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Updated 23 January 2018

LG Mannheim

LG Mannheim
4 March 2016 - Case No. 7 O 24/14

A. Facts

Case No. 7 O 24/14 [8] related to the infringement of patent EP 0.734.181.B1, which covered technology for decoding video signals in the DVD standard (‘subtitle data encoding/decoding and recording medium for the same’). [9] The defendant was a German subsidiary of a Taiwanese electronics company. It sold computers that used such DVD-software. The claimant, a Japanese electronics company, commercialised the patent in question through a patent pool. In early 2013, the patent pool approached the defendant’s parent company about the use of their patents in general.

On 30 May 2014, the defendant offered to enter into a license agreement for the respective German patent. The defendant indicated that it was willing to enter into negotiations for a portfolio license (but for Germany only). It was also willing to have the claimant determine the royalties owed under section 315 of the German Civil Code. On 25 July 2014, the claimant suggested to change the license offer to a worldwide portfolio license. The defendant rejected and informed the claimant on 22 August 2014 as to the number of respective computers they put into circulation between July 2013 and June 2014 in Germany.

On 13 March 2015, the claimant made an offer for a worldwide portfolio license. On 5 May 2015, the defendant requested the relevant claim charts and further details as to how the license fees had been calculated. On 25 June 2015, the claimant sent the claim charts but refused to elaborate on the calculation method. The claimant suggested a meeting in which it would answer further questions. The defendant responded on 13 July 2015 that most of the claim charts lacked necessary details. In a meeting between the claimant and the defendant’s parent company on 3 September 2015, the parties were unable to reach an agreement. On 30 September 2015, the claimant sent a PowerPoint presentation containing explanations regarding the patent and the calculation of the license fees.

The District Court of Mannheim granted an injunction order on 4 March 2016. [10] It also held that the defendant was liable for compensation and ordered it to render full and detailed accounts of its sales to determine the amount of compensation owed. Further, the District Court ordered a recall and removal of all infringing products from the relevant distribution channels.

B. Court’s Reasoning

1. Notice of Infringement

According to the Huawei/ZTE ruling, the claimant is required to notify the defendant of the alleged patent infringement. According to the District Court, this notice is supposed to provide the defendant an opportunity to assess the patent situation. [11] Thus, it is insufficient to notify the defendant that its products contain the respective standard and it is therefore infringing the SEP. Instead, the claimant is required to specify the infringed patent, the standard in question, and that the patent has been declared essential. The level of detail required depends on the respective situation. [12] However, the description does not need to be as thorough as a statement of claim in patent litigation. In the eyes of the court, the customary claim charts (which show the relevant patent claims and the corresponding passages of the standard) will typically be sufficient. By sending the charts to the defendant, the claimant had met its obligations under the Huawei/ZTE ruling. [13]

The Huawei/ZTE principles require the SEP holder to give notice of infringement before commencing patent infringement proceedings. Otherwise, the SEP holder would abuse its market power, which would mean that the patent infringement court would not be able to grant an injunction order. However, according to the District Court, in such a situation the SEP holder would not lose its patent rights, but would be prevented from exercising those rights in court. [14] Proceedings that had been commenced prior to the Huawei/ZTE ruling present a special case. In that situation, the SEP holder could not have been aware of the obligations that the CJEU subsequently imposed on claimants. Thus, it must be possible for an SEP holder to go through the Huawei/ZTE process subsequently without losing the pending lawsuit. [15] On this basis, the District Could held that the claimant had taken all necessary steps after commencing proceedings, which met the Huawei/ZTE requirements. [16]

2. The SEP Owner’s Licensing Offer

The District Court expressed its view that the CJEU had wanted to establish a procedure that keeps the infringement proceedings free of complicated deliberations about the conditions of the offer, similarly to the German Federal Court of Justice decision Orange Book Standard. [17] If the alleged infringer argues that the conditions of the offer are not FRAND – and, according to the court, alleged infringers typically do so – it is not the role of the infringement court to examine the conditions of the offer and decide whether they are FRAND or not. [12] Thus, the District Court took the view that an infringement court only assesses in a summary review whether the conditions were not evidently non-FRAND. An offer is only non-FRAND if it is under the relevant circumstances abusive. For example, this would be the case if the conditions offered to the alleged infringer were significantly worse than those offered to third parties. [18] The District Court held that in the case in issue the royalties were not evidently non-FRAND because the royalty rates were generally accepted in the market. [19]

The offer needs to include the calculation method in respect of the royalties. [18] However, the CJEU did not elaborate on the level of detail required. [20] The District Court took the view that the SEP holder needs to enable the alleged infringer to understand why the offer is FRAND. In the case in issue, the claimant had included the calculation method. It had also provided further explanations regarding the calculation, which met the Huawei/ZTE requirements. [21]

3. The standard implementer’s reaction

The alleged infringer is required to respond to the SEP proprietor’s license offer, even if the infringer is of the opinion that the offer does not meet the FRAND criteria. [20] The only possible exception is an offer that, by means of summary examination, is clearly not FRAND, which would constitute an abuse of market power. A counter-offer would need to be made as soon as possible, taking into account recognized commercial practices in the field and good faith. The District Court held that the defendant had not made an adequate counter-offer. It is common business practice to enter into license agreements in respect of worldwide portfolio licenses. [22] The defendant’s counter-offer only included the respective German license, which was deemed by the District Court as insufficient. [22] Further, the defendant had not made an adequate deposit into the court as required under the Huawei/ZTE principles. [23]

C. Other Important Issues

The court held that the procedures prescribed by the Huawei/ZTE ruling apply to applications for injunctions and recall orders, but not to rendering accounts and compensation. Regarding rendering accounts and compensation, SEP holders could pursue their rights in court without additional requirements. [20]

Further, the District Court was of the opinion that an alleged breach of Art. 101 TFEU could not be raised as a defence in patent infringement proceedings. Even if the claimant’s conduct was anti-competitive pursuant to Art. 101 TFEU, the standardisation agreement would be void. [24] This has no implications for patent infringement proceedings.

