacturers to Daimler. The Court rejected the notion that the SEP holder's information duty extends to the full content of every licensing agreement previously signed and that the SEP holder is obliged to disclose all existing agreements [417] . Adding to that, the Court noted that licensing agreements from the telecommunications sector are not relevant for the assessment of FRAND conformity of licences in the automotive field [417] .

FRAND defence raised by suppliers

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

The Court left the question open whether an end-device manufacturer that has been sued can, in principle, rely on a FRAND defence raised by one of its suppliers, or not. According to the Court, this would, however, in any case require that the supplier is willing to obtain a licence from the patent holder calculated on basis of the value of the patent(s) in question for the end-product (and not for the component it produces) [419] . This had not been the case in the present proceedings [420] .

The Court did not ignore that it can be challenging for suppliers to pass on the royalty fees paid to the SEP holder to their clients [421] . However, the contractual arrangements of third parties (here: the arrangements between suppliers and end-device manufacturers) should not, in the eyes of the Court, direct the SEP holder towards licencing agreements that do not allow a participation in the value created by the patented technology for the end-product [421] .


C. Other issues

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

The Court left this question open, since neither Daimler nor its suppliers were willing to obtain a licence on FRAND terms from Nokia based on the value of the protected technology for the cars manufactured by Daimler  Ibid, paras. 253 and 291. The Court also noted that the fact that the patent-in-suit would expire in few years from now would also speak against ordering a stay of the proceedings [423]

  • [375] Nokia v Daimler, District Court of Mannheim, judgment dated 18 August 2020, Case-No. 2 O 34/19
  • [376] Ibid, paras. 49-136
  • [377] Ibid, para. 138
  • [378] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13
  • [379] Nokia v Daimler, District Court of Mannheim, judgment dated 18 August 2020, Case-No. 2 O 34/19, para. 144
  • [380] Ibid, para. 146
  • [381] Ibid, para. 147
  • [382] Ibid, para. 148
  • [383] Ibid, para. 149
  • [384] Ibid, para. 152
  • [385] Ibid, paras. 151-156
  • [386] Ibid, para. 248
  • [387] Ibid, paras. 153 et seq
  • [388] Ibid, para. 154
  • [389] Ibid, para. 155
  • [390] Ibid, paras. 157-231
  • [391] Ibid, para. 158
  • [392] Ibid, para. 159
  • [393] Ibid, para. 161
  • [394] Ibid, para. 197-199
  • [395] Ibid, paras. 157, 160 and 162-164
  • [396] Ibid, paras. 160 and 165-168
  • [397] Ibid, para. 169
  • [398] Ibid, para. 170
  • [399] Ibid, para. 171
  • [400] Ibid, para. 172
  • [401] Ibid, para. 173
  • [402] Ibid, paras. 174 et seqq
  • [403] Ibid, paras. 174
  • [404] Ibid, paras. 177
  • [405] Ibid, para. 180
  • [406] Ibid, paras. 187 et seqq
  • [407] Ibid, paras. 201-212
  • [408] Ibid, para. 202
  • [409] Ibid, para. 203
  • [410] Ibid, para. 205
  • [411] Ibid, para. 210
  • [412] Ibid, para. 213
  • [413] Ibid, para. 215
  • [414] Ibid, paras. 216 et seqq
  • [415] Ibid, para. 217
  • [416] Ibid, para. 218
  • [417] Ibid, para. 230
  • [418] Ibid, paras. 232 et seqq
  • [419] Ibid, paras. 234 and 236 et seqq
  • [420] Ibid, paras. 240 et seqq
  • [421] Ibid, para. 239
  • [422]  Ibid, paras. 253 and 291
  • [423] Ibid, para. 291.

Updated 2 August 2019

Tagivan (MPEG-LA) v Huawei

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

A. Facts

The Claimant, Tagivan II LLC, holds a patent essential to the practice of the AVC/H.264 standard concerning the compression of video data (Standard Essential Patent, or SEP). The patent in question is subject to a FRAND commitment (FRAND stands for Fair, Reasonable and Non-Discriminatory terms and conditions) made towards the relevant standardisation body. It was included into a patent pool administered by MPEG LA LLC (MPEG LA), comprising more the 5,000 patents referring to the AVC/H.264 standard (MPEG LA pool) [424] .

