Case Law post CJEU ruling Huawei v ZTE

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Updated 17 January 2018

Sisvel v Haier

OLG Düsseldorf
30 March 2017 - Case No. I-15 U 66/15

A. Facts

The claimant is the owner of European patent EP B1, allegedly covering data transmission technology under the GPRS standard. The defendants produce and market devices using the GPRS standard. On 10 April 2013, the claimant made a commitment towards ETSI by declaring to grant a license on FRAND terms regarding, inter alia, patent EP B1. In various letters and meetings between 2012 and 2015, the claimant informed the parent companies of the defendants about its patent portfolio and made an offer, but no licensing agreement was entered into. These interactions took place before the CJEU handed down its Huawei v. ZTE ruling in July 2015. On 3 November 2015, the District Court granted an injunction order. [23] The District Court also held that the defendants were liable for compensation in principle and ordered them to render full and detailed account of its sales. Further, the District Court ordered a recall and removal of all infringing products from the relevant distribution channels.

The defendants lodged an appeal with the Higher Regional Court of Düsseldorf. They argued, inter alia, that the District Court had not taken into account the procedural requirements set out by the CJEU in the decision Huawei v. ZTE [24] and that the claimant had not made a license offer on FRAND conditions. [25] The Higher Regional Court of Düsseldorf partially granted the appeal. It held that the defendants were under an obligation to render accounts and that they owed compensation in principle. [26] However, it held that the defendants were under no obligation to recall and remove the products from the relevant distribution channels because the claimant was in breach of its obligations under EU competition law (‘kartellrechtlicher Zwangslizenzeinwand’). [27] The Higher Regional Court did not have to decide about the injunction order because the parties had agreed to settle the matter in this regard (the patent had expired in September 2016). [28]

B. Court’s reasoning

1. Market Power

The Higher Regional Court held that the claimant was a dominant undertaking within the meaning of Art 102 TFEU. [29] In the eyes of the court, proprietorship of an SEP does not automatically constitute a dominant market position because not all SEPs necessarily influence competition in the downstream product market. [30] Rather, it needs to be ascertained whether or not market dominance exists in respect of each SEP individually. A dominant market position exists, for example, if it would not be possible to successfully market a competitive product without using the respective SEP, or if compatibility and interoperability under the standard could not be guaranteed. In contrast, a dominant position does not exist if the technology covered by the SEP is only of little importance for consumers in the relevant market. [30] On this basis, the Higher Regional Court had no doubts that the claimant was in a dominant market position [31] because the patent in question was related to data transfer, an essential function of the GPRS standard. [32]

2. Notice of Infringement

The Higher Regional Court held that the claimant had given proper notice of infringement under the CJEU requirements. According to the court, the procedure set out by the CJEU in the Huawei v. ZTE ruling applied to transitional cases (i.e. proceedings that had commenced before the CJEU decision, but where the decisions were handed down after). [33] The District Court had wrongfully assumed that the Huawei v. ZTE principles did not apply to the case at hand. CJEU decisions pursuant to Art 267 TFEU apply ab initio (‘ex tunc’) and thus to transitional cases. [34] The Higher Regional Court argued that the Huawei v. ZTE case itself had been of a transitional nature and that the CJEU had been aware of the diverging principles created by the German Federal Court of Justice in the Orange Book Standard decision in 2009. [34] Nevertheless, the CJEU had not distinguished between transitional and ‘new’ cases. As a consequence, the claimant was under an obligation to notify the defendants of the infringement. The written correspondence between the parties from 2012 and 2013 met this requirement [35]

The Higher Regional Court also held that it was sufficient to notify the defendants’ parent companies. [36] The claimant can reasonably expect that the parent company will pass on the respective information to all subsidiaries that are active on the relevant product markets. Requiring the claimant to give additional notices to the subsidiaries would be an unjustified formality (‘bloße Förmelei’). [36]

3. The Defendant’s Willingness to Enter into a License Agreement

As a consequence, the defendants were under an obligation to declare their willingness to enter into a license agreement on FRAND terms. [37] Several months had passed between the notice of infringement and the defendants’ declaration of willingness. However, the defendants had made it clear in an email from December 2013 that they were willing to enter into a license agreement. In the eyes of the Higher Regional Court, this was sufficient because there was ample time between this declaration and the commencement of proceedings in 2014.