The court also held that there was no general rule that the SEP holder could only bring proceedings against the manufacturer of the infringing product. [25] In the eyes of the District Court, the Higher Regional Court of Karlsruhe decision 6 U 44/15 (23 April 2015) did not establish such a principle. In that case, the defendant was a company that acted merely as a distributor of infringing products (which means it was reselling the products without making any alterations). In contrast, the defendant in the present case had installed the infringing software onto laptops and then sold them under its own brand name. Thus, the two cases were not comparable. [25]

  • [8] See also OLG Karlsruhe, 8 September 2016, 6 U 58/16 (application to stay execution of LG Mannheim, 7 O 24/14).
  • [9]  LG Mannheim, 4 March 2016, 7 O 24/14, pp. 4-6.
  • [10] LG Mannheim, 4 March 2016, 7 O 24/14, pp. 2-3.
  • [11] LG Mannheim, 4 March 2016, 7 O 24/14, p. 22.
  • [12] LG Mannheim, 4 March 2016, 7 O 24/14, p. 23.
  • [13] LG Mannheim, 4 March 2016, 7 O 24/14, p. 34/35.
  • [14] LG Mannheim, 4 March 2016, 7 O 24/14, p. 26.
  • [15] LG Mannheim, 4 March 2016, 7 O 24/14, pp. 27-30.
  • [16] LG Mannheim, 4 March 2016, 7 O 24/14, p. 33.
  • [17] LG Mannheim, 4 March 2016, 7 O 24/14, p. 21.
  • [18] LG Mannheim, 4 March 2016, 7 O 24/14, p. 24.
  • [19] LG Mannheim, 4 March 2016, 7 O 24/14, p. 37.
  • [20] LG Mannheim, 4 March 2016, 7 O 24/14, p. 25.
  • [21] LG Mannheim, 4 March 2016, 7 O 24/14, p. 35/36.
  • [22] LG Mannheim, 4 March 2016, 7 O 24/14, p. 38.
  • [23] LG Mannheim, 4 March 2016, 7 O 24/14, pp. 38-40.
  • [24] LG Mannheim, 4 March 2016, 7 O 24/14, p. 43.
  • [25] LG Mannheim, 4 March 2016, 7 O 24/14, p. 44.

Updated 17 January 2018

Sisvel v Haier

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

A. Facts

The claimant is the owner of European patent EP B1, allegedly covering data transmission technology under the GPRS standard. The defendants produce and market devices using the GPRS standard. On 10 April 2013, the claimant made a commitment towards ETSI by declaring to grant a license on FRAND terms regarding, inter alia, patent EP B1. In various letters and meetings between 2012 and 2015, the claimant informed the parent companies of the defendants about its patent portfolio and made an offer, but no licensing agreement was entered into. These interactions took place before the CJEU handed down its Huawei v. ZTE ruling in July 2015. On 3 November 2015, the District Court granted an injunction order. [1] The District Court also held that the defendants were liable for compensation in principle and ordered them to render full and detailed account of its sales. Further, the District Court ordered a recall and removal of all infringing products from the relevant distribution channels.

The defendants lodged an appeal with the Higher Regional Court of Düsseldorf. They argued, inter alia, that the District Court had not taken into account the procedural requirements set out by the CJEU in the decision Huawei v. ZTE [2] and that the claimant had not made a license offer on FRAND conditions. [3] The Higher Regional Court of Düsseldorf partially granted the appeal. It held that the defendants were under an obligation to render accounts and that they owed compensation in principle. [4] However, it held that the defendants were under no obligation to recall and remove the products from the relevant distribution channels because the claimant was in breach of its obligations under EU competition law (‘kartellrechtlicher Zwangslizenzeinwand’). [5] The Higher Regional Court did not have to decide about the injunction order because the parties had agreed to settle the matter in this regard (the patent had expired in September 2016). [6]

B. Court’s reasoning

1. Market Power

The Higher Regional Court held that the claimant was a dominant undertaking within the meaning of Art 102 TFEU. [7] In the eyes of the court, proprietorship of an SEP does not automatically constitute a dominant market position because not all SEPs necessarily influence competition in the downstream product market. [8] Rather, it needs to be ascertained whether or not market dominance exists in respect of each SEP individually. A dominant market position exists, for example, if it would not be possible to successfully market a competitive product without using the respective SEP, or if compatibility and interoperability under the standard could not be guaranteed. In contrast, a dominant position does not exist if the technology covered by the SEP is only of little importance for consumers in the relevant market. [8] On this basis, the Higher Regional Court had no doubts that the claimant was in a dominant market position [9] because the patent in question was related to data transfer, an essential function of the GPRS standard. [10]