The Defendant, a German subsidiary of a Chinese group of companies, sells – among other things – mobile phones in Germany that practise the AVC/H.264 standard [425] .

MPEG LA uses a standard licensing agreement, which is publicly available at its website [426] . Since 2004, MPEG-LA has signed approx. 2,000 agreements with implementers [427] , 1,400 of which are still in force [426] .

In 2009, MPEG LA and the Defendant’s parent company (parent company) started discussions about a potential licence covering other standards, especially the MPEG-2 standard. On 6 September 2011, MPEG LA informed the parent company about the possibility to obtain a licence also regarding the AVC/H.264 standard, by sending PDF-copies of its standard licensing agreement to the parent company via email [428] . On 15 September 2011, the parent company suggested to arrange a call on this issue [429] . In February 2012, MPEG LA sent the pool’s standard licensing agreement for the AVC/H.264 standard to the parent company also by mail [430] .

In November 2013, the discussions between MPEG LA and the parent company ended without success [431] . The parties resumed negotiations in July 2016; again, no agreement was reached [431] .

The Claimant then brought an action against the Defendant before the District Court of Düsseldorf in Germany (Court), requesting for injunctive relief, information and rendering of accounts, the destruction and the recall of infringing products as well as for a declaratory judgement confirming Defendant’s liability for damages on the merits [432] .

In November 2017, during the course of the present proceedings, the Defendant made a counteroffer to the Claimant for a licence, which – in contrast to MPEG LA’s standard licensing agreement – was limited to the Claimant’s patent portfolio and established different royalty rates for different regions, in which the Defendant sold products [433] .

In March and September 2018 (again during the proceedings), the Defendant provided bank guarantees to the Claimant covering past and future sales of (allegedly) infringing products. The security amounts were calculated based on the Defendant’s counteroffer dated November 2017 [434] . Furthermore, the Defendant made a second counteroffer to the Claimant shortly after the last oral hearing before the Court [435] .

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

B. Court’s reasoning

The Court found that the patent in suit was valid [436] , standard essential [437] and infringed by the products sold by the Defendant in Germany [438] . Furthermore, the Court held that by filing the present suit the Claimant did not abuse its dominant market position in violation of Article 102 of the Treaty for the Functioning of the EU (TFEU), since it had fully complied with the conduct obligations stipulated by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [439] (Huawei obligations or framework) with respect to dominant undertakings [440] .

Dominant market position

The Court found that the Claimant holds a dominant market position in terms of Article 102 TFEU [441] .

The Court defined the relevant market for the assessment of dominance as the market, in which licences for any given patent are offered [442] . A dominant market position can further also exist, when the patent holder can hinder competition in downstream markets for standard-compliant products and services [442] .

The Court made clear that ownership of a SEP does not per se establish market dominance [443] . A dominant market position is given, when the use of the SEP is required for entering the market [444] . The same is true, if the patent user could not market competitive products or services, without access to the respective SEP [445] .

Based on these considerations, the Court saw no ‘reasonable’ doubt that the Claimant was a dominant undertaking: It was undisputed that almost all mobile phones available worldwide use the AVC/H.264 standard and that no ‘realistic’ alternative to the MPEG LA pool existed in the licensing market for patents essential to this standard [446] .

Huawei framework

The Court found, however, that the Claimant did not abuse its dominant position by suing the Defendant in the present case, since its conduct was in line with the Huawei framework [447] . The Huawei framework establishes mutual conduct obligations for both SEP holders and SEP users, which need to be fulfilled step by step and one after another (meaning that each party’s obligation to act arises only after the other party has fulfilled its own obligation) [448] . Subject to the Huawei framework is not only the patent holder’s claim for injunctive relief, but also the claim for the destruction of infringing products [449] .