In the further course of the negotiations, the rejection of certain license terms by the defendant was not necessarily an indicator for general unwillingness. [38] The defendant’s willingness needs to be seen in the overall context of the case. Unwillingness would be demonstrated only if the defendant definitively and finally rejects the claimant’s offers (the ‘last word’). [38] The Higher Regional Court held that the statements made by the defendants in the course of the negotiations did not justify such a conclusion. [38]

4. The SEP Owner’s Licensing Offer and the Standard Implementer’s Reaction

The Higher Regional Court held that the District Court had been incorrect to leave open the question as to whether the claimant’s offer had been FRAND. [39] The Higher Regional Court took the view that the CJEU had established an intricate system of consecutive actions that the parties must take. A claimant needs to make an offer on FRAND terms only if the defendant declared its willingness to enter into a license agreement on FRAND terms. Similarly, a defendant is under an obligation to make a counter-offer on FRAND terms only if the claimant made an offer on FRAND terms. [40] According to the Higher Regional Court, this view flows from the wording of the Huawei v. ZTE ruling that relates the content of offer and counter-offer (‘such an offer’; ‘responded to that offer’). [40] An SEP owner who has given a commitment to an SSO to offer FRAND licenses can be expected to make a FRAND offer that can reasonably be accepted by the defendant. In addition, a defendant needs to be able to assess whether the conditions of the claimant’s offer are FRAND. Requiring a defendant to make a FRAND counter-offer no matter what the claimant had offered earlier would be a contradiction of this basic proposition of the Huawei v. ZTE ruling. [40] Thus, it was necessary to have a decision in respect of the conditions of the claimant’s licensing offer.

The Higher Regional Court held that the claimant’s licensing offer did not meet FRAND requirements [41] because it discriminated against the defendants. [42] The court reiterated that infringement courts cannot limit their assessment to a summary review of whether the conditions were not evidently non-FRAND. Rather, infringement courts need to make a full assessment of the license conditions. [43]

The court held that dominant undertakings are under no obligation to treat all business partners in exactly the same way. [44] SEP owners have discretion regarding the license fees that they charge. [45] Different treatment of licensees is accepted if it can be justified as a result of normal market behavior. [46] Further, license conditions can be abusive only if they are significantly different between licensees. [46] These principles also apply to SEP owners who have given a FRAND declaration because this commitment refers to Art 102 lit. c) TFEU. [47] The burden of proof for such substantially unequal treatment lies with the defendant, [48] whilst the onus is on the claimant to prove that this unequal treatment is justified. [48] However, as the defendant will typically not have the necessary information, the claimant is under an obligation to provide information as to which competitors have been granted licenses and on what terms. [48] On this basis the Higher Regional Court concluded that the claimant had treated the defendants significantly differently from their competitors [49] without having a proper justification. [50] In particular, the claimant could not prove that discounts given to a competitor were common in the industry, [51] or that these discounts were a result of the particularities of the case. [52]

  • [23] LG Düsseldorf, 3 November 2015, File No. 4a O 93/14
  • [24] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 32.
  • [25] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 34.
  • [26] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 75.
  • [27] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 74 and 175.
  • [28] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 47.
  • [29] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 177 et seqq.
  • [30] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 182.
  • [31] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 185.
  • [32] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 186.
  • [33] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 202.
  • [34] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 203.
  • [35] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 215.
  • [36] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 213.
  • [37] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 220.
  • [38] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 240.
  • [39] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 244.
  • [40] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 245.
  • [41] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 242.
  • [42] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 251.
  • [43] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 249.
  • [44] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 254.
  • [45] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 255 and 257.
  • [46] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 256.
  • [47] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 257.
  • [48] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 258.
  • [49] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 263.
  • [50] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 268.
  • [51] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 270 et seqq.
  • [52] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 275 et seqq. and paras 290 et seqq.

Updated 23 January 2018

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

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

A. Facts

The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue (EP (UK) 2 229 744, EP (UK) 2 119 287, EP (UK) 2 485 514, EP (UK) 1 230 818, EP (UK) 1 105 991, EP (UK) 0 989 712) relate to telecommunication network coding and procedures. [1] Most were part of a large patent portfolio that the claimant had acquired from a major telecommunications company in 2013. [2] In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents. This summary focuses on the non-technical trial addressed competition law issues, FRAND issues, injunctive relief and damages for past infringements. [3]

In April 2014 the claimant made an open offer to the defendant, a major international smartphone manufacturer, to grant a license in respect of the claimant’s entire global patent portfolio (containing SEPs and non-SEPs). The defendant refused the offer, contending that there was no patent infringement, that the patents were not essential, and that they were invalid. The defendant also argued that the offer was not FRAND and thus did not constitute an abuse of a dominant market position under Art. 102 TFEU. In July 2014 the claimant made a further offer, limited to the claimant’s SEPs. Again, the defendant refused, arguing that the license conditions were not FRAND. [4] In June 2015 both parties made further offers. These offers were the result of directions from the court. The claimant offered a worldwide portfolio license while the defendant wanted to limit the territorial scope to the United Kingdom. [5] Between August and October 2016 the parties exchanged further offers without reaching an agreement. [6]

The Patents Court (Birrs J) held that the claimant was in a dominant position, but did not abuse this position. [7] The defendant was not prepared to take a license on FRAND conditions and the claimant was not in breach of competition law. Thus, the court held that a final injunction to restrain patent infringements should be granted. An injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 was granted on 7 June 2017. [8]

B. Court’s Reasoning

1. Market Power

The court defined the relevant market for assessing dominance as a distinct market for licensing each SEP individually. [9] European case law indicated that owning an SEP could be a rebuttable presumption for the existence of a dominant position. [10] The claimant’s pleaded position was a non-admission of dominance rather than a denial coupled with a positive case to the contrary. It was the view of the court that this was insufficient to rebut the presumption. In particular, the claimant’s argument of countervailing buyer power was unconvincing because it had not been supported by a proper economic analysis. [11]

