Case Law post CJEU ruling Huawei v ZTE

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Updated 26 January 2017

Sisvel v Haier

LG Düsseldorf
3 November 2015 - Case No. 4a O 93/14

  1. Facts
    Claimant, a non-practicing entity, is the proprietor of European patent EP B, originally granted to the applicant “A”, allegedly covering a feature of the GPRS standard, and being part of Claimant’s patent portfolio “H Wireless Patent Program” which purportedly encompasses patents essential to various ICT standards. Defendants “I” and “J” produce and market GPRS-based devices. On 10 April 2013, Claimant made a commitment towards ETSI declaring to grant a license on FRAND terms with regard to, inter alia, patent EP B. By letters as of 20 December 2012, 22 August 2013 and 11 November 2013, as well as in meetings on 17 February 2014 Claimant informed the parent company of Defendants “I” and “J” about the “H Wireless Patent Program” and made an offer but no licensing agreement was concluded. On 29 August 2014 Claimant made another licensing offer which was refused on 1 September 2014 by Defendant “J” without a counter-offer. By letter as of 12 August 2015 Defendants submitted a counter-offer regarding patent EP B which was, in turn, refused by Claimant on 24 August 2015. After Claimant had brought an action against “I” and “J”, Defendants made yet another licensing offer in their court filing as of 21 September 2015 which was refused as well. In the course of the oral hearings on 29 September 2015, Defendants submitted a security in the amount of € 5000 and rendered account in respect of acts of use in the past.
  2. Court’s reasoning
    1. Market power and notice of infringement
      The court left 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 (cf. below). As to the infringement notification, [1] the court did not decide whether the meetings with individual companies of the group to which Defendants belong already satisfied the requirements established by the ECJ. Since, in the present case, Claimant filed its actions before the judgment in Huawei v ZTE was rendered the court considered it sufficient that the infringer was alerted of the infringement through the statement of claims: The rules of conduct established by the German Federal Court (Bundesgerichtshof) in its Orange Book-ruling do not require the patent holder to give notice or submit a licensing offer prior to suing a (purportedly) infringing standard implementer. Although Orange Book addressed a de facto Standard and was heavily criticized by scholars and the EU Commission alike, it was being applied by German lower courts to de jure standards until the ECJ handed down its Huawei decision. In consequence, Claimant could—prior to the Huawei decision—reasonably consider itself to comply with the law by acting in accordance with the Orange Book rules. In terms of content, the District Court left undecided the question whether of the infringement notification must only indicate the patent for which prohibitory injunction is sought, whether—on the contrary—reference to other IP rights with respect to which a license is offered has to be made, or whether such additional reference is relevant only in determining FRAND licensing conditions. The court also left open whether the alleged infringer must accept a FRAND offer since the patent holder has then fulfilled its obligations according to antitrust law and thus there is no room for a counter-offer.

    2. The SEP owner’s licensing offer
      As regards the Huawei requirement to present the alleged infringer with a specific, written offer for a license on FRAND terms, three statements of the district court deserve attention: Firstly, the SEP holder is in compliance with the ECJ conditions if the licensing offer is submitted not to all individual companies within a group but to the group parent only. Secondly, the court did not decide on whether an offer providing for a worldwide portfolio license and encompassing also non-SEPs could be considered as FRAND because, thirdly, the alleged infringers did not comply with their duties of conduct under Huawei (cf. below). [2]

    3. The standard implementer’s reaction
      According to the court even if the patent proprietor’s licensing offer is not FRAND-compliant, a standard implementer would still have to respond to that offer. The question of whether the alleged infringer may respond to a non-FRAND offer in a different manner than by submitting a specific counter-offer, in particular by merely demonstrating that the SEP owner’s offer was not FRAND, was left undecided. [3] Since Defendants decided to submit a counter-offer, the court stated that they were obliged to render account in respect of acts of use and to provide security for potential royalties, both based on their counter-offer and starting with the refusal of the first counter-offer, regardless of whether subsequent offers and counter-offers were formulated. These obligations also apply to “transitional” cases in which the (first) counter-offer has been rejected before the Huawei ruling because the—previously applicable—Orange Book-rules of conduct were even more demanding for the standard implementer. In the present case, Defendants did not comply with this prerequisite because they rejected, on 1 September 2014, the offers presented by Claimant on 17 February and 29 August 2014 without formulating any counter-offer, submitting such a counter-offer only belatedly, on 12 August 2015. [4] Furthermore, Defendants did not comply with their duties to render account and to provide security because they did so only on 29 September 2015, i.e. more than one month after their first counter-offer had been rejected by the claimant on 24 August 2015. [5]