In this context, the Court pointed out that the Huawei framework applies, irrespective of whether a ‘well-established’ licensing practice concerning the asserted patents already existed before the CJEU delivered the Huawei judgment, or not [450] . The Claimant had argued that, in the present case, the Court should apply the (German) legal standard that preceded the Huawei framework (which was based on the so-called ‘Orange-Book-Standard’ ruling of the Federal Supreme Court [451] ), since with respect to the SEP in suit a ‘routine’ practice already existed prior to the Huawei judgement. The Court explained that the Huawei judgment does not contain either an explicit or an implicit limitation of its scope of application [452] . Furthermore, even if a ‘well-established’ licensing practice existed, the need to apply the Huawei framework will still be given, in order to bridge the, nevertheless, existing information gap between patent holder and implementer concerning the (potential) infringement of SEPs [453] . Finally, it would be very challenging for courts to distinguish whether a ‘well-established’ licensing practice excluding the application of the Huawei framework is at hand, or not [453] . Notwithstanding the above, according to the Court, the actual licensing practice of the patent holder could be of ‘particular significance’ when assessing the compliance of the latter with the Huawei obligations: Such practice could, for instance, serve as an indicator of the appropriateness of SEP holder’s licensing offer to the implementer [454] .

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

Notification of infringement

The Court ruled that the Claimant had adequately notified the Defendant about the infringement of the SEP in suit through the email sent by MPEG LA to the parent company on 6 September 2011 [455] .

The fact that this email was not addressed to the Defendant, but to the parent company, did not raise any concerns as to the compatibility of the notification with the Huawei framework. The Court explained that a notification of infringement addressed only to the parent company of a group of companies is sufficient, as far as it can be assumed that the notification will be forwarded to the subsidiaries concerned [456] . The sole fact that a company belongs to a group justifies such an assumption, unless indications to the contrary exist [457] . This was, however, not the case here.

Besides that, the Court did not consider it inappropriate that the aforementioned e-mail was not sent to the parent company by the Claimant, but by MPEG LA (which is not the holder of the SEP in suit) [458] . The Court held that MPEG LA is entitled to perform legal actions in connection with the licensing of the MPEG LA pool on behalf of the Claimant. The Defendant could not contest that this was not the case, since MPEG LA’s standard licensing agreement, which it is aware of, contains an indication about MPEG LA’s respective capacity [459] . In addition, the Defendant’s parent company was most likely aware of MPEG LA’s capacity to act on behalf of the Claimant, since it had entered into direct negotiation with MPEG LA already in 2009, that is almost two years prior to the notification of infringement [460] .

The Court further ruled that, in terms of content, a notification of infringement must – at least – name the infringed patent (including the patent number) and indicate the contested embodiments as well as the (allegedly) infringing acts of use [461] . A detailed (technical and/or legal) explanation of the infringement is not required; the implementer needs just to be put in the position to assess the infringement allegations, if necessary, by seeking expert advice [461] . A notification of infringement is, therefore, not necessary, when it constitutes just a ‘pointless formality’ [461] . This is true, when according to the overall circumstances of the case, one can safely assume that the implementer is aware of the infringement, so that claiming that the SEP holder failed to provide adequate notification prior to the initiation of court proceedings would appear to be abusive [461] . The respective test is, however, subject to strict conditions [461] .

Based on the above considerations, the Court found that MPEG LA’s email to the parent company dated 6 September 2011 should be considered – as an exception – to constitute a sufficient notification of infringement, although it did not contain the minimum information required (particularly the patent number and a reference to the specific infringing embodiments) [462] . The overall circumstances of the case (especially the fact that the parent company had been in negotiations with MPEG LA already since 2009 and, therefore, should have been aware that MPEG LA has granted licences for the AVC/H.264 standard to the implementers mentioned at its website), give rise to the assumption that the parent company had been conscious of the fact that AVC/H.264-compliant products need to be licensed [463] .

Willingness to obtain a licence

The Court held that the parent company had adequately expressed its willingness to obtain a FRAND-licence through the email sent to MPEG LA on 15 September 2011 [464] .