2. SEP Proprietor’s Licensing Offer

a. FRAND Declaration as Conceptual Basis

The court pointed out that that the FRAND undertaking also applied in the case that the SEP proprietor was not in a dominant position. It held that the FRAND undertaking operated as a practical constraint on a SEP owner’s market power. [12] The ETSI declaration made by the SEP proprietor is also the starting point for determining the FRAND rate. The underlying issue, which is discussed at length by the court, [13] is if such a declaration forms a contract and whether that contract can benefit third parties. The court acknowledged that the legal effect of this declaration, in particular its enforceability, is a controversial issue under French law. [14] However, the court reasoned that the FRAND declaration is an important aspect of technology standardisation. Holders of SEPs are not compelled to give a FRAND declaration. If they do, the undertaking would be enforceable and irrevocable due to public interest. [14]

The court applied a procedural approach to FRAND. It emphasised that FRAND describes not only a set of license terms, but also the process by which a set of terms are agreed. [15] It applies to both the SEP-holder and the implementer/defendant. In particular, this approach allows for starting offers that leave room for negotiation. On the other hand, making extreme offers and taking an uncompromising approach which prejudices fair, reasonable, and non-discriminatory negotiation is not a FRAND approach. [16] This approach also means that the SEP proprietor is under an obligation to make a FRAND offer and to enter into FRAND license agreements. [17]

b. ‘True FRAND Rate’

The court considered that there is only a single set of terms for a given set of circumstances that would meet FRAND conditions (‘true FRAND rate’). [18] This eliminates the so-called Vringo-problem, [19] i.e. if FRAND were a range there would be two different but equally FRAND offers. Thus, if the court would grant or not an injunction, it would be unfair for the alleged infringer or SEP holder respectively. [20]

The court was of the opinion that the true FRAND rate approach does not cause problems under competition law. Theoretically, if only one set of terms is truly FRAND, and if FRAND also represents the line between abusive and non-abusive conduct under Art. 102 TFEU, then every agreed SEP-licence could be at serious risk of being abusive. [21] However, the court took the view that FRAND-compliance and compliance with Art. 102 TFEU are not the same thing (the court pointed out that the CJEU in the Huawei ruling appears to equate an obligation to make a FRAND offer with compliance with Art 102 TFEU).Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154./span> Since Art. 102 TFEU condemns excessive pricing, [23] a royalty rate can be somewhat higher than the true FRAND rate and still not be contrary to competition law. Conversely, for a breach of competition law, it will be necessary but not sufficient that the rate is not the true FRAND rate. [23]

c. Discrimination

The court held that the correct approach is to start from a global rate as a benchmark and to then adjust this rate as appropriate. [24] It distinguished between two concepts of discrimination. First, the ‘general’ concept of non-discrimination describes an overall assessment of FRAND which can be used to derive the benchmark mentioned above. [25] It is based on the intrinsic value of the patent portfolio, but it does not depend on the licensee. The court held that this benchmark should be applied to all licensees seeking the same kind of license. [26]

Second, the ‘hard-edged’ non-discrimination obligation, which takes into account the nature of the potential licensee, [25] is a distinct concept that could be used to adjust license terms. However, the court held that the FRAND declaration does not introduce such a hard-edged non-discrimination concept. [27] If, contrary to the view taken by the court, the FRAND undertaking did include hard-edged non-discrimination, a licensee could only have the right to a lower rate granted to another licensee (i.e. a specific non-discrimination obligation resulting from the FRAND declaration) if the difference would otherwise distort competition between the two licensees. [26]

d. Territorial Scope of License

The court held that the defendant’s offer that was limited to UK licenses was not FRAND. In the court’s opinion country by country licensing is inefficient for goods such as mobile telecommunications devices that are distributed across borders. [28] It would also be inefficient to negotiate many different licenses and then to keep track of so many different royalty calculations and payments. No rational business would do this, if it could be avoided. [28] This was illustrated by the fact that the vast majority of licenses introduced in the trial were worldwide licenses. [29] Further, it is common ground that the industry assesses patent families rather than individual patents within the family. Assessing portfolios on a family basis inevitably involved tying a patent in one jurisdiction with a patent in another. [30] Thus, according to the court, a worldwide license would not be contrary to competition law. As willing and reasonable parties would agree on a worldwide licence, the insistence by the defendant on a license which was limited to the UK was not FRAND. [31]