  3. Other important issues
    In addition to its considerations regarding Huawei, the court deliberated on two other important issues: As regards the transfer of a SEP from the original patent proprietor to a non-practicing entity, registration in the patent register in accordance with § 30 (3) PatG establishes presumption of ownership, allowing the proprietor to enforce all rights derived from the SEP as long as the presumption has not been successfully rebutted by Defendants. [6] Furthermore, no patent ambush-defense based on § 242 BGB could successfully be raised because, firstly, Defendants could not substantiate the alleged patent ambush by “A” (being the original SEP proprietor); secondly, the alleged patent ambush would, arguably, have resulted only in a FRAND licensing obligation while, thirdly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [7]
  • [1]  Case No. 4a O 93/14, para. 90-94
  • [2]  Case No. 4a O 93/14, para. 96-98, 125
  • [3]  Case No. 4a O 93/14, para. 98-101
  • [4]  Case No. 4a O 93/14, para. 14, 103-109
  • [5]  Case No. 4a O 93/14, para. 103-111
  • [6]  Case No. 4a O 93/14, para. 37-40
  • [7]  Case No. 4a O 93/14, para. 118-123

Updated 23 January 2018

Saint Lawrence v Deutsche Telekom

OLG Karlsruhe
23 April 2015 - Case No. 6 U 44/15

A. Background

1. Facts

The proceedings related to the defendant’s application to the Higher Regional Court of Karlsruhe for a stay of execution of the decision of the District Court of Mannheim (Case No. 2 O 103/14, 10 March 2015). The background was the alleged infringement of patent EP 1.125.276.B1, which covered technology for coding broadband signals which is essential for the ETSI AMR-WB standard.

The defendant was a major German telecommunications company (Deutsche Telekom). Intervenor 1 and intervenor 2 were smartphone manufacturers (HTC and others) whose products used the AMR-WB standard. These phones were supplied to the defendant and then sold to consumers as part of the defendant’s contract plans. [1] The claimant, a German non-practicing entity, Saint Lawrence, became owner of the respective SEP in August 2014. [2] The previous owner of the SEP had declared its willingness to grant licenses on FRAND conditions several times. [3] The defendant had shown no interest in such a license. [3] After commencing infringement proceedings in the District Court of Mannheim, the claimant contacted intervenor 2 for the first time. Intervenor 2 signed a confidentiality agreement on 23 February 2015, rejected an initial offer made by the claimant, and made a counter offer. On 25 March 2015 (after the decision of the District Court of Mannheim), the claimant made another offer, which intervenor 2 also rejected.

2. Ensuing Decisions

On 10 March 2015, the District Court of Mannheim granted an injunction. Inter alia, it held that the defendant had not attempted to enter into negotiations for a license. [3] In particular, the court considered it irrelevant that intervenor 2 might have demonstrated its willingness to enter into a license on FRAND conditions. In the eyes of the court, the relevant issue was whether the claimant had a right to demand an injunction to stop the defendant using the patent. Even if an intervenor could successfully raise a competition law based defence relying on the Federal Court of Justice decision Orange Book Standard, [4] this was of no relevance for the relationship between the claimant and the defendant. [5]

The defendant and intervenor 1 applied to the Higher Regional Court of Karlsruhe to stay the execution of the District Court decision. Under the German rules of civil procedure, the Higher Regional Court can grant a stay of execution only if an appeal is pending and it is probable that the challenged decision will be overturned on the basis that it appears manifestly erroneous. [6] Alternatively, the Higher Regional Court can grant a stay of execution if the defendant can prove that the execution would cause particularly severe harm beyond the usual effects of an execution. [6]

The Higher Regional Court of Karlsruhe granted the defendant’s application to stay the execution regarding the smartphones manufactured by intervenor 2, but dismissed the application made by intervenor 1. [7] It held that it would be sufficient for a successful competition law based defence that an intervenor is willing to enter into a license agreement. [8] Since the District Court of Mannheim had dismissed the intervenors’ willingness as irrelevant for the case, the resulting decision was manifestly erroneous. [8] Significantly, the Higher Regional Court required the defendant to make a deposit of EUR 5 million into the court to safeguard the claimant’s financial interests.

B. Court’s Reasoning

Importantly, the decision was handed down in April 2015 and thus several months prior to the CJEU Huawei/ZTE ruling. The Higher Regional Court stated that the final opinion of Advocate General Wathelet [9] was the legal basis of its decision. [10]

The Higher Regional Court reasoned that a patent holder could seek injunction orders against any business in the supply chain of the product that infringes the respective SEP – which includes manufacturers (such as the intervenors) and distributors (such as the defendant). In principle, according to the Federal Court of Justice decision Tripp-Trapp-Stuhl,Federal Court of Justice, 14 May 2009, Case No. I ZR 98/06. the decision against whom to bring proceedings lies with the patent holder. [12] However, according to the Higher Regional Court, this was not the issue in this case. The issue was whether the patent holder was abusing its dominant market position by commencing proceedings against the defendant. The only relevant question is whether this is conduct that deviates from ‘normal’ competition behaviour, being detrimental to consumer interests. If the SEP holder has made a FRAND declaration in the past and is typically entering into license agreements with manufacturers, then the court could see no objective reason why the SEP holder would only bring proceedings against the distributor. [12] In contrast, there is a reasonable expectation that the SEP holder makes an offer to the manufacturer of the relevant product first. Bringing proceedings against distributors would put significant pressure on the manufacturer. This can distort the license negotiation because distributors will have little interest in legal arguments with patent holders. If a patent holder is a dominant undertaking, exerting such pressure constitutes an abuse of market power. [12] In addition, bringing proceedings against distributors whilst granting licenses to manufacturers in other cases is inconsistent behaviour. [12]

