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Updated 6 March 2018

OLG Düsseldorf

OLG Düsseldorf
18 July 2017 - Case No. I-2 U 23/17

A. Facts

The Claimant is holder of a patent declared as essential to a standard (Standard Essential Patent, SEP). The Defendant is a provider of telecommuni­cation services. Under the policy governing the relevant standard, the Claimant is obliged to license its SEP on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions. Against Claimant’s SEP a nullity action is pending. The Claimant, nevertheless, concluded portfolio licensing agreements also covering the SEP in question with two companies.

Since November 2012, the Claimant made efforts to license his SEP also to the Defendant. The parties could, however, not reach an agreement. In January 2016, the Claimant brought an action against the Defendant before the Regional Court of Düsseldorf requesting for a declaration of the Defendant’s liability for damages as well as rendering of accounts (main proceedings). After the main proceedings were ini­tiated, the Claimant made two offers for a license agreement to the Defendant. In order to protect busi­ness secrets connected with these offers, the Claimant requested the Defendant to sign a Non-Disclosure Agreement (NDA). The Defendant refused to sign a NDA. Moreover, the Defendant brought an action against the Claimant before an Irish Court requesting for a declaration that Claimant’s offers did not comply with FRAND.

Subsequently, the Claimant filed a motion for a preliminary injunction against the Defendant before the Regional Court of Düsseldorf. The Regional Court of Düsseldorf dismissed Claimant’s motion. The Claimant appealed this judgement. With the present ruling the competent Higher Regional Court of Düsseldorf in­dicated that the Claimant’s appeal has no prospects of success.

B. Court’s reasoning

The court made clear that preliminary injunctions involving SEPs are subject to the same strict prerequi­sites as injunctions referring to non-SEPs. The SEP-holder has, therefore, to adequately establish the va­lidity of the SEP, its use by the alleged infringer as well as the urgency of its request for a preliminary injunction.

Besides this, prior to seeking for a preliminary injunction, the SEP holder also has to fulfill the require­ments set forth by the Court of Justice of the European Union in its decision in the matter Huawei ./. ZTE (Huawei judgement). This follows from the fact that SEP-holders’ claims for injunctive relief are, in prin­ciple, only enforceable, after the prerequisites established by the Huawei judgement have been fully met.

Since preliminary injunctions may severely affect alleged infringer’s ongoing business, such injunctions can only be granted, when both the validity and the use of the SEP by the alleged infringer appear to be given with a high degree of certainty.

The validity of a SEP is deemed to be given, when the SEP has been confirmed in patent opposition or nullity proceedings. Without a prior confirming decision, the validity of a SEP can, exceptionally, also be regarded as being given, when

  • the alleged infringer has unsuccessfully intervened in the proceedings, in which the SEP was granted,
  • no opposition or nullity proceedings were initiated against the SEP, because it is universally consid­ered to be able to receive patent protection (one indication for this being, for instance, the fact that the SEP was licensed to renowned licensees),
  • the objections raised against SEP’s validity can be proven to be unfounded even by the limited means of the summary examination foreseen in proceedings for interim relief, as well as
  • in “extraordinary circumstances”, in which the SEP-holder will face substantial disadvantages, if he is forced to wait with the initiation of proceedings against the infringer, until after the end of opposition or nullity proceedings pending against the SEP.

Against this background, the court argued that the Claimant is most likely not entitled to the requested preliminary injunction.

First, the Claimant failed to establish the validity of the SEP in dispute with the required high degree of certainty. A decision confirming the SEP in dispute is missing, since the nullity proceedings are still pending. Furthermore, the exceptions allowing this conclusion to be drawn, even without a prior con­firming decision, do most likely not apply. In particular, the fact that the Claimant concluded portfolio licensing agreements with two other companies covering also the SEP in question, does not suffice to adequately establish its validity. This fact only proves that the licensees held the SEP-holder’s portfolio as being able to receive patent protection as a whole, not, however, that they considered the SEP itself as being worthy of such protection. Furthermore, due to the high level of technical complexity, the court does not expect that the objections raised against the validity of the SEP can be proven as being unfounded solely on basis of the limited examination means available to the court in the present pro­ceedings for interim relief.

Second, the court has also substantial doubts that urgency is given. The Claimant was aware of the alleged infringement since 2012. Nevertheless, the Claimant refrained from making his claim for injunctive relief enforceable by fulfilling the Huawei judgement requirements. Furthermore, in the main proceedings ini­tiated prior to the present proceedings for preliminary injunction, the Claimant did not request for injunc­tive relief, but limited his action against the Defendant to damages and rendering of accounts. In terms of urgency, it could be expected from the Claimant to request for injunctive relief already in the main proceedings. Furthermore, the fact that the Defendant brought an action before an Irish Court requesting a declaration that Claimant’s offers did not comply with FRAND, also fails to establish urgency. It is the Defendant’s right to seek legal redress.