In the eyes of the Court, this email indicates the parent company’s intention to deal with issues concerning the licensing of patents referring to the AVC/H.264 standard, especially if it is seen in the context of the negotiations between MPEG LA and the parent company that had commenced in 2009 [464] . This is sufficient under the Huawei framework: A general, informal statement suffices [465] . The implementer is not required to refer to a specific licensing agreement (on the contrary, this could be considered harmful under certain circumstances) [465] .

SEP holder’s offer

The Court further found that the standard licensing agreement sent by MPEG LA to the parent company in February 2012 presents an offer accountable to the Claimant which is in line with the Huawei framework in terms of both form and content [466] .

The fact that the standard licensing agreement was not tailored to the parent company but was designed for use towards a large number of (potential) licensees (the name of the licensee ought to be added in each case separately), was not criticized by the Court. MPEG-LA had made clear that the documents sent by mail in February 2012 would serve as the basis for negotiations and a future agreement with the parent company [467] .

In addition, the Court did not take an issue with the fact that the offer was addressed to the parent company and not to the Defendant, since the parties were discussing about a licensing agreement on group level and the parent company had been involved in the communications from the beginning [468] .

The Court further ruled that the Huawei requirement, according to which the SEP holder’s licensing offer must specify the royalty calculation, was met, although the draft standard licensing agreement sent to the parent company did not contain a detailed explanation of the way the royalties were calculated [469] . The Court found that, in the present case, it was sufficient that the parent company was aware that the (standard) agreement presented to her had been accepted in the market by a great number of licensees [470] . In the Court’s view, the explanation of the royalty calculation does not require a ‘strict mathematical derivation’ of the royalty; moreover, it will, as a rule, suffice to demonstrate that the (standard) royalty rates offered have been accepted in the market by presenting existing licensing agreements with third parties (comparable agreements) [471] . If a sufficient number of comparable licences is presented, then the SEP holder will usually not be required to provide further information regarding the appropriateness of its licensing offer [471] . It will need, however, to provide information on all essential comparable agreements, in order to rule out the risk that only agreements supporting the offered royalty level are presented [471] . In this context, the Court noted that it cannot be required from the SEP holder to present all comparable agreements along with the licensing offer to the implementer; a respective industry practice does not exist [472] .

Apart from the above, the Court held that the standard licensing agreement offered to the parent company was FRAND also in terms of content [473] .

According to the Court, a licensing offer cannot be considered as fair and reasonable, if the patent holder requests royalties that go significantly beyond the (hypothetical) price that would have been formed in an effectively competitive market, unless there is a commercial justification for the royalty level requested [474] . Particularly in connection with the licensing of SEPs, an offer can lie outside the FRAND-scope, if the cumulative royalty burden imposed on the implementer would not be tenable in commercial terms [474] . The Court made clear that, in this context, no exact mathematical derivation of a FRAND-conform royalty rate is required; moreover, an approximate value is to be determined based on assessments and estimations [474] . In this respect, comparable agreements can serve as an ‘important indicator’ of the fair and reasonable character of the offered royalty rates [474] .

Non-discrimination

Regarding to the non-discriminatory element of FRAND, the Court pointed out that it applied only to similar situated cases [475] . Even then, an unequal treatment is allowed, as long as it is objectively justified [475] . Limitations may, nevertheless, occur, especially when the implementation of the patent is necessary for entering a downstream market or when a product becomes competitive, only when it uses the patent’s teachings [475] . As a rule, the burden of proof with respect to the discriminatory character of a licensing offer rests on the implementer. Since the latter will usually not be aware of the existence or the content of comparable agreements of the patent holder, it may, however, seem appropriate to request the patent holder to provide the implementer with respective details, as far as this is reasonable [476] . The information to be shared should cover all existing licensees and include which (concretely designated) company with which importance in the relevant market has obtained a licence on which conditions [476] .

Against this background, the Court found that the offer made by MPEG LA to the parent company was not discriminatory. The Defendant had argued that seeking a licence also covering sales in China violated FRAND, since not every other competitor in the Chinese market was licensed by MPEG LA [477] . The Court observed that the selective assertion of patents against only a part of the competitors in a downstream market might, in principle, be discriminatory [478] . This was, however, not the case here, because the Claimant had already sued another company active in China and was attempting to persuade other companies to obtain a licence [479] . Due to the high cost risk associated with court proceedings, the patent holder is not obliged to sue all potential infringers at once; choosing to assert its patents against larger implementers first was considered by the Court as reasonable, since a win over a large market player could motivate smaller competitors to also obtain a licence (without litigation) [480] .