C. Other Important Issues

The Higher Regional Court pointed out that the claimant was a non-practising entity. Accordingly, by exercising its patent rights it is not protecting its own market share in the market for smartphones. [13] In contrast, it is in the claimant’s objective interest that as many mobile phones using its SEP from numerous manufacturers are present in this market. Moreover, it is unlikely that a stay of execution would jeopardise the claimant’s financial interests. A deposit made by the defendant into the court should be a sufficient safeguard. [13] On the other hand, an execution of the decision at first instance would cause considerable harm to the defendant. As a telecommunications company, the defendant relies on a comprehensive portfolio of mobile phones that it can offer to consumers. [14] Removing the devices manufactured by intervenor 2 from the portfolio would be a significant blow to the defendant’s core business. Moreover, a removal would also be detrimental for intervenor 2 because a major distribution channel for its smartphones would become inaccessible. [15] As a result, the defendant’s interest in staying the execution outweigh the interests of the claimant.

  • [1] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 2.
  • [2] Landgericht Mannheim, 10 March 2015, 2 O 103/14, para 27.
  • [3] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 3.
  • [4] Bundesgerichtshof, 6 May 2015, KZR 39/06.
  • [5] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 6.
  • [6] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 17.
  • [7] OLG Karlsruhe, 8 September 2016, 6 U 58/16, para 38. After lodging the application, the claimant and intervenor 1 had reached a settlement agreement. As a result, intervenor 1 had withdrawn its appeal to the Higher Regional Court of Karlsruhe. Thus, in the eyes of the court, no stay of execution was required.
  • [8] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 19.
  • [9] GA Wathelet, 20 November 2014, C-170/13.
  • [10] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 20.
  • [11] Federal Court of Justice, 14 May 2009, Case No. I ZR 98/06.
  • [12] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 21.
  • [13] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 25.
  • [14] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 26.
  • [15] OLG Karlsruhe, 23 April 2015, 6 U 44/15, para 27.

Updated 26 January 2017

Sisvel v Haier

LG Düsseldorf
3 November 2015 - Case No. 4a O 144/14

  1. Facts
    The facts of the case are very similar to those of LG Düsseldorf, 3 November 2015 – Case No. 4a O 93/14: Claimant, a non-practicing entity, is the proprietor of the European patent EP D, originally applied for by “A” and formerly owned (after various transfers) by “B”, allegedly covering part of the UMTS standard, and being part of Claimant’s patent portfolio “H Wireless Patent Program” which purportedly encompasses patents essential to various ICT standards. Defendants “I” and “J” produce and market UMTS-based devices. On 10 April 2013 Claimant made a FRAND commitment towards ETSI, inter alia regarding patent EP D. By letters as of 20 December 2012, 22 August 2013 and 11 November 2013, as well as in meetings on 17 February 2014, Claimant informed the parent company of Defendants “I” and “J” about the “H Wireless Program” but no licensing agreement was concluded. On 29 August 2014 Claimant made another licensing offer which was refused on 1 September 2014 by “J” without a counter-offer. By letter as of 13 October 2014 one of the Defendants submitted a first counter-offer regarding patent EP D which Claimant refused on 20 October 2014 referring to the ongoing negotiations with the parent company of that Defendant. On 12 August 2015 Defendants “I” and “J” made a second counter-offer which was rejected by Claimant on 24 August 2015. After Claimant had brought a lawsuit Defendants made a last counter-offer in their court filing as of 22 September 2015 that was also refused by Claimant. In the course of the oral hearings of 29 September 2015, Defendants submitted a security (€ 5000) and rendered account in respect of acts of use in the past.
  2. Court’s reasoning
    Except for references to the slightly differing facts of both cases the court’s considerations are identical to those in the decision LG Düsseldorf, 3 November 2015 – Case No. 4a O 93/14.
    1. Market power and notice of infringement
      The court left 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 (cf. below). As to the infringement notification, [8] the court did not decide whether the meetings with individual companies of the group to which Defendants belong already satisfied the requirements established by the ECJ. Since, in the present case, Claimant filed its actions before the judgment in Huawei v ZTE was rendered the court considered it sufficient that the infringer was alerted of the infringement through the statement of claims: The rules of conduct established by the German Federal Court (Bundesgerichtshof) in its Orange Book-ruling do not require the patent holder to give notice or submit a licensing offer prior to suing a (purportedly) infringing standard implementer. Although Orange Book addressed a de facto Standard and was heavily criticized by scholars and the EU Commission alike, it was being applied by German lower courts to de jure standards until the ECJ handed down its Huawei decision. In consequence, Claimant could—prior to the Huawei decision—reasonably consider itself to comply with the law by acting in accordance with the Orange Book rules.