C. Other issues

In addition, the court expressed its view regarding the consequences of the refusal of a potential licensee to sign a NDA covering information connected with the SEP-holder’s offer for a licensing agreement on FRAND terms, without, however, ruling on this question on the merits of the present case.

The court suggested that the unjustified refusal of a licensee to enter into a NDA does not release the SEP-holder from the obligations established by the Huawei judgement, namely the obligation to make a FRAND offer to the licensee and specify the underlying conditions (particularly the price calculation). An unjusti­fied refusal of the licensee to sign a NDA shall, however, lead to easing the SEP-holder’s burden to provide the licensee with detailed explanations regarding the justification of its licensing conditions, to the extent that this is required for protecting its justified confidentiality interests. Instead of detailed information, “merely indicative observations would, basically, suffice. The licensee cannot object the FRAND con­formity of the SEP-holder’s offer based on the insufficient specification of the licensing terms.
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. [47] 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. [48] 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. [49]
    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. [50]
    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. [51]
      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. [52] 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”. [53]
  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. [54]
    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. [55]
    No patent ambush-defense based on § 242 BGB could be raised. As the court assessed in a detailed, torts-based analysis, [56] 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. [57] 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. [58] 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. [59]
  • [47] Case No. 2 O 106/14, para. 133
  • [48] Case No. 2 O 106/14, para. 139-144
  • [49] Case No. 2 O 106/14, para. 146-149
  • [50] Case No. 2 O 106/14, para. 152-153
  • [51] Case No. 2 O 106/14, para. 153-160
  • [52] Case No. 2 O 106/14, para. 158-164
  • [53] Case No. 2 O 106/14, para. 167-169
  • [54] Case No. 2 O 106/14, para. 146
  • [55] Case No. 2 O 106/14, para. 78-80
  • [56] Cf. for details LG Mannheim, 27 November 2015 - Case No. 2 O 106/14, para. 119-131
  • [57] Case No. 2 O 106/14, para. 118-131
  • [58] 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.
  • [59] Case No. 2 O 106/14, para. 198