Furthermore, the Court did not consider the fact that the offered standard licensing agreement contained a cap for the annual licensing fees payable to the MPEG LA pool to be discriminatory [481] . The Defendant had argued that the respective cap disproportionally favoured licensees with high volume sales which offered not only mobile phones, but also other standard compliant products in the market. The Court made, however, clear that Art. 102 TFEU does not establish a ‘most-favoured-licensee’ principle (meaning that the patent holder must offer the same conditions to all licensees) [482] . It is not per se discriminatory to use sale volumes as a criterion for discounts, especially if a company has managed to open up a larger market than its competitors [483] . Discounts can further hardly be discriminatory, if they are offered to every (potential) licensee under the same conditions [483] .

Besides that, the Court dismissed the Defendant’s argument that MPEG LA’s standard licensing agreement is discriminatory, because it is offered to both MPEG LA pool members and third licensees. The Court found that the share of the licensing income paid to pool members, who have also signed a MPEG LA licence, reflects their contribution to the pool and, therefore, does not discriminate the latter against third licensees (who have not contributed any patents to the pool) [484] . In this context, the Court also pointed out that the clauses contained in MPEG LA’s standard licensing agreement, providing for deductions or instalment payments are not discriminatory, particularly because they are offered to all licensees [485] .

The Court was further not convinced that the parent company was discriminated by MPEG LA’s offer, because the MPEG LA pool had refrained from requesting a licence at group level from a competitor, but had only granted a licence to a subsidiary within the respective group, instead. In the Court’s eyes, the Claimant had managed to establish that this exception was objectively justified, since only the subsidiary granted a licence had activities concerning the patents included in the pool [486] .

Fair and reasonable terms

With respect to the assessment of whether MPEG LA’s offer to the parent company was also fair and reasonable, the Court placed particular emphasis on the existing licensing agreements between the MPEG-LA pool and third licensees. The Court took the view, that existing licences can establish the actual presumption that the terms offered (as well as the scope of the licence) are fair and reasonable [487] . Moreover, the fact that licences regarding the same patent portfolio have already been granted for similar products prima facie suggests that the selection of the patents included in the pool was adequate [487] .

Based on these premises, the Court found that the approx. 2,000 standard licensing agreements concluded by the MPEG LA pool provide a ‘strong indication’ (‘erhebliche Indizwirkung’) that the underlying licensing terms are fair and reasonable [488] . In the Court’s view, the Defendant had failed to show sufficient facts that could rebut this indication.

In particular, the Court did not accept Defendant’s claim that, as a rule, licences for products sold in the Chinese market are subject to special conditions. On the contrary, the Court found that the existing MPEG LA pool licences allow the assumption that setting worldwide uniform licence fees corresponds to industry practice [489] . Accordingly, the Court rejected Defendant’s argument, that the royalties offered by MPEG LA to the parent company would hinder the Defendant from making profits with its sales in China, since the overall licensing burden (including licences needed from third parties) would be too high. The Court noted that the price level for Defendant’s sales in China does not significantly differ from the price level in other regions [490] . What is more, the Defendant did not show that further licences are needed with respect to the AVC/H.264 standard [491] . The Court further did not recognise a need to apply special conditions for the Chinese market, because – compared to patents from other regions – a lower number of Chinese patents is contained in the MPEG LA pool. According to the Court, the number of patents in a specific market should not be ‘overestimated’ as a factor for assessing the FRAND conformity of an offer, since even a single patent can block an implementer from a market, generating, therefore, the need for obtaining a licence [492] .