2. Notice of Infringement

The Higher Regional Court held that the claimant had given proper notice of infringement under the CJEU requirements. According to the court, the procedure set out by the CJEU in the Huawei v. ZTE ruling applied to transitional cases (i.e. proceedings that had commenced before the CJEU decision, but where the decisions were handed down after). [11] The District Court had wrongfully assumed that the Huawei v. ZTE principles did not apply to the case at hand. CJEU decisions pursuant to Art 267 TFEU apply ab initio (‘ex tunc’) and thus to transitional cases. [12] The Higher Regional Court argued that the Huawei v. ZTE case itself had been of a transitional nature and that the CJEU had been aware of the diverging principles created by the German Federal Court of Justice in the Orange Book Standard decision in 2009. [12] Nevertheless, the CJEU had not distinguished between transitional and ‘new’ cases. As a consequence, the claimant was under an obligation to notify the defendants of the infringement. The written correspondence between the parties from 2012 and 2013 met this requirement [13]

The Higher Regional Court also held that it was sufficient to notify the defendants’ parent companies. [14] The claimant can reasonably expect that the parent company will pass on the respective information to all subsidiaries that are active on the relevant product markets. Requiring the claimant to give additional notices to the subsidiaries would be an unjustified formality (‘bloße Förmelei’). [14]

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

As a consequence, the defendants were under an obligation to declare their willingness to enter into a license agreement on FRAND terms. [15] Several months had passed between the notice of infringement and the defendants’ declaration of willingness. However, the defendants had made it clear in an email from December 2013 that they were willing to enter into a license agreement. In the eyes of the Higher Regional Court, this was sufficient because there was ample time between this declaration and the commencement of proceedings in 2014.

In the further course of the negotiations, the rejection of certain license terms by the defendant was not necessarily an indicator for general unwillingness. [16] The defendant’s willingness needs to be seen in the overall context of the case. Unwillingness would be demonstrated only if the defendant definitively and finally rejects the claimant’s offers (the ‘last word’). [16] The Higher Regional Court held that the statements made by the defendants in the course of the negotiations did not justify such a conclusion. [16]

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

The Higher Regional Court held that the District Court had been incorrect to leave open the question as to whether the claimant’s offer had been FRAND. [17] The Higher Regional Court took the view that the CJEU had established an intricate system of consecutive actions that the parties must take. A claimant needs to make an offer on FRAND terms only if the defendant declared its willingness to enter into a license agreement on FRAND terms. Similarly, a defendant is under an obligation to make a counter-offer on FRAND terms only if the claimant made an offer on FRAND terms. [18] According to the Higher Regional Court, this view flows from the wording of the Huawei v. ZTE ruling that relates the content of offer and counter-offer (‘such an offer’; ‘responded to that offer’). [18] An SEP owner who has given a commitment to an SSO to offer FRAND licenses can be expected to make a FRAND offer that can reasonably be accepted by the defendant. In addition, a defendant needs to be able to assess whether the conditions of the claimant’s offer are FRAND. Requiring a defendant to make a FRAND counter-offer no matter what the claimant had offered earlier would be a contradiction of this basic proposition of the Huawei v. ZTE ruling. [18] Thus, it was necessary to have a decision in respect of the conditions of the claimant’s licensing offer.

The Higher Regional Court held that the claimant’s licensing offer did not meet FRAND requirements [19] because it discriminated against the defendants. [20] The court reiterated that infringement courts cannot limit their assessment to a summary review of whether the conditions were not evidently non-FRAND. Rather, infringement courts need to make a full assessment of the license conditions. [21]

The court held that dominant undertakings are under no obligation to treat all business partners in exactly the same way. [22] SEP owners have discretion regarding the license fees that they charge. [23] Different treatment of licensees is accepted if it can be justified as a result of normal market behavior. [24] Further, license conditions can be abusive only if they are significantly different between licensees. [24] These principles also apply to SEP owners who have given a FRAND declaration because this commitment refers to Art 102 lit. c) TFEU. [25] The burden of proof for such substantially unequal treatment lies with the defendant, [26] whilst the onus is on the claimant to prove that this unequal treatment is justified. [26] However, as the defendant will typically not have the necessary information, the claimant is under an obligation to provide information as to which competitors have been granted licenses and on what terms. [26] On this basis the Higher Regional Court concluded that the claimant had treated the defendants significantly differently from their competitors [27] without having a proper justification. [28] In particular, the claimant could not prove that discounts given to a competitor were common in the industry, [29] or that these discounts were a result of the particularities of the case. [30]

  • [1] LG Düsseldorf, 3 November 2015, File No. 4a O 93/14
  • [2] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 32.
  • [3] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 34.
  • [4] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 75.
  • [5] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 74 and 175.
  • [6] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 47.
  • [7] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 177 et seqq.
  • [8] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 182.
  • [9] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 185.
  • [10] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 186.
  • [11] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 202.
  • [12] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 203.
  • [13] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 215.
  • [14] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 213.
  • [15] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 220.
  • [16] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 240.
  • [17] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 244.
  • [18] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 245.
  • [19] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 242.
  • [20] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 251.
  • [21] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 249.
  • [22] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 254.
  • [23] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 255 and 257.
  • [24] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 256.
  • [25] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 257.
  • [26] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 258.
  • [27] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 263.
  • [28] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, para 268.
  • [29] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 270 et seqq.
  • [30] OLG Düsseldorf, 30 March 2017, File No. I-15 U 66/15, paras 275 et seqq. and paras 290 et seqq.