      In terms of content, the District Court left undecided the question whether of the infringement notification must only indicate the patent for which prohibitory injunction is sought, whether—on the contrary—reference to other IP rights with respect to which a license is offered has to be made, or whether such additional reference is relevant only in determining FRAND licensing conditions. The court also left open whether the alleged infringer must accept a FRAND offer since the patent holder has then fulfilled its obligations according to antitrust law and thus there is no room for a counter-offer.
    2. The SEP owner’s licensing offer
      As regards the Huawei requirement to present the alleged infringer with a specific, written offer for a license on FRAND terms, three statements of the district court deserve attention: Firstly, the SEP holder is in compliance with the ECJ conditions if the licensing offer is submitted not to all individual companies within a group but to the group parent only. Secondly, the court did not decide on whether an offer providing for a worldwide portfolio license and encompassing also non-SEPs could be considered as FRAND because, thirdly, the alleged infringers did not comply with their duties of conduct under Huawei (cf. below). [9]
    3. The standard implementer’s reaction
      According to the court, even if the patent proprietor’s licensing offer is not FRAND-compliant, a standard implementer would still have to respond to that offer. The question of whether the alleged infringer may respond to a non-FRAND offer in a different manner than by submitting a specific counter-offer, in particular by merely demonstrating that the SEP owner’s offer was not FRAND, was left undecided. [10] Since Defendants decided to submit a counter-offer, the court stated that they were obliged to render account in respect of acts of use and to provide security for potential royalties, both based on their counter-offer and starting with the refusal of the first counter-offer, regardless of whether subsequent offers and counter-offers were formulated. These obligations also apply to “transitional” cases in which the (first) counter-offer has been rejected before the Huawei ruling because the—previously applicable—Orange Book-rules of conduct were even more demanding for the standard implementer. In the present case, Defendants did not comply with this prerequisite because they rejected, on 1 September 2014, the offers presented by Claimant on 17 February and 29 August 2014 without formulating any counter-offer, submitting such a counter-offer only belatedly, on 12 August 2015. [11] Furthermore, Defendants did not comply with their duties to render account and to provide security because they did so only on 29 September 2015, i.e. more than one month after their first counter-offer had been rejected by the claimant on 24 August 2015. [12]
  3. Other important issues
    In addition to its considerations regarding Huawei, the court deliberated on two other important issues: As regards the transfer of a SEP from the original patent proprietor to a non-practicing entity, registration in the patent register in accordance with § 30 (3) PatG establishes presumption of ownership, allowing the proprietor to enforce all rights derived from the SEP as long as the presumption has not been successfully rebutted by Defendants. [13] Furthermore, no patent ambush-defense based on § 242 BGB could successfully be raised because, firstly, Defendants could not substantiate the alleged patent ambush by “A” (being the original SEP proprietor); secondly, the alleged patent ambush would, arguably, have resulted only in a FRAND licensing obligation while, thirdly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [14]
  • [8] Case No. 4a O 93/14, para. 90-94
  • [9] Case No. 4a O 93/14, para. 96-98, 125
  • [10] Case No. 4a O 93/14, para. 98-101
  • [11] Case No. 4a O 93/14, para. 14, 103-109
  • [12] Case No. 4a O 93/14, para. 103-111
  • [13] Case No. 4a O 93/14, para. 37-40
  • [14] Case No. 4a O 93/14, para. 118-123