C. Other Important Issues

1. Comparable agreements and reasonable aggregate royalty rate

The court held that for determining the royalty rate, the evidence of the parties would be relevant, including evidence of how negotiations actually work in the industry. [32] Other freely-negotiated license agreements might be used as comparables. [33] This may be compared with a top down approach [34] can also be used in which the rate is set by determining the patentee’s share of relevant SEPs and applying that to the total aggregate royalty for a standard, but this may be more useful as a cross-check. [35] Royalty rates determined by other courts might be useful as persuasive precedents. However, in the eyes of the court, a license rate determined at a binding arbitration does not carry much weight as to what parties are usually paying. [32] License agreements must meet certain criteria to be comparable. [36] First, the licensor is the claimant. Second, the license agreement is recent. However, it is not necessary that the licensee is the defendant or a comparable company because different market participants have different bargaining powers, which is reflected in the negotiations and the resulting royalty rates. [36] Finally the court confirmed that a royalty based on the handset price was appropriate and implied a reasonable aggregate royalty rate of 8.8%of the handset price. The court found that the 8.8% was reasonable, in part, because the aggregate implied by either party’s case was higher (10.4% and 13.3%). [37]

2. Principles derived from Huawei v. ZTE

The court also provided a compiled overview of its interpretation of the Huawei v. ZTE ruling. [38] In the eyes of the court, the ‘willingness to conclude a licence on FRAND terms’ refers to a willingness in general. The fact that concrete proposals are also required does not mean it is relevant to ask whether the proposals are actually FRAND or not. If the patentee complies with the procedure as set out by the CJEU, then bringing a claim for injunction is not abusive under Art 102. But even if sufficient notice is given, bringing a claim can constitute an abuse because complying with the procedure does not mean that a patentee can behave with impunity. In other words, there might be other aspects that make the claim abusive. Conversely, bringing such a claim without prior notice will necessarily be abusive.

Significantly, the court held, the legal circumstances of this case differ from the circumstances assumed by the CJEU in a crucial respect. A FRAND undertaking can be effectively enforced irrespective of Art 102. The defendant does not need Art 102 TFEU to have a defence to the injunction claim.
  • [1] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 2.
  • [2] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 54 et seqq.
  • [3] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 3.
  • [4] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 5.
  • [5] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 7-8.
  • [6] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 11-14.
  • [7] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 807.
  • [8] Unwired Planet v Huawei, EWHC 1304 (Pat).
  • [9] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 631.
  • [10] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 634.
  • [11] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 636-646.
  • [12] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 656.
  • [13] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 108-145.
  • [14] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 146.
  • [15] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 162.
  • [16] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 163.
  • [17] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 159.
  • [18] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 164.
  • [19] See Vringo v ZTE [2013] EWHC 1591 (Pat) and [2015] EWHC 214 (Pat).
  • [20] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 158.
  • [21] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 152.
  • [22] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154./span> Since Art. 102 TFEU condemns excessive pricing,Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153. a royalty rate can be somewhat higher than the true FRAND rate and still not be contrary to competition law. Conversely, for a breach of competition law, it will be necessary but not sufficient that the rate is not the true FRAND rate.Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153.
  • [23] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153.
  • [24] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 176.
  • [25] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 177.
  • [26] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 503.
  • [27] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 501.
  • [28] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 544.
  • [29] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 534.
  • [30] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 546.
  • [31] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 572.
  • [32] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 171.
  • [33] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 170
  • [34] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 178
  • [35] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 806 (10)
  • [36] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 175.
  • [37] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 476.
  • [38] Unwired Planet v. Huawei [2017] EWHC 711(Pat), 744.

Updated 17 January 2018

Unwired Planet v Huawei, [2017] EWHC 1304 (Pat)

English court decisions
7 June 2017 - Case No. HP-2014-000005

A. Facts and Main Judgment

The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue relate to telecommunication network coding and procedures. In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents and one non-technical trial relating to competition law issues, FRAND issues, injunctive relief and damages for past infringements.Unwired Planet v. Huawei [2017] EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html In its decision on 5 April 2017 (the ‘main judgment’), the Patents Court (Birrs J) held that two patents were valid and that they had been infringed, and that the claimant was in a dominant position, but had not abused this position. The court stated that a final decision about an injunction to restrain patent infringements should be made separately. A few weeks after the main judgment, a license representing the FRAND terms between the two parties was prepared (the ‘settled license’), but had not yet been entered into. [112] Further, the defendant offered to give an undertaking to the court to enter into the license settled by the Patents Court or any other court. [113]

In its subsequent decision on 7 June 2017 (the case at hand), the parties argued whether the court should grant an injunction order given the existence of the settled license. Other minor issues of the case related to damages, declaratory relief, costs and permission to appeal. [114] The court granted an injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 (the ‘final order’). [115] The injunction order would be discharged if the defendant entered into a FRAND license and it would be stayed pending appeal. The court also declared that the settled license represented the FRAND terms in the given circumstances between the parties and that the defendant had to pay GBP 2.9 million of the claimant’s costs. Permission to appeal was granted to the defendant in respect of three issues and to the claimant in respect of one issue. [115]

B. Court’s Reasoning

1. Injunction

The main issue considered by the court was the interplay between the injunction, the settled license and the undertaking offered by the defendant. Patent EP (UK) 2 229 744 will expire in 2028. The settled license’s expiry date is 31 December 2020, [116] which would put the defendant in a difficult position if it attempts to renegotiate the license while the injunction is still in place. The defendant would even risk being in contempt of court if it continued to sell equipment if there was an argument that the license had come to an end for other reasons (e.g. repudiatory breach of contract). [117] However, the court took the view that it cannot be said that the defendant must be free to sell products if the license has ceased to exist. [116] Similarly, it cannot be said with certainty that the claimant must have an injunction at that date.