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. [100] 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. [101] 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. [102]
    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. [103]
    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. [104]
      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. [105] 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”. [106]
  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. [107]
    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. [108]
    No patent ambush-defense based on § 242 BGB could be raised. As the court assessed in a detailed, torts-based analysis, [109] 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. [110] 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. [111] 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. [112]
  • [100] Case No. 2 O 106/14, para. 133
  • [101] Case No. 2 O 106/14, para. 139-144
  • [102] Case No. 2 O 106/14, para. 146-149
  • [103] Case No. 2 O 106/14, para. 152-153
  • [104] Case No. 2 O 106/14, para. 153-160
  • [105] Case No. 2 O 106/14, para. 158-164
  • [106] Case No. 2 O 106/14, para. 167-169
  • [107] Case No. 2 O 106/14, para. 146
  • [108] Case No. 2 O 106/14, para. 78-80
  • [109] Cf. for details LG Mannheim, 27 November 2015 - Case No. 2 O 106/14, para. 119-131
  • [110] Case No. 2 O 106/14, para. 118-131
  • [111] 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.
  • [112] 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, [61] 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. [62] The court declared the Huawei rules applicable to claims for the recall of products. [63] 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. [64] 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. [65] In non-transitional cases, however, the court doubts whether it is possible to rectify an omitted infringement notification without withdrawing the action. [66] 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. [67] 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. [68] 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. [69] 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. [70] 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. [71] 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. [72] 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. [73] 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. [74]
    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. [75] Whether the Intervener satisfied the ECJ criteria was left undecided. [76] 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. [77] 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. [78] 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. [79] 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. [80] 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. [81] 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. [82] 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. [83]
  3. Other important issues
    According to the court, the Huawei requirements apply to both non-practicing entities and other market participants. [84] 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. [85] 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. [86]
  • [61] 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.
  • [62] Case No. 4a O 73/14, para. 184
  • [63] Case No. 4a O 73/14, para. 187
  • [64] Case No. 4a O 73/14, para. 195 et seq.
  • [65] Case No. 4a O 73/14, para. 208-210
  • [66] Case No. 4a O 126/14, para. IV, 3, a, bb, 2, c
  • [67] Case No. 4a O 73/14, para. 193
  • [68] Case No. 4a O 73/14, para. 270 et seq.
  • [69] Case No. 4a O 73/14, para. 222 et seq.
  • [70] Case No. 4a O 73/14, para. 225 et seq.
  • [71] 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.
  • [72] 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.
  • [73] Case No. 4a O 73/14, para. 256 et seq.
  • [74] Case No. 4a O 73/14, para. 279 et seq.
  • [75] Case No. 4a O 73/14, para. 214-220
  • [76] Case No. 4a O 73/14, para. 214-220; 278
  • [77] Case No. 4a O 73/14, para. 266
  • [78] Case No. 4a O 73/14, para. 185 et seq.; 262 et seq.
  • [79] Case No. 4a O 73/14, para. 264
  • [80] Case No. 4a O 73/14, para. 291 et seq.
  • [81] Case No. 4a O 73/14, para. 278
  • [82] Case No. 4a O 73/14, para. 267 et seq.; 299 et seq.
  • [83] Case No. 4a O 73/14, para. 304
  • [84] Case No. 4a O 73/14, para. 189
  • [85] Case No. 4a O 73/14, para. 309-313
  • [86] Case No. 4a O 73/14, para. 317 et seq.

Updated 20 February 2018

TQ Delta LLC v Zyxel Communications, [2017] EWHC 3305 (Pat)

English court decisions
21 November 2017 - Case No. HP-2017-000045

A. Facts

The Claimant is holder of two patents declared as essential to the implementation of the DSL standard under the relevant policy (ITU Recommen­dations). According to this policy he is required to license these patents on Fair, Reasonable and Non-Discriminatory (FRAND) terms. The Defendants manufacture and sell various types of equipment complying with the DSL standard.

The parties were unable to reach an agreement on a worldwide portfolio license. The Claimant argued that the Defendants followed a “hold-out” strategy by trying to delay negotiations and litigation as long as possible, in order to avoid royalty payments.

The actions brought before the High Court of Justice of England and Wales (EWHC) involve, on the one hand, the technical issues of validity, essentiality and infringement (technical trials) and, on the other hand, non-technical issues regarding licensing on FRAND terms (non-technical trial).

The parties agreed that the technical trials should be tried separately from, and before, the non-technical trial. After holding a case management conference, the court complied with the parties’ agreement to hold the technical trials first. The court, however, refrained from ordering the stay of the non-technical trial until the completion of the technical trials. Instead, the court allowed it to go ahead.

B. Court’s reasoning

In light of both the decision of the European Union Court of Justice in the matter Huawei v ZTE and the recent decision of the EWHC in the matter Unwired Planet v Huawei the court questioned the practice it followed so far, to hold FRAND related trials after technical trials.

In the court’s opinion, particularly if a global license for a global portfolio is in dispute between the parties, it is worth considering whether the prioritization of the trials should be altered, so that the non-technical trial comes first. If the defendant (potential infringer) wishes to argue that it does not need to take any license under any of the patents in suit, it is not compelled to do so. In this case, however, the defendant risks that it will, subsequently, be injuncted in infringement proceedings.