Updated 26 January 2017

Saint Lawrence v Vodafone

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

  1. Facts
    Since 28 August 2014 Claimant, a non-practicing entity, is the proprietor of the European patent EP 1 125 276 B1 “J”, originally granted to applicants “Voiceage, and allegedly covering part of the AMR-WB standard. Defendant is a company active in the telecommunications sector and which markets AMR-WB-based devices, inter alia devices produced by the Intervener in this case. After the adoption (“freeze”) of AMR-WB by ETSI on 10 April 2001, Claimant (who was not an ETSI member during the setting of the AMR-WB standard) made, on 29 May 2001, a commitment towards ETSI to grant licenses on FRAND terms inter alia for patent EP J. Claimant and its parent company “O” offer the SEP and all other patents of the same family to third parties by means of a portfolio license. Licensing conditions are accessible on the Internet and various producers in the sector have taken a license under these conditions. Prior to the submission of the patent infringement action on 23 July 2014 and to the advance payments on costs on 29 July 2014, Claimant alerted neither Defendant nor the manufacturer of the contested embodiments, who acted as an intervener in the present proceedings and became aware of the lawsuit in August 2014. By e-mails on 31 July and (as a reminder) on 9 December 2014, the first of which included a copy of the statement of claims and reached the defendant before it was formally served with the statement, Claimant notified the alleged patent violation to Defendant. After Defendant’s reply as of 12 January 2015, Claimant presented a draft licensing agreement to Defendant by letter as of 22 April 2015. On 9 December 2014, the Intervener (HTC) declared willingness to take a license for that patent, inter alia for the patent-in-suit, provided infringement was found in Mannheim’s District Court. It further declared that it would accept royalties determined by a court or arbitration tribunal. Claimant, in turn, offered a licensing agreement by letters as of 12 January 2015 and 25 March 2015 respectively. In the course of meetings taking place since 23 January 2014, [76] Claimant offered a license to the Intervener. On 23 February 2015 and on 2 April 2015 respectively, the Intervener made two licensing offers, including third party determination (arbitration panel or English court) of the amount of royalty, for the whole German patent portfolio of Claimant. An additional offer for a licensing agreement, limited to Germany and implementing a royalty of USD 0.0055 per patent by reference to the “WCDMA Patent Pools”, was made by the Intervener on 6 March 2015 and 24 September 2015 respectively, but it was finally refused by Claimant on 4 October 2015. Moreover, the Intervener provided a bank “guarantee of payment” as of 3 September 2015, being modified by letter as of 10 November 2015, and also rendered account of past and prospective sales in Germany since 2011.
  2. Court’s reasoning
    1. Market power and notice of infringement
      The court leaves open the question of whether the SEP conferred market power to Claimant since it did, in any case, find no abuse of such potential market power. [77] The court declared the Huawei rules applicable to claims for the recall of products. [78] As regards the Huawei requirement to alert the standard user of the infringement, the decision arrived at various findings of interest: Firstly, the judges found that—in “non-transitional” cases where the lawsuit was brought after the Huawei decision—the infringement notification has to take place before the action is filed, or the latest before the advance payment on costs is made. In transitional cases, such as the present case, a delayed infringement notification, taking place after the advance payment on costs as well as the submission of the court action, but before the statement of claims is served, is admissible. [79] Moreover, an infringement notification could possibly be omitted (in particular) if—as in the present case—the patent user already disposes of all necessary information and lacks willingness to license. [80] In non-transitional cases, however, the court doubts whether it is possible to rectify an omitted infringement notification without withdrawing the action. [81] Secondly, the court specified the minimum content of the infringement notification which has to indicate at least the number of the patent, the contested embodiments and the alleged acts of use performed by the standard implementer. The court did not decide whether additional information has to be provided, in particular regarding the interpretation of the patent claims or on which part of the standard the patent reads, but it stated that such additional information is not harmful to the patent proprietor. [82] Lastly, the court detailed on the particular situation of the Intervener, being Defendant’s manufacturer and supplier in the present case: Even though a FRAND defense successfully raised by the Intervener would in general also cover subsequent levels of the distribution chain, the Huawei requirements apply only indirectly to suppliers of contested embodiments which have not been sued themselves. Accordingly, the SEP proprietor is not obliged to notify the patent infringement to third parties, but as soon as a request to grant a license on FRAND terms is submitted the (adapted) Huawei procedure applies. [83] In casu, no separate infringement notice vis-à-vis the Intervener was required since the Intervener was, since August 2014, aware of the action having been brought.
    2. The SEP owner’s licensing offer
      Since the patent user did not express its willingness to conclude a licensing agreement in due time, the court found Claimant to comply with the Huawei requirement to submit a licensing offer on FRAND terms even though the offer was made in the course of the ongoing litigation. For transitional cases, as the present one, this holds true even if infringement notification and court action take place at the same time. [84] Besides, the court analyzed under which circumstances licensing conditions can be considered as FRAND according to Huawei. In the opinion of the judges, the more licensing agreements implementing comparable terms the SEP proprietor has already concluded, the stronger is the presumption that these conditions are FRAND, unless factual reasons—which are to be demonstrated by the patent user—justify modified terms. Recognized commercial practice in the relevant sector has to be considered when defining the admissible scope of the licensing agreement. If patent portfolios are usually covered by group or worldwide licenses in the relevant market, a (worldwide) portfolio license will be FRAND unless the circumstances of the specific case, e.g. the SEP proprietor’s market activity being limited to one geographic market, require a modification. [85] Accordingly, Claimant’s (worldwide) licensing offer to Defendant for the whole AMR-WB pool, demanding royalties of USD 0.26 per mobile device that implemented the standard and was produced or marketed in countries in which the SEP was in force, and complying with Claimants existing licensing practice (accessible on the Internet and already implemented in 12 licensing agreements) was declared FRAND. While the court considered that comparable licensing agreements “represent an important indicator of the adequacy of the license terms offered” it clarified that the significance of a patent pool as an indication of FRAND conformity is “limited”. Defendant and the Intervener failed to show that the portfolio comprised (non-used) non-SEPs as well. [86] They further failed to show that the pre-concluded licensing agreements provided no valid basis for comparison as they were concluded under the threat of pending litigation. [87] In order to fulfill the Huawei obligation of specifying the calculation of royalties, the SEP proprietor only has to provide the information necessary to determine the amount of royalties to be paid, e.g. the royalty per unit and the products covered by the license. While the court left undecided whether additional indications, e.g. concerning the FRAND character of the licensing offer, are necessary to comply with Huawei, it found that the SEP proprietor’s duty to inform should not be interpreted too strictly as FRAND does regularly encompass a range of values that will be fair, reasonable, and non-discriminatory. [88] Claimant’s licensing offer presented to the Intervener was considered as being FRAND for the same reasons. Furthermore, the court emphasized that the contractual clause allowing for judicial review of the royalties offered could be a possible way to avoid abusive practices and to ensure that licensing offers correspond to FRAND terms. [89]