Thus, the court considered what the correct form of injunction in respect of a FRAND undertaking should be when a court has settled a license but the defendant has not entered into it (‘FRAND injunction’). [118] The court held that the FRAND injunction should contain a proviso that it will cease to have effect as soon as the defendant enters into the FRAND license. The injunction should also be subject to an express liberty to either party to return to court in the future if the FRAND license ceases to exist or expires while the patent is still valid. [118]

The court also held that despite the court’s discretion as to whether an injunction is granted, an injunction is normally effective, proportionate and dissuasive in IP cases. [119] Although the practical effect of a defendant’s undertaking and an injunction are similar, rights holders usually insist on an injunction. [120] One reason is that it involves a public vindication of the claimant’s rights. [120] As the claimant has been forced to come to court, an offer of undertaking after judgment is usually considered too late. [120] In this case, the defendant had maintained throughout the negotiations and the trial that it was under no obligation to accept a worldwide license. [121] Thus, according to the court, the right thing to do was to grant a FRAND injunction which will be stayed on terms pending appeal.

2. Other Issues

The court held that the issue of damages is closely related to the main issue. [122] If the defendant entered into the settled license, all payments would be covered by the license. If the defendant did not enter into the settled license, an order for damages is required. As a consequence, the court order should be in the same form as the FRAND injunction (stayed pending appeal and ceasing to have effect if the parties enter into the settled license). [122]

The parties also disagreed about the wording of the court declaration regarding the FRAND terms of the settled license. [123] The court dismissed the defendant’s suggestion as too complicated and the claimant’s suggestion as incomprehensive. Instead, the court declaration would be ‘the license annexed to the judgment represents the FRAND terms applicable between the parties in the relevant circumstances’. [124] Further, the court rejected the defendant’s petition to make a declaration that the claimant had not abused its dominant market position. [125] It took the view that the main judgment made a clear finding on this issue in summary paragraph 807(17).

Further, the parties disagreed about the extent of the defendant’s obligation to bear the claimant’s costs. The claimant argued that it should be regarded as the successful party so that the defendant had to pay its costs (GBP 6.4million). [126] The defendant argued the claimant had been clearly wrong regarding the applicable FRAND rate [127] and the appropriate thing would be to make no cost order. The court rejected the idea that there was no overall winner (as argued by the defendant) because the claimant was successful on the issues of the nature of the license and the existence and abuse of market dominance. [128] The ensuing question was whether any deductions were appropriate. [129] The court held that neither party had offered terms that were essentially FRAND. [130] However, the rates offered by the claimant were significantly further away from the end result than the rates offered by the defendant. [130] Thus, the defendant’s costs in relation to the FRAND rate issue were not recoverable by the claimant.

The fifth and final issue was in respect of permission to appeal. The court granted the defendant permission on three grounds: first, the necessity of granting a global license (including the court’s view that there is only one applicable license fee); [131] second, the hard-edged non-discrimination point; [132] and third, the issue of injunctive relief and abuse of market dominance under the CJEU ruling Huawei v. ZTE. [133] Conversely, the claimant was granted permission to appeal on the blended global benchmark issue (using a blended global rate as a benchmark, leading to the question whether another discount for the Chinese market should given). [134]

  • [111] Unwired Planet v. Huawei [2017] EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html
  • [112] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 2.
  • [113] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 8.
  • [114] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 1.
  • [115] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 70.
  • [116] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 22.
  • [117] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 19.
  • [118] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 20.
  • [119] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 25.
  • [120] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 26.
  • [121] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 29.
  • [122] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 33.
  • [123] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 34.
  • [124] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 36.
  • [125] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 38.
  • [126] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), paras 39-40.
  • [127] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 41.
  • [128] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 44.
  • [129] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 45.
  • [130] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 56.
  • [131] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 170 et seqq.
  • [132] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 177 and 481 et seqq.
  • [133] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 627 et seqq.
  • [134] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 537 et seqq.

Updated 30 July 2018

France Brevets v HTC, LG Düsseldorf

LG Düsseldorf
26 March 2015 - Case No. 4b O 140/13

A. Facts

The Claimant is a patent assertion entity established by the French State [1] . The Claimant was granted an exclusive licence by a company previously called Inside Technologies S.A. (SEP holder) for a European patent essential (Standard Essential Patent or SEP) for the implementation of the Standard LL V11.0.0, 2011-09 (LL standard) which was developed by the European Telecommunications Standards Institute (ETSI) [2] . The SEP holder had made an undertaking towards ETSI to make its SEP accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [3] . The LL standard enables applications of the so-called “Near field Communication” (NFC) technology to run on smartphones over the phone’s SIM-card [4] . NFC-applications can alternatively be implemented on smartphones also by a so-called “Smartcard”, or so-called “embedded secure elements” [5] .