To justify its decision not to stay the non-technical trial, the Court referred to EWHC’s decision in the matter Unwired Planet v Huawei and pointed out, that the longer these proceedings are postponed, the longer their objective from the Claimant's perspective is frustrated, that is to obtain appropriate relief by way of injunction and/or financial compensation.

C. Other issues

Although the court did not rule on Claimant’s allegation that the Defendants pursued a “hold out” strategy, it made clear – again under reference to the matter Unwired Planet v Huawei that if that is the case, then the Defendants face the risk of being injuncted, if they should be unsuccessful in either of the technical trials.


Updated 24 July 2020

Sisvel v Haier, Federal Court of Justice (Bundesgerichtshof)

Federal Court of Justice - BGH
5 May 2020 - Case No. KZR 36/17

A. Facts

The claimant, Sisvel, holds patents declared as (potentially) essential to the practice of several wireless telecommunications standards (Standard Essential Patents, or SEPs).

The defendants are a German and a French subsidiary of the Haier group (Haier) which has its headquarters in China. The Haier group produces and markets -among other things- electronic devices complying with the GPRS standard.

On 20 December 2012, Sisvel informed the parent company of the Haier group (Haier China) about the infringing use of Sisvel's SEPs. Sisvel provided a list of approx. 450 patents included in its portfolio and informed Haier that Sisvel offers licences for its SEPs.

On 10 April 2013, Sisvel made a commitment towards the European Telecommunications Standards Institute (ETSI) to make SEPs accessible to standards users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions.

In August and November 2013, Sisvel sent further letters with information about its licensing program to Haier China. Haier China replied to Sisvel only in December 2013. It expressed the hope to have 'a formal negotiation' with Sisvel and asked for information regarding potential discounts mentioned by Sisvel in previous communications.

In August 2014, Sisvel made a licensing offer to Haier, which was rejected in September 2014. Shortly after that, Sisvel filed an infringement action against Haier before the District Court of Duesseldorf (District Court) based on a SEP covering data transmission technology under the GPRS standard (patent in suit). As a reaction to this step, Haier filed a nullity action against the patent in suit before the German Federal Patent Court in March 2015.

On 3 November 2015, the District Court granted an injunction against Haier [95] . The District Court also ordered the recall and destruction of infringing products. It further recognised Haier's liability for damages on the merits and ordered Haier to render full and detailed account of the sales of infringing products to Sisvel.

Haier appealed this decision and also requested the Higher District Court of Duesseldorf (Appeal Court) to order a stay in the enforcement of the injunction granted by the District Court. In January 2016, the Appeal Court rendered a respective order [96] .

In the appeal proceedings, Haier argued –among other things– that the District Court had not adequately taken into account the conduct requirements imposed on SEP holders by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE in a decision rendered in July 2015 (Huawei judgment), that is after Sisvel had filed the infringement action [97] . During the course of the proceedings before the Appeal Court, on 16 January 2016, Haier further declared that is was willing to take a FRAND licence from Sisvel, however, only in case that the German courts would finally confirm the validity and infringement of the patent in suit. On 23 March 2016, Haier sent another letter to Sisvel, stating that their position remained unchanged. Moreover, Haier requested claim charts with respect to all of Sisvel's patents as well as further information about the royalty calculation. In December 2016, Sisvel made a further licensing offer to Haier, which was also rejected.

By judgment dated 30 March 2017, the Appeal Court partially granted Haier's appeal [98] . It confirmed Haier's liability for damages on the merits as well as its obligation to render accounts. However, the Appeal Court held that Haier was under no obligation to recall and destroy infringing products, because Sisvel had not complied with its obligations under the Huawei judgment, especially by failing to make a FRAND licensing offer to Haier. The Appeal Court did not have to decide about the claim for injunctive relief, because the parties had agreed to settle the matter in this regard. Reason for that was that the patent in suit had expired in September 2016. Sisvel appealed the decision of the Appeal Court.

In October 2017, the Federal Patent Court narrowed certain claims of the patent in suit and, otherwise, confirmed its validity [99] . In March 2020, the Federal Court of Justice (FCJ or Court), basically, confirmed this decision in second instance [100] .

With the present judgment dated 5 May 2020 [101] (cited by https://juris.bundesgerichtshof.de/cgi-bin/rechtsprechung/document.py?Gericht=bgh&Art=en&sid=3abd1ba29fc1a5b129c0360985553448&nr=107755&pos=0&anz=1), the FCJ reversed the judgment of the Appeal Court. The ruling of the District Court in first instance was confirmed with respect to Sisvel's damage claims and claims for information and rendering of accounts. Sisvel's claims for the recall and destruction of infringing products were limited to products that were in the possession of Haier or had been produced or delivered until the expiration of the patent in suit in September 2016. Sisvel's claim for injunctive relief was not subject to the Court's ruling, since this claim was withdrawn in the course of the preceding proceedings before the Appeal Court after the patent in suit had lapsed.

B. Court's reasoning

The Court found that the patent in suit was essential to the GPRS standard and infringed [102] .

Furthermore, the Court held that by initiating infringement proceedings against Haier, Sisvel had not abused a dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) [103] .

In the Court's eyes, Sisvel met its obligation under the Huawei judgment to notify Haier about the infringing use of its SEPs prior to filing the infringement action. On the other hand, Haier had failed to comply with its Huawei obligation to adequately express its willingness to enter into a licensing agreement with Sisvel. Although this fact was no longer decisive for the present case, the Court also expressed the view that Sisvel had made a FRAND licensing offer to Haier in line with the respective Huawei requirement.