    3. The standard implementer’s reaction
      The court found that the more details the infringement notification contains, the less time remains for the standard user to examine the patent(s) at issue and to express its willingness to conclude a licensing agreement on FRAND terms. In the present case, Defendant did not comply with Huawei because it took more than five months to react and then only asked for proof of the alleged infringement. Given this excessive delay, the court did not decide whether Defendant’s reaction satisfied the Huawei requirements in terms of content. It denied the possibility to remedy a belated reaction by a subsequent declaration of willingness to license. On the contrary, and as a consequence of the patent user’s non-compliance, the SEP proprietor may continue the infringement action without violating Article 102 TFEU, but it still has to grant licenses on FRAND terms. [90] Whether the Intervener satisfied the ECJ criteria was left undecided. [91] The court made some further remarks of interest as to the Huawei requirements concerning the standard implementer: Firstly, it left undecided whether the obligation of the patent user to diligently respond is caused also by a (potentially) non-FRAND licensing offer. [92] Secondly, a standard user who has taken a license is not prevented from challenging validity and essentiality of the SEP afterwards, nor is the SEP proprietor entitled to terminate the license if such a challenge takes place. However, the standard implementer may not delay the (unconditional) conclusion of the licensing agreement until a final court decision on these issues has been rendered. While validity and standard-essentiality is litigated, the licensee remains obliged to pay royalties and it cannot request to insert into the licensing contract a clause entitling it to reclaim paid royalties in case of its success in court. [93] Thirdly, as, in the present case, no specific counter-offers satisfying FRAND terms were submitted and Defendant could not establish that Claimant had waived this requirement the court did not decide on whether a SEP proprietor is obliged to negotiate further although itself and the patent user have submitted FRAND offers. [94] None of the counter-offers of the Intervener were FRAND in terms of content. They were either inadmissibly limited to Germany, contained no precise royalty, were not submitted “promptly” because the standard user had waited until the oral pleadings in the parallel procedure, or they proposed royalties per device which the court considered as too low. [95] While it was therefore held to be irrelevant whether, in the first place, the Intervener duly declared its willingness to license, the court emphasized that the Intervener’s readiness to take a license only after the SEP infringement was determined in court did not satisfy the Huawei standard of conduct. [96] Moreover, the obligation imposed by Huawei to provide appropriate security and to render account was not fulfilled. While Defendant refrained from taking any of these actions, the Intervener waited several months after the counter-offers were refused in order to submit its bank “guarantee of payment”, which was not recognized as “appropriate security” due to its amount and its limitation to acts of use in Germany. [97] Neither was the Intervener’s initial proposal to have the security—if requested by Claimant—determined by an arbitration tribunal or by an English court accepted as an appropriate way to provide security. [98]
  3. Other important issues
    According to the court, the Huawei requirements apply to both non-practicing entities and other market participants. [99] Suing a network operator instead of the undertakings producing devices operating in the network constitutes (at least under the circumstances of this case and absent selective enforcement) no violation of competition law even though this strategy might aim at using the action against the network operator as a “lever” to obtain licensing commitments from the device suppliers. On the other hand, device manufacturers are entitled to a FRAND license as well and can raise the FRAND defense if such a license is not granted. In consequence, the court perceives a fair balance of interests as the SEP proprietor can choose on which level of the chain of production to sue while the undertakings in the chain of production can choose on which level to take a license. [100] Furthermore, no patent ambush-defense based on § 242 BGB could be raised because, firstly, Defendant and the Intervener could not substantiate the alleged patent ambush by “Y” and “C”, being the original SEP proprietors; secondly, they could not show that a different patent declaration conduct would have resulted in a different version of the standard excluding the patent-in-suit; thirdly, the alleged patent ambush would, arguably, have resulted only in a FRAND-licensing obligation and, fourthly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [101]
  • [76] This is the date mentioned by the Court although “23 January 2015” may seem more plausible and the date given by the Court may result from a scrivener’s error.
  • [77] Case No. 4a O 73/14, para. 184
  • [78] Case No. 4a O 73/14, para. 187
  • [79] Case No. 4a O 73/14, para. 195 et seq.
  • [80] Case No. 4a O 73/14, para. 208-210
  • [81] Case No. 4a O 126/14, para. IV, 3, a, bb, 2, c
  • [82] Case No. 4a O 73/14, para. 193
  • [83] Case No. 4a O 73/14, para. 270 et seq.
  • [84] Case No. 4a O 73/14, para. 222 et seq.
  • [85] Case No. 4a O 73/14, para. 225 et seq.
  • [86] Case No. 4a O 73/14, para. 225 et seq. On the relevance of the SIPRO-pool royalty rates, cf. LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 245-248. On the facts indicating that a worldwide license was appropriate LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 249-255.
  • [87] Case No. 4a O 73/14, para. 234-242. The court argued that it is questionable in principle how much the threat of a claim for injunctive relief can (inadmissibly) affect license agreement negotiations, since the Orange Book case law of the BGH (German Federal Court of Justice), the Motorola decision of the European Commission, and now the CJEU judgment in the Huawei Technologies/ZTE Case could be and can be invoked against inappropriate demands that are in breach of antitrust law.
  • [88] Case No. 4a O 73/14, para. 256 et seq.
  • [89] Case No. 4a O 73/14, para. 279 et seq.
  • [90] Case No. 4a O 73/14, para. 214-220
  • [91] Case No. 4a O 73/14, para. 214-220; 278
  • [92] Case No. 4a O 73/14, para. 266
  • [93] Case No. 4a O 73/14, para. 185 et seq.; 262 et seq.
  • [94] Case No. 4a O 73/14, para. 264
  • [95] Case No. 4a O 73/14, para. 291 et seq.
  • [96] Case No. 4a O 73/14, para. 278
  • [97] Case No. 4a O 73/14, para. 267 et seq.; 299 et seq.
  • [98] Case No. 4a O 73/14, para. 304
  • [99] Case No. 4a O 73/14, para. 189
  • [100] Case No. 4a O 73/14, para. 309-313
  • [101] Case No. 4a O 73/14, para. 317 et seq.