The Defendant is the German subsidiary of an international manufacturer of smartphones that incorporate a so-called “NFC-controller” implementing the LL standard [6] The Defendant promotes the offering and sale of smartphones manufactured by its parent company in Germany [7] .

The Claimant brought an action for infringement of the German part of the SEP in question against the Defendant before the District Court (Landgericht) of Düsseldorf (Court), requesting for injunctive relief, information and rendering of accounts [8] . The Claimant also sought for a declaratory judgment on the Defendant’s liability for damages on the merits [8] .

Against these claims, the Defendant raised inter alia a defence based on antitrust considerations; basically, it argued that the Claimant’s request for injunctive relief constitutes an abuse of market power conferred to the Claimant by the SEP in suit in breach of Article 102 of the Treaty on the Functioning of the European Union (TFEU) (antitrust defence) [9] . The Defendant also requested the Court to stay its proceedings, until the Court of Justice of the European Union (CJEU) rendered its final decision in the matter Huawei v ZTE which concerned the availability of injunctive relief to SEP holders [10] .

The Court dismissed the Defendant’s request to order a stay of the proceedings [11] and granted the Claimant’s motions to the full extent. In its analysis regarding to the antitrust defence, the Court took into account the opinion delivered by Advocate General Wathelet in the matter Huawei v ZTE (Wathelet opinion) [12] , before the final decision of the CJEU was delivered on 16th July 2015 [13] .


B. Court’s reasoning

As a starting point, the Court made clear that an entity granted an exclusive licence for a SEP is entitled to all rights arising from the patent, including claims for injunctive relief as well as claims for damages, information and rendering of accounts [14] .

Having said that, the Court pointed out that the protection of intellectual property rights (IPRs) is a high priority; IPRs are expressly protected under the Charter of Fundamental Rights of the European Union (Article 17 Sec. 2), which also guarantees right holders access to justice (Article 47). Limitations of these rights can be justified only by antirust rules for the protection of general public interest, particularly Article 102 TFEU [15] .

Following the Wathelet opinion, the Court found that a dominant position of the Claimant, which is re-quired for the implementation of Article 102 TFEU, cannot be established solely on grounds of its legal position with respect to the SEP in suit [16] . In the Court’s view, not every SEP confers market power relevant from an antitrust perspective to its holder [16] . Moreover, it has to be examined on a case-by-case basis whether the technical teachings protected by the SEP actually establish such market power [16] .

Further, the Court held that ownership of a SEP does not give rise to the presumption that market power exists [17] . Standards, particularly in the telecommunications sector, refer also to technical functionalities which are of secondary importance to the relevant market; with respect to such functionalities, there are no grounds for a presumption that the SEP holder has market power [17] . Insofar, the party asserting the existence of market power must plead and establish the relevant facts in trial [17] .

With respect to IPRs, the relevant market from an antitrust perspective is not the licensing market, but the downstream product market [18] . Looking at SEPs, relevant is the market in which products implement-ing the respective standard are offered [19] . Accordingly, the Court found that the relevant market in the present case is the smartphone market, because the NFC technology is almost solely used in smartphones [20] .

Since the NFC technology does not apply to basic functionalities of smartphones and is, therefore, no prerequisite for market entry, market power could only be established, if smartphones that do not use the teachings of a SEP could not compete in the market with products implementing this patent [21] .

In the eyes of the Court, this was not the case. The SEP in suit (and the LL Standard) enable NFC-applications to run over smartphones’ SIM-card. However, NFC-applications can alternatively also run over so-called “Smartcards” or “embedded secure elements”. The Defendant could not establish that NFC-applications running over the SEP in suit have reached market penetration to the extent that market power could be achieved [22] . On the contrary, smartphone byers do not appear to base their purchase decision on which of the three available technical solutions for enabling NFC-applications the smartphone uses [22] .

  • [1] France Brevets v HTC, Landgericht Düsseldorf, judgement dated 26 March 2015, Case-No. 4b O 140/13, para. 18
  • [2] Ibid, paras. 19, 20, 24 and 26
  • [3] Ibid, para. 22
  • [4] Ibid, para. 212
  • [5] Ibid, para. 213
  • [6] Ibid, para. 22.
  • [7] Ibid, paras. 151 et seq
  • [8] Ibid, para. 3
  • [9] Ibid, para. 46
  • [10] Ibid, para. 38
  • [11] Ibid, para. 219
  • [12] Opinion of Advocate General Wathelet delivered on 20 November 2014, ECLI:EU:C:2014:2391
  • [13] France Brevets v HTC, Landgericht Düsseldorf, judgement dated 26 March 2015, Case-No. 4b O 140/13, para. 197 et seqq
  • [14] Ibid, para. 61
  • [15] Ibid, para. 197
  • [16] Ibid, para. 199
  • [17] Ibid, para. 201
  • [18] Ibid, para. 204
  • [19] Ibid, para. 205
  • [20] Ibid, para. 206
  • [21] Ibid, para. 208
  • [22] Ibid, para. 217