Dominant market position

The Court held that Sisvel had a dominant market position within the meaning of Article 102 TFEU [104] .

The FCJ explained that a dominant market position does not arise alone from the exclusivity rights granted by a patent [105] . For this, several factors need to be considered [106] . One key factor is the relevant market. When a patent is technically essential for complying with a standard developed by a standardisation body (or a de facto standard) and technical alternatives to the standard are not available for products brought on a downstream market, relevant for the assessment of dominance is the (distinct) market, in which licences for the patent in question are offered [107] .

On this basis, the Court found that Sisvel was in a dominant market position: The patent in suit was essential to the practice of the GPRS standard and non GPRS compliant mobile phones could not compete in the (downstream) market, since neither the previous not subsequent standards generations allowed the same features [108] .

In this context, the FCJ was not convinced by Sisvel's argument that SEP holders' market dominance is restricted by the fact that standards implementers – compared to buyers in markets for goods and services – often have a stronger standing in negotiations [109] . The Court saw that –unlike buyers of goods and services– standards implementers are in the favourable position to be able to access protected technology needed for producing standard compliant products, even without an agreement with the patent holder [110] . According to the Court, however, this fact does not suffice to rule out market dominance. The extent of SEP holders' bargaining power towards individual implementers in licensing negotiations is not relevant [111] . A dominant market position is conferred by the patent holder's structural superior market power arising from the legal ability to exclude any implementer from the market by enforcing exclusivity rights [112] .

Similarly, the Court pointed out that the limitations imposed by the Huawei judgment with respect to the enforcement of SEPs likewise do not impair market dominance [113] . The Court noted that these limitations significantly weaken the bargaining position of the SEP holder, since the lever needed for negotiations on an equal footing is not available to the latter to the full extent [113] . Nevertheless, this does not suffice to question the dominant position of the patent holder, even in cases in which the implementer might engage in 'hold-out' by delaying negotiations until the patent expires [113] .

Having said that, the Court pointed out that Sisvel's dominant market position ended, when the patent in suit expired [114] . An SEP holder is no longer dominant, if the legal power to exclude infringing products from entering a (downstream) market is no longer given [114] .

Abuse of market dominance

Looking at the parties' conduct, the Court found – in contrast to the Appeal Court – that Sisvel did not abuse its dominant market position [115] .

The Court made clear that SEP holders are not per se prevented from enforcing the exclusivity rights arising from their patents [116] . The fact that a patent is standard essential does not mean that the patent holder is obliged to tolerate the use of its technology, unless it has allowed such use or was under an obligation to allow such use, as a consequence of holding a dominant market position [116] . According to the FCJ, an obligation to allow the use of SEPs does, however, not exist, when the implementer is not willing to obtain a licence on FRAND terms. A patent holder –even with a dominant market position– is not obliged to 'impose' a licence to any standards user, not least because it has no legal claim to request the signing of a licensing agreement [117] .

Against this background, the Court identified two cases, in which the assertion of exclusivity rights (claims for injunctive relief and/or the recall and destruction of infringing products) by an SEP holder can amount to an abuse of market dominance:

1. The implementer has made an unconditional licensing offer on terms which the patent holder cannot reject, without abusing its dominance or violating its non-discrimination obligation (insofar the Court repeated its previous ruling in 'Orange-Book-Standard'; judgment dated 6 May 2009 – Case No KZR 39/06) [118] ;

2. the implementer is, basically, willing to take a licence, but the SEP holder has not made 'sufficient efforts' to facilitate the signing of an agreement in line with the 'particular responsibility' attached to its dominant position [119] .

Notification of infringement

Consequently, the Court took the view that the SEP holder has an obligation to notify the implementer about the infringing use of the patent in suit prior to filing an infringement action [120] . The FCJ seems to suggest that this obligation arises, only when the implementer is not already aware of the infringementIbid, para. 73. According to the Court, the patent holder has to notify the standards user about the infringement of the patent, if the latter 'is not aware of the fact' that by implementing the standard the teaching of the patent is used without permission..

The Court explained that technology implementers are, in principle, obliged to make sure that no third party rights are infringed, before assuming the manufacturing or sales of products [122] . However, this task is often significantly challenging, especially in the Information and Communication Technology (ICT) sector, in which a product might be affected by numerous patent rights [122] . The patent holder, who will regularly have already examined infringement, should, therefore, inform the implementer about the use of the patent before initiating court proceedings, allowing the latter to assess the need to obtain a licence on FRAND terms and, consequently, avoid an injunction [123] .

In the eyes of the Court, it will usually be sufficient to address a respective notification of infringement to the parent company within a group of companies [124] . In terms of content, the notification must name the patent(s) infringed and describe the specific infringing use and the attacked embodiments [125] . A detailed technical and legal analysis of the infringement is not required: the implementer should only be placed in a position to evaluate the infringement allegation, eventually by taking recourse to expert and/or legal advice [125] . As a rule, presenting claim charts, as it is often the case in practice, will be sufficient (but not mandatory) [125] .

Furthermore, the FCJ added that a patent holder which has provided information about the patent infringed and the standard affected can expect that the implementer will indicate within a short period of time that the information received is not sufficient for the assessment of infringement [126] . This applies also to cases, in which a number of patents and standards are involved [126] .