Updated 26 January 2017

Saint Lawrence v Vodafone

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

  1. Facts
    Since 28 August 2014 Claimant, a non-practicing entity, is the proprietor of the European patent EP J, originally granted to applicants “Y” and “C”, and allegedly covering part of the AMR-WB standard. Defendant is a company active in the telecommunications sector and which markets AMR-WB-based devices, inter alia devices produced by the Intervener in this case. After the adoption (“freeze”) of AMR-WB by ETSI on 10 April 2001, Claimant (who was not an ETSI member during the setting of the AMR-WB standard) made, on 29 May 2001, a commitment towards ETSI to grant licenses on FRAND terms inter alia for patent EP J. Claimant and its parent company “O” offer the SEP and all other patents of the same family to third parties by means of a portfolio license. Licensing conditions are accessible on the Internet and various producers in the sector have taken a license under these conditions.
    Prior to the submission of the patent infringement action on 23 July 2014 and to the advance payments on costs on 29 July 2014, Claimant alerted neither Defendant nor the manufacturer of the contested embodiments, who acted as an intervener in the present proceedings and became aware of the lawsuit in August 2014. By e-mails on 31 July and (as a reminder) on 9 December 2014, the first of which included a copy of the statement of claims and reached the defendant before it was formally served with the statement, Claimant notified the alleged patent violation to Defendant. After Defendant’s reply as of 12 January 2015, Claimant presented a draft licensing agreement to Defendant by letter as of 22 April 2015.
    On 9 December 2014, the Intervener declared willingness to take a license, inter alia for the patent-in-suit, provided infringement was found in court. It further declared that it would accept royalties determined by a court or arbitration tribunal. Claimant, in turn, offered a licensing agreement by letters as of 12 January 2015 and 25 March 2015 respectively. In the course of meetings taking place since 23 January 2014, [162] Claimant offered a license to the Intervener. On 23 February 2015 and on 2 April 2015 respectively, the Intervener made two licensing offers, including third party determination (arbitration panel or English court) of the amount of royalty, for the whole German patent portfolio of Claimant. An additional offer for a licensing agreement, limited to Germany and implementing a royalty of USD 0.0055 per patent by reference to the “WCDMA Patent Pools”, was made by the Intervener on 6 March 2015 and 24 September 2015 respectively, but it was finally refused by Claimant on 4 October 2015. Moreover, the Intervener provided a bank “guarantee of payment” as of 3 September 2015, being modified by letter as of 10 November 2015, and also rendered account of past and prospective sales in Germany since 2011.
  2. Court’s reasoning
    The considerations of the court are almost exactly the same as those in the case LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14.
    1. Market power and notice of infringement
      The court leaves open the question of whether the SEP conferred market power to Claimant since it did, in any case, find no abuse of such potential market power. [163] The court declared the Huawei rules applicable to claims for the recall of products. [164]
      As regards the Huawei requirement to alert the standard user of the infringement, the decision arrived at various findings of interest: Firstly, the judges found that—in “non-transitional” cases where the lawsuit was brought after the Huawei decision—the infringement notification has to take place before the action is filed, or the latest before the advance payment on costs is made. In transitional cases, such as the present case, a delayed infringement notification, taking place after the advance payment on costs as well as the submission of the court action, but before the statement of claims is served, is admissible. [165] Moreover, an infringement notification could possibly be omitted (in particular) if—as in the present case—the patent user already disposes of all necessary information and lacks willingness to license. [166] In non-transitional cases, however, the court doubts whether it is possible to rectify an omitted infringement notification without withdrawing the action. [167]
      Secondly, the court specified the minimum content of the infringement notification which has to indicate at least the number of the patent, the contested embodiments and the alleged acts of use performed by the standard implementer. The court did not decide whether additional information has to be provided, in particular regarding the interpretation of the patent claims or on which part of the standard the patent reads, but it stated that such additional information is not harmful to the patent proprietor. [168]