Apart from the above, the Court did not criticise that MPEG LA’s standard licensing agreement did not contain an adjustment clause. Such clauses can secure that the agreed licensing fees remain reasonable, in case that the number of patents contained in the pool changes during the term of the licensing agreement. They are, however, in the Court’s view, not the only mean to reach this goal: Moreover, the clause contained in MPEG LA’s standard licensing agreement, according to which the agreed royalties will not be adjusted either when more patents are added to the pool or when patents are withdrawn from the pool, offers an adequate balance of risk and is, therefore, FRAND compliant [493] . This assumption is also confirmed by the fact that all existing licensees have accepted this clause [494] .

In addition, the Court made clear that pool licences, as the one offered to the parent company, are, in general, appropriate under the Huawei framework. An offer for a pool licence cannot per se be seen as abusive (Article 101 TFEU) [495] . On the contrary, such licences usually serve the interest of potential licensees to be granted access to the whole standard on uniform conditions under one roof, without having to seek a licence from every single patent holder separately [495] .

An offer for a pool licence can, nevertheless, violate FRAND in ‘special circumstances’ [496] , for instance, if not all patents included in the pool are used by the licensee [497] . According to the Court, the fact that the Defendant – as well as mobile phone manufacturers in general – usually use only one of four available profiles of the AVC-Standard does not, however, render the standard licensing agreement offered by MPEG LA unreasonable [498] . This is particularly the case, since Defendant’s products – and especially its latest smartphones – have the technical capability to implement more than one available profile [499] . Besides that, it is reasonable to offer one single licence covering all profiles, since modern products incorporate functionalities of several types of devices (e.g. smartphones offer also digital television functionalities) [499] .

In this context, the Court dismissed Defendant’s arguments that the licence offered by MPEG LA was not FRAND, because it allegedly covered both standard-essential and non-essential patents. The Court recognised that the ‘bundling’ of essential and non-essential patents in a patent pool could, in principle, be incompatible with FRAND, if it is done with the intention to extract higher royalties from licensees by increasing the number of patents contained in the pool [500] . The Defendant failed, however, to present any reliable evidence that this was the case with the MPEG-LA pool [501] .

In the Court’s eyes, the Defendant also failed to establish that the rates offered by MPEG LA would lead to an unreasonably high total burden of licensing costs (‘royalty stacking’) [502] . The theoretical possibility that the Defendant might need to obtain licences also for patents not included in a pool does not per se lead to royalty stacking; the Defendant would have been obliged to establish that the total amount of royalties actually paid does not allow to extract any margin from the sale of its products [503] .

The Court further pointed out that MPEG-LA’s offer did not violate FRAND principles, because it referred to a licence covering all companies within the group, to which the Defendant belonged [504] . In the electronics and mobile communications industries, licences on a group level are in line with the industry practice and, therefore, FRAND-compliant [505] .

Implementer’s counteroffer

Having said that, the Court found that the Defendant failed to make a FRAND counteroffer [506] .

In particular, the counteroffer made in November 2017 after the commencement of the present proceedings violated the FRAND principles in terms of content, because it was limited to a licence covering solely the Claimant’s patent portfolio and not all patents included in the MPEG LA pool [507] . Furthermore, the counteroffer established different licensing rates for different regions (especially for China) without factual justification [508] .

Furthermore, the second counteroffer made by the Defendant after the end of the last oral hearing was belated and, therefore, not FRAND. The Court held that the Claimant was not given sufficient time to respond to that counteroffer, so that there was no need for any further assessment of its content [435] . On the contrary, the Court expressed the view that the purpose of this counteroffer was most likely to delay the infringement proceedings [435] .

Provision of security

Since Defendant’s counter-offers were not FRAND in terms of content, the Court did not have to decide, whether the security provided in form of bank guarantees was FRAND or not. The Court noted, however, that the amounts provided were insufficient, since they were calculated on basis of Defendant’s counteroffer from November 2017, which itself failed to meet the FRAND requirements [509] .