Updated 26 January 2017

Saint Lawrence v Deutsche Telekom

LG Mannheim
27 November 2015 - Case No. 2 O 106/14

  1. Facts
    Since 28 August 2014, Claimant, a non-practicing entity established under German law, is registered as the current proprietor of the European patent EP 1.125.284 B1, originally granted to applicant “V” (Voiceage Corporation). Whether “V” validly transferred the patent to Claimant is disputed between the parties. Defendant is a company active in the telecommunications sector and which markets AMR-WB-based devices. The patent has been found to be essential to ETSI’s AMR-WB standard by IPEC. After the adoption (“freeze”) of AMR-WB by ETSI on 10 April 2001 “V”, who joined ETSI only after the standard had been set, repeatedly—on 29 May 2001, 26 October 2004 and 7 January 2010—declared its readiness to grant licenses on FRAND terms for the respective patent.
    After initiating the present action—Defendant having been served with the claim on 7 August 2014—Claimant informed Defendant by letter as of 31 July 2014 (including a copy of the statement of claims as of 23 July 2014) that it was ready to grant licenses on FRAND terms for the patent-in-suit and five other German patents allegedly used by Defendant. Inviting Defendant to discuss such a licensing agreement Claimant offered, in addition, to communicate a draft licensing agreement by letter as of 9 December 2014. Defendant did not show any interest in acquiring a license regarding the patent-in-suit.
    Prior to the infringement action, Claimant neither tried to contact nor to make a licensing offer to Defendant’s supplier “H”(HTE) which, knowing about the lawsuit since August 2014, acted as an intervener in the present proceedings. Subsequent to Defendant’s third-party notice, “H” started licensing negotiations with Claimant on 9 December 2014. After “H” had signed a non-disclosure agreement provided by Claimant on 22 December 2014, Claimant submitted a draft licensing agreement on 12 January 2015, being corrected on 26 January 2015. Talks took place on 9 February 2015. By letter as of 23 February 2015 “H” made a supplemented proposal for the determination of the licensing conditions. In an e-mail as of 6 March 2015 “H” declared its willingness to take a license for Germany alone and specified conditions. As a reaction to Claimant’s offer as of 25 March 2015 concerning a worldwide license “H” submitted, on 2 April 2015, a counter-offer that was limited to Germany and suggested third party determination of royalties by the High Court of England and Wales. While Claimant rejected the counter-offer by letter as of 19 April 2015, “H” declared to adhere to its offer by letter as of 8 June 2015. On 3 September 2015 “H” sent an additional letter according to which a bank guaranteed, under certain conditions, payment of royalties for past use of the relevant patents in Germany. As Claimant criticized the letter as incomprehensible by e-mail of 13 September 2015, Defendant subsequently (inter alia by submitting documents to the court on 23 September 2015) explained in greater detail how the royalties were to be calculated.
  2. Court’s reasoning
    1. Market power and notice of infringement
      The court finds, in any case, no abuse of (potential) market power, as H behaved tactically motivated causing delay and made its own offers linked to unacceptable conditions. However, the court leaves open the questions (1) of whether the SEP conveyed actual market power to Claimant, (2) of whether—even absent actual market dominance—the FRAND declaration subjected Claimant to the conduct requirements for a market dominant SEP proprietor, (3) of whether Claimant is to be treated as if it had made the FRAND declaration itself, and (4) of whether a refusal to grant FRAND licenses to Defendant’s device suppliers entitled Defendant to a FRAND defense regardless of its own readiness to take a license. [1] The court made however clear that enforcing the right of injunction is not a misuse when the infringer, even after the complaint has been raised and despite a reasonable timeframe, does not show any interest in getting a license.
      As regards the Huawei requirement to alert the standard user of the infringement, the court focused on different aspects. Since, in the present case, Defendant refrained from expressing its willingness to conclude a licensing agreement on FRAND terms it was left undecided whether Claimant complied with its obligation to notify prior to the initiation of court proceedings by sending, after bringing the action but before the statement of claims was served to Defendant, a letter from which Defendant could recognize that an action had already been brought.