      Lastly, the court detailed on the particular situation of the Intervener, being Defendant’s manufacturer and supplier in the present case: Even though a FRAND defense successfully raised by the Intervener would in general also cover subsequent levels of the distribution chain, the Huawei requirements apply only indirectly to suppliers of contested embodiments which have not been sued themselves. Accordingly, the SEP proprietor is not obliged to notify the patent infringement to third parties, but as soon as a request to grant a license on FRAND terms is submitted the (adapted) Huawei procedure applies. [169] In casu, no separate infringement notice vis-à-vis the Intervener was required since the Intervener was, since August 2014, aware of the action having been brought.
    2. The SEP owner’s licensing offer
      Since the patent user did not express its willingness to conclude a licensing agreement in due time, the court found Claimant to comply with the Huawei requirement to submit a licensing offer on FRAND terms even though the offer was made in the course of the ongoing litigation. For transitional cases, as the present one, this holds true even if infringement notification and court action take place at the same time. [170]
      Besides, the court analyzed under which circumstances licensing conditions can be considered as FRAND according to Huawei. In the opinion of the judges, the more licensing agreements implementing comparable terms the SEP proprietor has already concluded, the stronger is the presumption that these conditions are FRAND, unless factual reasons—which are to be demonstrated by the patent user—justify modified terms. Recognized commercial practice in the relevant sector has to be considered when defining the admissible scope of the licensing agreement. If patent portfolios are usually covered by group or worldwide licenses in the relevant market, a (worldwide) portfolio license will be FRAND unless the circumstances of the specific case, e.g. the SEP proprietor’s market activity being limited to one geographic market, require a modification. [171] Accordingly, Claimant’s (worldwide) licensing offer to Defendant for the whole AMR-WB pool, demanding royalties of USD 0.26 per mobile device that implemented the standard and was produced or marketed in countries in which the SEP was in force, and complying with Claimants existing licensing practice (accessible on the Internet and already implemented in 12 licensing agreements) was declared FRAND. While the court considered that comparable licensing agreements “represent an important indicator of the adequacy of the license terms offered” it clarified that the significance of a patent pool as an indication of FRAND conformity is “limited”. Defendant and the Intervener failed to show that the portfolio comprised (non-used) non-SEPs as well. [172] They further failed to show that the pre-concluded licensing agreements provided no valid basis for comparison as they were concluded under the threat of pending litigation. [173]
      In order to fulfill the Huawei obligation of specifying the calculation of royalties, the SEP proprietor only has to provide the information necessary to determine the amount of royalties to be paid, e.g. the royalty per unit and the products covered by the license. While the court left undecided whether additional indications, e.g. concerning the FRAND character of the licensing offer, are necessary to comply with Huawei, it found that the SEP proprietor’s duty to inform should not be interpreted too strictly as FRAND does regularly encompass a range of values that will be fair, reasonable, and non-discriminatory. [174]
      Claimant’s licensing offer presented to the Intervener was considered as being FRAND for the same reasons. Furthermore, the court emphasized that the contractual clause allowing for judicial review of the royalties offered could be a possible way to avoid abusive practices and to ensure that licensing offers correspond to FRAND terms. [175]
    3. The standard implementer’s reaction
      The court found that the more details the infringement notification contains, the less time remains for the standard user to examine the patent(s) at issue and to express its willingness to conclude a licensing agreement on FRAND terms. In the present case, Defendant did not comply with Huawei because it took more than five months to react and then only asked for proof of the alleged infringement. Given this excessive delay, the court did not decide whether Defendant’s reaction satisfied the Huawei requirements in terms of content. It denied the possibility to remedy a belated reaction by a subsequent declaration of willingness to license. On the contrary, and as a consequence of the patent user’s non-compliance, the SEP proprietor may continue the infringement action without violating Article 102 TFEU, but it still has to grant licenses on FRAND terms. [176] Whether the Intervener satisfied the ECJ criteria was left undecided. [177]
      The court made some further remarks of interest as to the Huawei requirements concerning the standard implementer: Firstly, it left undecided whether the obligation of the patent user to diligently respond is caused also by a (potentially) non-FRAND licensing offer. [178] Secondly, a standard user who has taken a license is not prevented from challenging validity and essentiality of the SEP afterwards, nor is the SEP proprietor entitled to terminate the license if such a challenge takes place. However, the standard implementer may not delay the (unconditional) conclusion of the licensing agreement until a final court decision on these issues has been rendered. While validity and standard-essentiality is litigated, the licensee remains obliged to pay royalties and it cannot request to insert into the licensing contract a clause entitling it to reclaim paid royalties in case of its success in court. [179] Thirdly, as, in the present case, no specific counter-offers satisfying FRAND terms were submitted and Defendant could not establish that Claimant had waived this requirement the court did not decide on whether a SEP proprietor is obliged to negotiate further although itself and the patent user have submitted FRAND offers. [180]