Updated 1 November 2017

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

English court decisions
4 May 2017 - Case No. HP-2014-000005

  1. Facts
    The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue (EP (UK) 2 229 744, EP (UK) 2 119 287, EP (UK) 2 485 514, EP (UK) 1 230 818, EP (UK) 1 105 991, EP (UK) 0 989 712) relate to telecommunication network coding and procedures [227] . Most were part of a large patent portfolio that the claimant had acquired from a major telecommunications company in 2013. [228] In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents. This summary focuses on the non-technical trial addressed competition law issues, FRAND issues, injunctive relief and damages for past infringements. [229]
    In April 2014 the claimant made an open offer to the defendant, a major international smartphone manufacturer, to grant a license in respect of the claimant’s entire global patent portfolio (containing SEPs and non-SEPs). The defendant refused the offer, contending that there was no patent infringement, that the patents were not essential, and that they were invalid. The defendant also argued that the offer was not FRAND and thus did not constitute an abuse of a dominant market position under Art. 102 TFEU. In July 2014 the claimant made a further offer, limited to the claimant’s SEPs. Again, the defendant refused, arguing that the license conditions were not FRAND. [230] In June 2015 both parties made further offers. These offers were the result of directions from the court. The claimant offered a worldwide portfolio license while the defendant wanted to limit the territorial scope to the United Kingdom. [231] Between August and October 2016 the parties exchanged further offers without reaching an agreement. [232]
    The Patents Court (Birrs J) held that the claimant was in a dominant position, but did not abuse this position. [233] The defendant was not prepared to take a license on FRAND conditions and the claimant was not in breach of competition law. Thus, the court held that a final injunction to restrain patent infringements should be granted. An injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 was granted on 7 June 2017. [234]
  2. Court’s reasoning
    1. Market power
      The court defined the relevant market for assessing dominance as a distinct market for licensing each SEP individually. [235] European case law indicated that owning an SEP could be a rebuttable presumption for the existence of a dominant position. [236] The claimant’s pleaded position was a non-admission of dominance rather than a denial coupled with a positive case to the contrary. It was the view of the court that this was insufficient to rebut the presumption. In particular, the claimant’s argument of countervailing buyer power was unconvincing because it had not been supported by a proper economic analysis. [237]
    2. SEP Proprietor’s Licensing Offer
      1. FRAND Declaration as Conceptual Basis
        The court pointed out that that the FRAND undertaking also applied in the case that the SEP proprietor was not in a dominant position. It held that the FRAND undertaking operated as a practical constraint on a SEP owner’s market power. [238] The ETSI declaration made by the SEP proprietor is also the starting point for determining the FRAND rate. The underlying issue, which is discussed at length by the court, [239] is if such a declaration forms a contract and whether that contract can benefit third parties. The court acknowledged that the legal effect of this declaration, in particular its enforceability, is a controversial issue under French law. [240] However, the court reasoned that the FRAND declaration is an important aspect of technology standardisation. Holders of SEPs are not compelled to give a FRAND declaration. If they do, the undertaking would be enforceable and irrevocable due to public interest. [240]
        The court applied a procedural approach to FRAND. It emphasised that FRAND describes not only a set of license terms, but also the process by which a set of terms are agreed. [241] It applies to both the SEP-holder and the implementer/defendant. In particular, this approach allows for starting offers that leave room for negotiation. On the other hand, making extreme offers and taking an uncompromising approach which prejudices fair, reasonable, and non-discriminatory negotiation is not a FRAND approach. [242] This approach also means that the SEP proprietor is under an obligation to make a FRAND offer and to enter into FRAND license agreements. [243]
      2. ‘True FRAND Rate’
        The court considered that there is only a single set of terms for a given set of circumstances that would meet FRAND conditions (‘true FRAND rate’). [244] This eliminates the so-called Vringo-problem, [245] i.e. if FRAND were a range there would be two different but equally FRAND offers. Thus, if the court would grant or not an injunction, it would be unfair for the alleged infringer or SEP holder respectively. [246]
        The court was of the opinion that the true FRAND rate approach does not cause problems under competition law. Theoretically, if only one set of terms is truly FRAND, and if FRAND also represents the line between abusive and non-abusive conduct under Art. 102 TFEU, then every agreed SEP-licence could be at serious risk of being abusive. [247] However, the court took the view that FRAND-compliance and compliance with Art. 102 TFEU are not the same thing (the court pointed out that the CJEU in the Huawei ruling appears to equate an obligation to make a FRAND offer with compliance with Art 102 TFEU). [248] Since Art. 102 TFEU condemns excessive pricing, [249] a royalty rate can be somewhat higher than the true FRAND rate and still not be contrary to competition law. Conversely, for a breach of competition law, it will be necessary but not sufficient that the rate is not the true FRAND rate. [249]
      3. Discrimination
        The court held that the correct approach is to start from a global rate as a benchmark and to then adjust this rate as appropriate. [250] It distinguished between two concepts of discrimination. First, the ‘general’ concept of non-discrimination describes an overall assessment of FRAND which can be used to derive the benchmark mentioned above. [251] It is based on the intrinsic value of the patent portfolio, but it does not depend on the licensee. The court held that this benchmark should be applied to all licensees seeking the same kind of license. [252]