      The Mannheim court did also not determine whether Claimant, in order to avoid a violation of Article 102 TFEU, had to inform “H” about the patent infringement because the latter learned or could have easily learned about the possible violation of the SEP during a phone call with Defendant in August 2014. [2] However, “H” did not sufficiently express its willingness to conclude a licensing agreement on FRAND terms because it took “H” more than three months to submit a license request after it had become aware of the court action. “H” could have objected a violation of Article 102 TFEU if it had expressed such willingness and complied with the subsequent Huawei obligations. However, “H” failed to do so also because it refrained from submitting a satisfying counter-offer. [3]
    2. The SEP owner’s licensing offer
      The court seems to favor FRAND-compatibility of worldwide licenses as it clarifies that limiting the counter-offer to Germany was “unacceptable” but does not decide on the issue. Also, the court left undecided whether the royalty rate offered by Claimant satisfied FRAND. [4]
    3. The standard implementer’s reaction
      Considering the subsequent conduct obligation of the standard user, the district court found that a FRAND counter-offer has to be submitted irrespective of whether the preceding licensing offer made by the SEP proprietor itself is FRAND. In order to trigger the counter-offer obligation it is sufficient that the licensing offer contains—as in the present case—all information, in particular regarding royalty calculation, which is necessary for Defendant to submit a counter-offer corresponding to FRAND terms. The Huawei obligation to diligently respond does not merely arise where a licensing offer is FRAND but it has to be considered as an expression of the sincere willingness of Defendant to conclude a licensing agreement. If such willingness is given, the patent proprietor will not be allowed to present a subsequent FRAND licensing offer after the initiation of proceedings. [5]
      The court then analyzed whether Defendant’s counter-offer met the ECJ requirements in terms of content, but left it undecided whether a limitation to Germany could be in compliance with FRAND terms. It denied the existence of a “specific” counter-offer in the present case because the amount of the royalty was not specified in the document itself but was intended to be determined by an independent third party. [6] In consequence, “H” could not fulfill its obligation to provide appropriate security because it was not possible to anticipate which amount of royalty would have been stipulated by the “independent third party”. [7]
  3. Other important issues
    In the course of licensing negotiations, the standard user is neither prevented from challenging validity, standard-essentiality or effective use of the patent in question nor to reserve its right to do so. [8]
    As regards ownership and the transfer of the patent from the original patent proprietor to the non-practicing entity, registration in the patent register in accordance with § 30 (3) PatG establishes the presumption of ownership, allowing the proprietor to enforce all rights derived from the SEP as long as the presumption has not been successfully rebutted by Defendants. [9]
    No patent ambush-defense based on § 242 BGB could be raised. As the court assessed in a detailed, torts-based analysis, [10] Defendant and Intervener could establish neither collusion of “V” and “N” (a participant in the setting of the AMR-WB standard) nor bad faith of “N” regarding “V” ’s patents. Hence, non-declaration by “N” did not amount to a patent ambush. Nor could non-declaration by “V” constitute a patent ambush since “V” was no member of ETSI—and, hence, not bound by a duty to disclose resulting from ETSI’s IP policy—when the AMR-WB standard was being set. Furthermore, Defendant and Intervener could not show why they should have been adversely affected by “V” ’s alleged violation of the ETSI IPR Policy, given that Claimant had declared its willingness to grant a license on FRAND terms. [11] In particular, they could not substantiate that a different form of the standard, avoiding “V” ’s patents, would have been set, had the standard-setting participants known about these patents. [12] Given these deficiencies in the attempt to establish a patent ambush the court left open whether such an ambush would result in an obligation to grant a royalty free- or “only” a FRAND license but indicated to favor the FRAND license-sanction. [13]
  • [1] Case No. 2 O 106/14, para. 133
  • [2] Case No. 2 O 106/14, para. 139-144
  • [3] Case No. 2 O 106/14, para. 146-149
  • [4] Case No. 2 O 106/14, para. 152-153
  • [5] Case No. 2 O 106/14, para. 153-160
  • [6] Case No. 2 O 106/14, para. 158-164
  • [7] Case No. 2 O 106/14, para. 167-169
  • [8] Case No. 2 O 106/14, para. 146
  • [9] Case No. 2 O 106/14, para. 78-80
  • [10] Cf. for details LG Mannheim, 27 November 2015 - Case No. 2 O 106/14, para. 119-131
  • [11] Case No. 2 O 106/14, para. 118-131
  • [12] Cf. LG Mannheim, 27 November 2015 - Case No. 2 O 106/14, para. 131, i.a. on the mechanism of “blind selection” among technological alternatives, (initially) irrespective of existing patents and their ownership situation.
  • [13] Case No. 2 O 106/14, para. 198