      None of the counter-offers of the Intervener were FRAND in terms of content. They were either inadmissibly limited to Germany, contained no precise royalty, were not submitted “promptly” because the standard user had waited until the oral pleadings in the parallel procedure, or they proposed royalties per device which the court considered as too low. [181] While it was therefore held to be irrelevant whether, in the first place, the Intervener duly declared its willingness to license, the court emphasized that the Intervener’s readiness to take a license only after the SEP infringement was determined in court did not satisfy the Huawei standard of conduct. [182]
      Moreover, the obligation imposed by Huawei to provide appropriate security and to render account was not fulfilled. While Defendant refrained from taking any of these actions, the Intervener waited several months after the counter-offers were refused in order to submit its bank “guarantee of payment”, which was not recognized as “appropriate security” due to its amount and its limitation to acts of use in Germany. [183] Neither was the Intervener’s initial proposal to have the security—if requested by Claimant—determined by an arbitration tribunal or by an English court accepted as an appropriate way to provide security. [184]
  3. Other important issues
    According to the court, the Huawei requirements apply to both non-practicing entities and other market participants. [185]
    Suing a network operator instead of the undertakings producing devices operating in the network constitutes (at least under the circumstances of this case and absent selective enforcement) no violation of competition law even though this strategy might aim at using the action against the network operator as a “lever” to obtain licensing commitments from the device suppliers. On the other hand, device manufacturers are entitled to a FRAND license as well and can raise the FRAND defense if such a license is not granted. In consequence, the court perceives a fair balance of interests as the SEP proprietor can choose on which level of the chain of production to sue while the undertakings in the chain of production can choose on which level to take a license. [186]
    Furthermore, no patent ambush-defense based on § 242 BGB could be raised because, firstly, Defendant and the Intervener could not substantiate the alleged patent ambush by “Y” and “C”, being the original SEP proprietors; secondly, they could not show that a different patent declaration conduct would have resulted in a different version of the standard excluding the patent-in-suit; thirdly, the alleged patent ambush would, arguably, have resulted only in a FRAND-licensing obligation and, fourthly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [187]
  • [162] This is the date mentioned by the court although “23 January 2015” may seem more plausible and the date given by the court may result from a scrivener’s error.
  • [163] Case No. 4a O 73/14, para. 184
  • [164] Case No. 4a O 73/14, para. 187
  • [165] Case No. 4a O 73/14, para. 195 et seq.
  • [166] Case No. 4a O 73/14, para. 208-210
  • [167] Case No. 4a O 126/14, para. IV, 3, a, bb, 2, c
  • [168] Case No. 4a O 73/14, para. 193
  • [169] Case No. 4a O 73/14, para. 270 et seq.
  • [170] Case No. 4a O 73/14, para. 222 et seq.
  • [171] Case No. 4a O 73/14, para. 225 et seq.
  • [172] Case No. 4a O 73/14, para. 225 et seq. On the relevance of the SIPRO-pool royalty rates, cf. LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 245-248. On the facts indicating that a worldwide license was appropriate LG Düsseldorf, 31 March 2016 – Case No. 4a O 73/14, para. 249-255.
  • [173] Case No. 4a O 73/14, para. 234-242. The court argued that it is questionable in principle how much the threat of a claim for injunctive relief can (inadmissibly) affect license agreement negotiations, since the Orange Book case law of the BGH (German Federal Court of Justice), the Motorola decision of the European Commission, and now the CJEU judgment in the Huawei Technologies/ZTE Case could be and can be invoked against inappropriate demands that are in breach of antitrust law.
  • [174] Case No. 4a O 73/14, para. 256 et seq.
  • [175] Case No. 4a O 73/14, para. 279 et seq.
  • [176] Case No. 4a O 73/14, para. 214-220
  • [177] Case No. 4a O 73/14, para. 214-220; 278
  • [178] Case No. 4a O 73/14, para. 266
  • [179] Case No. 4a O 73/14, para. 185 et seq.; 262 et seq.
  • [180] Case No. 4a O 73/14, para. 264.
  • [181] Case No. 4a O 73/14, para. 291 et seq.
  • [182] Case No. 4a O 73/14, para. 278
  • [183] Case No. 4a O 73/14, para. 267 et seq.; 299 et seq.
  • [184] Case No. 4a O 73/14, para. 304
  • [185] Case No. 4a O 73/14, para. 189
  • [186] Case No. 4a O 73/14, para. 309-313
  • [187] Case No. 4a O 73/14, para. 317 et seq.