Taking the above into consideration, the Court found that Sisvel had given proper notification of infringement to Haier. The letter dated 20 December 2012 and the following correspondence met the relevant requirements [127] .

Willingness

Considering Haier's conduct, on the other hand, the Court found that Haier did not act as a licensee willing to obtain a FRAND licence from Sisvel [128] . In this respect, the FCJ disagreed with the respective assessment of the Appeal Court which had reached the opposite conclusion.

The Court observed that the first response of Haier China to Sisvel's notification was belated, since Haier had waited for almost one year (December 2012 – December 2013) to react [129] . An implementer taking several months to respond to a notification of infringement typically sends a signal that there is no interest in taking a licence [129] . The fact that Sisvel made a FRAND commitment towards ETSI covering the patent in suit only after the first notification to Haier in December 2012 did not change anything in the assessment of timeliness: in its letter dated 20 December 2012, Sisvel had already declared that it is prepared to offer a FRAND licence to Haier [129] . The question, whether a late response made prior to the start of infringement proceedings (as it was the case with Haier's response from December 2013) shall, nevertheless, be taken into account, when assessing parties' compliance with the Huawei judgment (as the Appeal Court had assumed) was left undecided by the FCJ [130] . In the present case, this question was not relevant, since –in terms of content – none of Haier's responses could be seen as a sufficient declaration of willingness to obtain a licence [131] .

In the Court's eyes, the implementer has to 'clearly' and 'unambiguously' declare that it is willing to sign a licence with the SEP holder 'on whatever terms are in fact FRAND' (citing High Court of Justice of England and Wales, judgment dated 5 April 2017, [2017] EWHC 711(Pat) - Unwired Planet v Huawei) [132] . The implementer is, subsequently, obliged to engage in licensing negotiations in a 'target-oriented' manner [132] . On the contrary, it is not sufficient, in response to a notification of infringement, to just demonstrate willingness to consider signing a licensing agreement or to enter into negotiations about whether and under which conditions taking a licence comes into question [132] .

On this basis, the Court found that Haier's response in December 2013, in which only the hope to have a 'formal negotiation' was expressed, was not a sufficient declaration of willingness: This declaration was neither clear not unambiguous in the above sense [133] .

Similarly, Haier's letter dated 16 January 2016 did not contain a sufficient declaration of willingness, since Haier had made the signing of a licence subject to the prior confirmation of the validity and infringement of the patent in suit by German courts [134] . Although the implementer is, in principle, allowed to preserve the right to contest the validity of a licensed patent after conclusion of a licensing agreement, the Court held that a declaration of willingness cannot be placed under a respective condition [134] .

Furthermore, the FCJ found that Haier did not sufficiently express its willingness by the letter dated 23 March 2016 either. Apart from the fact that Haier had not withdrawn the above unacceptable condition, the Court took the view that requesting the production of claim charts for all of Sisvel's patents almost three years after the receipt of the notification of infringement was an indication that Haier was only interested in delaying the negotiations until the expiration of the patent in suit [135] .

Since no adequate declaration of willingness by Haier was in place, the Court did not answer the question, whether it is possible for the implementer to fulfil this obligation after infringement proceedings have been initiated [136] .

  • [95] Sisvel v Haier, District Court of Duesseldorf, judgment dated 3 November 2015, Case No. 4a O 93/14.
  • [96] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 13 January 2016, Case No. I-15 U 66/15.
  • [97] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [98] Sisvel v Haier, Higher District Court of Duesseldorf, judgment dated 30 March 2017, Case No. I-15 U 66/15.
  • [99] Federal Patent Court, judgment dated 6 October 2017, Case No. 6 Ni 10/15 (EP).
  • [100] Federal Court of Justice, judgment dated 10 March 2020, Case No. X ZR 44/18.
  • [101] Sisvel v Haier, Federal Court of Justice, judgment dated 5 May 2020, Case No. KZR 36/17.
  • [102] Ibid, paras. 9 et seqq. and 59.
  • [103] Ibid, para. 52.
  • [104] Ibid, para. 54.
  • [105] Ibid, para. 56.
  • [106] Ibid, paras. 57 et seqq.
  • [107] Ibid, para. 58.
  • [108] Ibid, paras. 59 et seq.
  • [109] Ibid, para. 61.
  • [110] Ibid, para. 63.
  • [111] Ibid, para. 62.
  • [112] Ibid, paras. 61 et seqq. According to the FCJ, market entry barriers are created already by the fact that the respective legal obstacles make it unreasonable for any company to enter a market, without having taken a licence before, see para. 63.
  • [113] Ibid, para. 64.
  • [114] Ibid, para. 65.
  • [115] Ibid, paras. 67 et seqq.
  • [116] Ibid, para. 69.
  • [117] Ibid, para. 70.
  • [118] Ibid, para. 71.
  • [119] Ibid, para. 72.
  • [120] Ibid, paras. 73 et seqq.
  • [121] Ibid, para. 73. According to the Court, the patent holder has to notify the standards user about the infringement of the patent, if the latter 'is not aware of the fact' that by implementing the standard the teaching of the patent is used without permission.
  • [122] Ibid, para. 74.
  • [123] Ibid, para. 74 and 85.
  • [124] Ibid, para. 89.
  • [125] Ibid, para. 85.
  • [126] Ibid, para. 87.
  • [127] Ibid, paras. 86 et seqq.
  • [128] Ibid, paras. 91 et seqq.
  • [129] Ibid, para. 92.
  • [130] Ibid, paras. 93 et seq.
  • [131] Ibid, para. 94.
  • [132] Ibid, para. 83.
  • [133] Ibid, para. 95.
  • [134] Ibid, para. 96.
  • [135] Ibid, para. 98.
  • [136] Ibid, para. 97.