Updated 26 January 2017

Unwired Planet v Samsung

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

  1. Facts
    Since 7 March 2014 Claimant, a non-practicing entity, is the proprietor of European patent EP D, allegedly covering a feature of the GSM standard, originally granted to the Intervener, and subsequently transferred to company “I”. Defendants, belonging to the K-group, produce and market GSM- and UMTS-based devices.
    In an agreement as of 26 October 2011, the Intervener granted a worldwide non-exclusive license to Qualcomm Inc., being, in turn, allowed to grant sub-licenses to its customers. Furthermore, by agreement as of 1 February 2014 one of the Defendants was granted a worldwide, non-exclusive license to patents owned by the Intervener.
    On 10 January 2013, the Intervener concluded a so-called “Master Sales Agreement” (MSA), concerning the exploitation of a portfolio of more than two thousand patents, with “E”, “F” and its subsidiaries. Claimant became a party to the MSA later on. After its accession to the MSA, “I”, by assuming the existing FRAND obligation of the Intervener in accordance with the MSA, made a separate FRAND commitment towards ETSI on 14 June 2013 and declared, in an agreement as of 13 February 2013, to ensure that subsequent acquirers equally assume this obligation. Accordingly, after the transfer of patent EP D to Claimant the latter made, on 6 March 2014, a separate commitment towards ETSI declaring to be willing to grant licenses on FRAND terms with regard to, inter alia, patent EP D.
    In order to implement the MSA the parties concluded three transfer agreements. Claimant argues that the Intervener validly transferred a part of its patent portfolio, including patent EP D, by agreement as of 11 February 2013 to undertaking “B”. On 13 February 2013, “B”, in turn, transferred the patent portfolio, including patent EP D, to “I”. After successfully requesting, on 3 September 2013, an amendment of the patent register, being performed on 24 October 2013, “I” transferred, on 27 February 2014, the patent portfolio, including patent EP D, to Claimant. Claimant successfully requested, on 7 March 2014, an amendment of the patent register which was performed on 3 July 2014.
    As a reaction to Claimant’s public license proposal including a royalty of USD 0.75 per mobile device Defendants allegedly submitted a counter-offer but no licensing agreement was concluded.
  2. Court’s reasoning
    1. Market power
      The court stressed that an application of Article 102 TFEU does not automatically result from SEP ownership but that it requires proof of a dominant position on the relevant market being conveyed by the SEP in question. Due to the fact that products not implementing the patent-in-suit could not effectively compete on the relevant market because of GSM being a key feature for such products market power of Claimant was affirmed. [54]
    2. Applicability of the Huawei rules to damages and the rendering of accounts
      While the Huawei rules of conduct apply to actions for injunction, recall and destruction of products they are, in principle, not directly applicable to claims for damages and the rendering of accounts. [55] Nor is it necessarily abusive for a SEP proprietor to bring an action for damages and the rendering of accounts without having notified the standard implementer of an infringement and without having offered a FRAND license beforehand. The Huawei obligations do, however, have an indirect impact on the extent to which damages and the rendering of accounts are due: Where the SEP proprietor fails to grant a FRAND license although he has made a FRAND commitment and the standard implementer has expressed its readiness to take a license, damages are limited to the FRAND royalty level but only for the period after the SEP proprietor’s abusive refusal to license. [56] Claims for information and the rendering of accounts must, in this event, be limited to what is necessary for determining FRAND-based damages. [57]
    3. Cap on damages/rendering of accounts in casu
      In casu Defendant could not show that he had complied with its Huawei obligation to sufficiently express its willingness to take a FRAND license. In consequence, no cap on Claimant’s claim for damages was deemed appropriate. [57]
  3. Other important issues
    Whether a SEP proprietor is free to enforce its patent in court or whether the proprietor is obliged to grant a FRAND license has to be determined under Art. 102 TFEU, not Art. 101 TFEU. [58] A FRAND declaration is not an unconditional offer made by the patent proprietor to enter into a licensing agreement with anyone willing to take a license, it merely expresses that the proprietor is, in principle, ready to grant a FRAND license if the patent in question conveys market dominance. As such, the FRAND commitment merely specifies a duty to license which competition law would impose anyway but it has an impact on the patent owner’s obligations under Art. 102 TFEU. [59]
    As regards the transfer of a SEP from the original patent proprietor to a non-practicing entity, registration in the patent register in accordance with § 30 (3) PatG establishes—also with regard to claims for damages and the rendering of accounts—presumption of ownership, allowing the proprietor to enforce all rights derived from the SEP as long as the presumption has not been successfully rebutted by Defendants. The non-registration of “B” as an interim owner was considered irrelevant under the circumstances of the present case (but not generally). Case No. 4b O 120/14, para. I, 1-2
    The MSA and the subsequent transfer agreements neither violate the German provisions on merger control (§§ 35-43 GWB) since, in any case, merger control thresholds are not reached.
    Nor was a violation of the European provisions on anticompetitive agreements (Article 101 TFEU) or on the abuse of a dominant position (Article 102 TFEU) found. Case No. 4b O 120/14, para. I, 4, a-c In particular, the transactions did not aim at enforcing non-FRAND royalties or at discriminating between licensees and the agreements framing the transactions ensured that the acquirers of the relevant patents were bound by (the initial) FRAND commitments. [60] The acquirer of a SEP is neither obliged to continue the transferor’s licensing practice in an unmodified manner nor to implement exactly the same conditions in all licensing agreements, provided the conditions are FRAND and no unjustified discrimination takes place. It is not abusive in itself for a (former) SEP proprietor to split its portfolio and to transfer the parts to several acquirers, thereby trying to arrive at higher overall royalties being paid for the portfolio. Nor is a resulting increase in the number of licenses a standard implementer has to take per se inacceptable. However, licensing conditions are FRAND only if the cumulative royalty level resulting from the licensing of all pertinent SEPs is not excessive. Putting it differently, where the royalty level for the entire portfolio was below or at the lower end of the FRAND range, it is not abusive to arrive, by way of splitting the portfolio and licensing its parts separately, at a higher overall royalty level within the FRAND range. Furthermore, the transaction agreements did not amount to price fixing. [61]
  • [54] Case No. 4b O 120/14, para. VII, 6, a
  • [55] Case No. 4b O 120/14, para. VII, 6, b, aa, bb
  • [56] Case No. 4b O 120/14, para. VII, 6, b, dd
  • [57] Case No. 4b O 120/14, para. VII, 6, b, ee
  • [58] Case No. 4b O 120/14, para. VII, 4
  • [59] Case No. 4b O 120/14, para. VII, 5
  • [60] Case No. 4b O 120/14, para. I, 4, b, aa
  • [61] Cf. for details LG Düsseldorf, 19 January 2016 - Case No. 4b O 120/14, para. I, 4, b, bb