Updated 15 May 2018

Conversant v Huawei and ZTE, [2018] EWHC 808 (Pat)

English court decisions
16 April 2018 - Case No. HP-2017-000048

A. Facts

The claimant, Conversant, is a licensing firm incorporated in Luxembourg. The defendants are two major Chinese telecoms equipment and handset manufacturers, Huawei and ZTE, and their English affiliates. After years of negotiations that failed to result in licenses for claimant’s portfolio of Standard Essential Patents (SEPs) reading on ETSI wireless telecoms standards (and comprising inter alia Chinese and UK patents),Conversant v. Huawei and ZTE[2018] EWHC 808 (Pat) para 5. the claimant filed an action for infringement of four of its UK SEPs before the High Court of Justice (Court), and requested the Court to define Fair, Reasonable and Non-Discriminatory (FRAND) terms for its global SEP portfolio. [405] The defendants in separate proceedings initiated in China disputed the validity, essentiality and infringement of claimant’s Chinese patents. Since the defendants failed to unequivocally commit to conclude licenses on FRAND terms decided by the Court, the plaintiff amended its pleading to include injunctive relief, unless and until the defendants comply with the Court’s FRAND determination. [406]

The judgment at hand involves the defendants’ challenge to the Court’s jurisdiction to decide upon the terms of a global portfolio license. According to the defendants, a UK court has no jurisdiction to decide on the validity and infringement of foreign (in the present case: Chinese) patents. [407] Furthermore, the defendants claim that the jurisdiction most closely connected to the case is China which is the centre of the defendants’ manufacturing activities as well as the jurisdiction where the bulk of their sales takes place. [408]

B. Court’s Reasoning

The court dismissed the defendants’ challenge of jurisdiction. Following the reasoning of Birss J in Unwired Planet,Unwired Planet v. Huawei[2017] EWHC 711 (Pat) paras 565-67 Carr J held that, although issues of validity of patents granted in foreign jurisdictions are not justiciable in the UK, nevertheless the issue of validity should be distinguished from the issue of the determination of a global portfolio license on FRAND terms. According to Carr J, the defendants are free to challenge the validity, essentiality, and infringement of claimant’s Chinese patents in separate proceedings before Chinese courts; the pending issues of validity, essentiality and infringement do not preclude, however, the Court from determining FRAND terms for a global license and providing a mechanism of adjusting the royalty rate according to the validity and infringement decisions of courts in other jurisdictions.Conversant v. Huawei and ZTE(n. 1) paras 17 et seq. Furthermore, the defendants’ justiciability defense, were it to be accepted, would make it impossible for patent holders with a global portfolio of SEPs to obtain relief in the form of court-determined FRAND terms for a global license, since they would need to commence litigation on a country-by-country basis. [411] Forcing the patent holder to seek separate licenses for every individual country where it held SEPs could be characterized as a ‘hold-out chater’, in the eyes of the Court. [411]

Moreover, the Court seized jurisdiction over the case on the ground that the plaintiff’s claim concerns four patents granted in the UK; the issue of relief for patent infringement, and in particular whether such relief will take the form of setting FRAND terms for a global license, is to be decided in the context of a ‘FRAND trial’, after a decision on infringement is reached. [412] Were the defendants’ argument to be accepted, the Court would, in effect, be barred from deciding on the infringement and the proper relief for patents granted in the UK. [408] Besides that, the Court also held that the defendants’ failed to establish that the Chinese courts would be the appropriate forum for the dispute. [413] In this respect, given that royalty rates for telecommunication SEPs are usually lower in China than in other countries, the Court particularly pointed out that no holder of a global SEP portfolio would voluntarily prefer to submit to determination of a FRAND license for the entirety of portfolio in a country, where the rates applied would be lower than the rest of the world. [414]

  • [404] Conversant v. Huawei and ZTE[2018] EWHC 808 (Pat) para 5.
  • [405] ibid, para 7.
  • [406] ibid, para 8.
  • [407] ibid, paras 9, 12 and 13.
  • [408] ibid.
  • [409] Unwired Planet v. Huawei[2017] EWHC 711 (Pat) paras 565-67
  • [410] Conversant v. Huawei and ZTE(n. 1) paras 17 et seq.
  • [411] ibid, para 28.
  • [412] ibid, para 69.
  • [413] ibid, paras 72 et seq.
  • [414] ibid, para 63.