  • [424] Tagivan (MPEG-LA) v Huawei, District Court of Düsseldorf, 9 November 2018, para. 36.
  • [425] Ibid, para. 35.
  • [426] Ibid, para. 37.
  • [427] Ibid, para. 453.
  • [428] Ibid, para. 39.
  • [429] Ibid, para. 43.
  • [430] Ibid, para. 44.
  • [431] Ibid, para. 53.
  • [432] Ibid, para. 2.
  • [433] Ibid, para. 54.
  • [434] Ibid, para. 65.
  • [435] Ibid, para. 716.
  • [436] Ibid, paras. 143-208.
  • [437] Ibid, paras. 209-293.
  • [438] Ibid, paras. 295-302.
  • [439] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
  • [440] Tagivan (MPEG-LA) v Huawei, District Court of Düsseldorf, 9 November 2018, paras. 304 et seqq.
  • [441] Ibid, para. 307.
  • [442] Ibid, para. 310.
  • [443] Ibid, para. 310. In this respect, the Court pointed out that – vice versa – also a non-essential patent might confer a dominant position, if the patented invention is superior in terms of technological merit and/or economical value, para. 312.
  • [444] Ibid, paras. 310 et seq.
  • [445] Ibid, para. 311.
  • [446] Ibid, paras. 315 et seqq.
  • [447] Ibid, para. 321.
  • [448] Ibid, para. 326.
  • [449] Ibid, para. 327.
  • [450] Ibid, para. 330.
  • [451] Under the ‘Orange-Book-Standard’ regime, in order to avoid an injunction, the implementer was required to make a licensing offer to the patent holder, which the latter could not refuse without acting in an anticompetitive manner; see Federal Supreme Court (Bundesgerichtshof), judgment dated 6 May 2009, Case No. KZR 39/06.
  • [452] Ibid, paras. 331 et seqq.
  • [453] Ibid, para. 335.
  • [454] Ibid, para. 337.
  • [455] Ibid, para. 339.
  • [456] Ibid, para. 343.
  • [457] Ibid, para. 345.
  • [458] Ibid, para. 356.
  • [459] Ibid, paras. 357 et seqq.
  • [460] Ibid, paras. 366 et seqq.
  • [461] Ibid, para. 340.
  • [462] Ibid, para. 341.
  • [463] Ibid, paras. 395 et seqq.
  • [464] Ibid, paras. 400 et seqq.
  • [465] Ibid, para. 399.
  • [466] Ibid, para. 405.
  • [467] Ibid, paras. 411-417.
  • [468] Ibid, para. 419.
  • [469] Ibid, para. 421.
  • [470] Ibid, para. 425.
  • [471] Ibid, para. 422.
  • [472] Ibid, paras. 426 et seqq.
  • [473] Ibid, para. 429.
  • [474] Ibid, para. 431.
  • [475] Ibid, para. 432.
  • [476] Ibid, para. 433.
  • [477] Ibid, para. 438.
  • [478] Ibid, para. 443.
  • [479] Ibid, para. 444.
  • [480] Ibid, para. 445.
  • [481] Ibid, para. 579.
  • [482] Ibid, para. 582.
  • [483] Ibid, paras. 583 et seqq.
  • [484] Ibid, para. 564.
  • [485] Ibid, paras. 568 et seqq.
  • [486] Ibid, paras. 573 et seqq.
  • [487] Ibid, para. 451.
  • [488] Ibid, para. 449.
  • [489] Ibid, para. 454.
  • [490] Ibid, paras. 487 et seqq.
  • [491] Ibid, para. 491.
  • [492] Ibid, para. 495.
  • [493] Ibid, paras. 591 et seqq., particularly para. 596.
  • [494] Ibid. para. 597.
  • [495] Ibid. para. 504.
  • [496] Ibid. para. 508.
  • [497] Ibid. para. 514.
  • [498] Ibid. paras. 511 et seqq.
  • [499] Ibid. para. 524.
  • [500] Ibid, para. 528.
  • [501] Ibid, paras. 531-543.
  • [502] Ibid, paras. 545 et seqq.
  • [503] Ibid, para. 546.
  • [504] Ibid, para. 599.
  • [505] Ibid, para. 600.
  • [506] Ibid, para. 603.
  • [507] Ibid, paras. 605 et seqq.
  • [508] Ibid, paras. 617 et seqq.
  • [509] Ibid, para. 625.