Updated 26 January 2017

Unwired Planet v Huawei, EWHC

English court decisions
2 October 2015 - Case No. HP-2014-000005

Dates: 2 October 2015, 19 November 2015, 23 November 2015, 7 December 2015, 16 December 2015, 28 January 2016, 29 January 2016, 12 February 2016, 22 March 2016, 29 April 2016, 27 May 2016

  1. Facts
    The overall dispute can be separated into five technical trials (A-E), three of which have been completed, each dealing with one patent and relating to technical issues such as validity, infringement and essentiality. Still uncompleted is the fifth trial, concerning the only non-SEP in the portfolio, and one trial relating to competition law and FRAND issues, scheduled to start on 20 October 2016 and to last for approximately thirteen weeks.
    Claimant (Unwired Planet Int. and Unwired Planet LLC) is the proprietor of European patents EP 2 229 744 whose standard-essential character has been confirmed in Trial A; EP 2 119 287 and EP 2 485 514 who have been revoked in Trial B; and EP 1 230 818 whose standard-essential character has been confirmed in Trial C. All patents were originally granted to Ericsson and are part of a patent portfolio Claimant obtained from Ericsson, purportedly encompassing patents essential to various ICT standards. Defendants (in particular Huawei and Samsung) produce and market GSM- and LTE 4G-based devices.
    In the decision of interest here, the court had to decide on the application of Defendant Samsung to transfer competition law as well as FRAND issues to the Competition Appeal Tribunal (CAT). The application was rejected because it appeared not to be feasible to decide these issues separately from the rest of the case. [61]
    With regard to competition law the court has, so far, examined three competition law defences pursuant to Article 101 TFEU raised by Defendant Samsung against the claim for patent infringement. This claim is based on, inter alia, the Master Sale Agreements (MSA) concluded as of 10 January 2013 between Claimant and Ericsson. The MSA entitles Ericsson to a share in the patent royalties and contains the option to transfer a substantial number of additional patents to Claimant in the future. On 14 June 2013 and 6 March 2014 respectively, Claimant and one of its subsidiaries made FRAND commitments towards ETSI. Defendant’s first defence contends that the MSA generally failed to transfer the FRAND commitments made by Ericsson towards ETSI to Claimant, because (a) it does not require Claimant to give any FRAND undertaking, (b) even if there were such an obligation, it cannot be enforced by third parties and (c) the MSA does not prohibit Claimant from obtaining licensing terms more favorable than those Ericsson could obtain. The second defence alleges that Claimant and Ericsson could, as an effect of the patent portfolio’s division by the MSA, demand excessive royalties. Moreover, by means of its third defence, Defendant argues that particular clauses of the MSA have the object or potential effect of restricting competition under Article 101 TFEU because they define minimum royalties and exclude alternative royalty schemes.
  2. Decision of the court of first instance
    The court of first instance let the second defense go to trial because it held that the MSA is not a straightforward agreement for the sale of patents since Ericsson retains a share in the royalties to be earned and can transfer a substantial further body of patents if it chooses to do so. Moreover, the acquirer, as a non-practicing entity, does not compete in the downstream market in the way that Ericsson does. In these circumstances the court of first instance considered it was arguable that the MSA has as its object or would have as its effect the distortion or restriction of competition.
    The court of first instance reached the same conclusion in relation to the third defence. It considered it arguable that the pertinent clauses would contribute to the creation of an anti-competitive incentive to charge higher royalties.
    However, the court of first instance rejected all elements of the first defense. As for the first aspect, it recognised that the acquirers acknowledged (1) that the SEPs were subject to existing encumbrances, including FRAND commitments to ETSI; (2) that all encumbrances would continue after assignment; and (3) that within a reasonable time after closing they would provide declarations to ETSI including FRAND undertakings in accordance with the ETSI IPR Policy. Such FRAND undertakings were indeed provided. Turning to the second element, the court of first instance considered that it was unarguable because once a FRAND undertaking had been given any third party could require to license the patents on FRAND terms. As for the third element, the judge rejected as unarguable the contention that Ericsson’s own FRAND obligations should have been assigned to and become binding on Unwired Planet.
    Defendant appealed against the findings regarding the second and third elements of the first defence.
  3. Court’s reasoning
    Having regard to the second element of the first defence the court, considering the fact that Claimant made commitments towards ETSI shortly after the conclusion of the MSA, found that the undertaking to grant licences on FRAND terms is equally binding for Claimant irrespective of the fact whether it is a member of ETSI and rejected Defendant’s submission that the obligations under the MSA cannot be enforced by third parties. [62]
    Contrary to the findings of the court of first instance regarding the third element of the first defence, the court states that Article 101 TFEU may require an effective transfer of Ericsson’s FRAND obligation to Claimant to the effect that the latter cannot obtain more favorable terms from its licensees than Ericsson could itself have obtained. It therefore let this aspect go to full trial as well.
  • [61] HP-2014-000005, 29 April 2016, para. 30 et seq., 46
  • [62] HP-2014-000005, 27 May 2016, para. 38-40