        Second, the ‘hard-edged’ non-discrimination obligation, which takes into account the nature of the potential licensee, [251] is a distinct concept that could be used to adjust license terms. However, the court held that the FRAND declaration does not introduce such a hard-edged non-discrimination concept. [253] If, contrary to the view taken by the court, the FRAND undertaking did include hard-edged non-discrimination, a licensee could only have the right to a lower rate granted to another licensee (i.e. a specific non-discrimination obligation resulting from the FRAND declaration) if the difference would otherwise distort competition between the two licensees. [252]
      4. Territorial Scope of License
        The court held that the defendant’s offer that was limited to UK licenses was not FRAND. In the court’s opinion country by country licensing is inefficient for goods such as mobile telecommunications devices that are distributed across borders. [254] It would also be inefficient to negotiate many different licenses and then to keep track of so many different royalty calculations and payments. No rational business would do this, if it could be avoided. [254] This was illustrated by the fact that the vast majority of licenses introduced in the trial were worldwide licenses. [255] Further, it is common ground that the industry assesses patent families rather than individual patents within the family. Assessing portfolios on a family basis inevitably involved tying a patent in one jurisdiction with a patent in another. [256] Thus, according to the court, a worldwide license would not be contrary to competition law. As willing and reasonable parties would agree on a worldwide licence, the insistence by the defendant on a license which was limited to the UK was not FRAND. [257]
  3. Court’s reasoning
    1. Comparable agreements and reasonable aggregate royalty rate
      The court held that for determining the royalty rate, the evidence of the parties would be relevant, including evidence of how negotiations actually work in the industry. [258] Other freely-negotiated license agreements might be used as comparables. [259] This may be compared with a top down approach [260] can also be used in which the rate is set by determining the patentee’s share of relevant SEPs and applying that to the total aggregate royalty for a standard, but this may be more useful as a cross-check. [261] Royalty rates determined by other courts might be useful as persuasive precedents. However, in the eyes of the court, a license rate determined at a binding arbitration does not carry much weight as to what parties are usually paying. [258] License agreements must meet certain criteria to be comparable. [262] First, the licensor is the claimant. Second, the license agreement is recent. However, it is not necessary that the licensee is the defendant or a comparable company because different market participants have different bargaining powers, which is reflected in the negotiations and the resulting royalty rates. [262] Finally the court confirmed that a royalty based on the handset price was appropriate and implied a reasonable aggregate royalty rate of 8.8%of the handset price. The court found that the 8.8% was reasonable, in part, because the aggregate implied by either party’s case was higher (10.4% and 13.3%). [263]
    2. Principles derived from Huawei v. ZTE
      The court also provided a compiled overview of its interpretation of the Huawei v. ZTE ruling. [264] In the eyes of the court, the ‘willingness to conclude a licence on FRAND terms’ refers to a willingness in general. The fact that concrete proposals are also required does not mean it is relevant to ask whether the proposals are actually FRAND or not. If the patentee complies with the procedure as set out by the CJEU, then bringing a claim for injunction is not abusive under Art 102. But even if sufficient notice is given, bringing a claim can constitute an abuse because complying with the procedure does not mean that a patentee can behave with impunity. In other words, there might be other aspects that make the claim abusive. Conversely, bringing such a claim without prior notice will necessarily be abusive. Significantly, the court held, the legal circumstances of this case differ from the circumstances assumed by the CJEU in a crucial respect. A FRAND undertaking can be effectively enforced irrespective of Art 102. The defendant does not need Art 102 TFEU to have a defence to the injunction claim.
  • [227] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 2
  • [228] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 54 et seqq.
  • [229] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 3
  • [230] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 5
  • [231] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 7-8
  • [232] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 11-14
  • [233] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 807
  • [234] Unwired Planet v Huawei, EWHC 1304 (Pat)
  • [235] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 631
  • [236] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 634
  • [237] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 636-646
  • [238] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 656
  • [239] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 108-145
  • [240] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 146
  • [241] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 162
  • [242] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 163
  • [243] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 159
  • [244] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 164
  • [245] See Vringo v ZTE [2013] EWHC 1591 (Pat) and [2015] EWHC 214 (Pat)
  • [246] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 158
  • [247] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 152
  • [248] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154
  • [249] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153
  • [250] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 176
  • [251] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 177
  • [252] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 503
  • [253] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 501
  • [254] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 544
  • [255] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 534
  • [256] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 546
  • [257] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 572
  • [258] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 171
  • [259] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 170
  • [260] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 178
  • [261] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 806 (10)
  • [262] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 175
  • [263] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 476
  • [264] Unwired Planet v. Huawei [2017] EWHC 711(Pat), 744