Updated 23 January 2018

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

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

A. Facts

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

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

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

B. Court’s Reasoning

1. Market Power

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

2. SEP Proprietor’s Licensing Offer

a. FRAND Declaration as Conceptual Basis

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

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

b. ‘True FRAND Rate’

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

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

c. Discrimination

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

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

d. Territorial Scope of License

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

C. Other Important Issues

1. Comparable agreements and reasonable aggregate royalty rate

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

2. Principles derived from Huawei v. ZTE

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

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

Updated 26 January 2017

Pioneer v Acer

LG Mannheim
8 January 2016 - Case No. 7 O 96/14

  1. Facts
    Claimant owns the patent EP 1 267348, allegedly essential to the DVD standard and administered with regard to its licensing by the patent pool “A”. Early in 2013 “A” and the Defendant’s group parent were in contact regarding “A” ’s DVD licensing activity, but no concrete notice of infringement was made and no licensing negotiations ensued. After having been sued for patent infringement Defendant submitted, on 6 October 2014, an offer to license the patent-in-suit for Germany at FRAND conditions, with the exact royalty rate to be determined by Claimant pursuant to § 315 German Civil Code. Furthermore, Defendant declared to be willing to negotiate a portfolio license for all German patents of Claimant and, in case the negotiations were to fail, to have the licensing conditions determined by a state court or arbitration tribunal. In order to indicate what Defendant considered to be a FRAND royalty rate Defendant submitted an expert opinion. As of 28 November 2014, Claimant proposed to modify the conditions to the effect that Defendant’s group parent was supposed to take a worldwide portfolio license comprising all Claimant’s portfolio patents administered by “A”. Claimant made a (perhaps: additional) FRAND declaration with regard to the patent and informed Defendant thereof in December 2014. After Defendant had rejected this offer, Claimant offered, on 13 March and 13 April 2015, a worldwide portfolio license to Defendant’s group parent company. To the offer were added claim charts for two pool patents, as well as information on how Claimant deduced the royalty from the overall royalty rates of the “A”-patent pool. On 5 May 2015, Defendant’s group parent requested claim charts regarding all patents to be licensed as well as further information on royalty calculation. Claimant sent, on 7 August 2015, claim charts for five additional patents declaring its willingness to provide further information as soon as constructive technical discussions would be taken up. In a filing to the court as of 20 November 2015, Claimant explained its royalty calculation in greater detail and submitted an expert opinion on the issue.
  2. Court’s reasoning
    1. General meaning of the Huawei framework and applicability to transitory cases
      As to the court’s general take on the Huawei rules cf. LG Mannheim, 29 January 2016 - 7 O 66/15 (above). Where an action for prohibitory injunction and recall of products has been brought before the ECJ handed down its ruling it has, in the opinion of the court, no negative effect on the action if Claimant fulfills its Huawei conduct obligations only after filing the lawsuit. [137] According to the extensive analysis undertaken by the court this is because, inter alia, the SEP proprietor could not be expected to comply with the – then future and unknown – conduct requirements established by Huawei but rather with the legal framework set by the German Federal Court (BGH) in Orange Book. Hence, a proprietor’s conduct that respected Orange Book but deviated from Huawei cannot be taken to signal inappropriate economic goals or lack of willingness to grant FRAND licenses. Furthermore, it seems more in line with the ECJ’s core intention of furthering successful licensing negotiations if the parties get the chance to perform their Huawei conduct obligations even though litigation is already underway.
      Where, however, the action is brought after the Huawei ruling a violation of the conduct requirements established therein bars—as a matter of substantive law, not of procedural law—Claimant from enforcing its patent-based rights to prohibitory injunction or recall of products. [138] Although Claimant’s action will then be dismissed, Claimant is free to catch up on its Huawei obligations and re-file the action if the standard user fails to comply with Huawei.
    2. Market power and notice of infringement
      Leaving open whether Claimant was market dominant, the court formulates general considerations identical to those in the decision LG Mannheim, 29 January 2016 - 7 O 66/15 (cf. above). The court doubts whether the initial contact between the patent pool “A” and Defendant’s group parent qualifies as an appropriate notice of infringement. In any case, such notice has been given by and after bringing the infringement lawsuit. Claimant’s statement of claims, in particular, contained all information necessary. Producing the original document in which Claimant made its FRAND declaration or proving that a FRAND declaration has been properly made during the standard-setting procedure is not required as long as the SEP proprietor considers itself bound by a FRAND licensing obligation. Not least because the lawsuit had been suspended for several months and some more months elapsed between the ECJ’s Huawei ruling and the oral hearings in the case at issue, there was ample time for the standard user to fulfill its Huawei duties and negotiate a license unburdened by the pressure created by an impending prohibitory injunction. [139] Even if it were justified to request—the court seems to doubt this—claim charts for a sample of patents where a worldwide portfolio license is offered, Claimant would have met this obligation, in particular because Defendant did not communicate that or why it considered the sample insufficient. It was not necessary for Claimant to impart to Defendant a documentation of the standard at issue. [140]
    3. The SEP proprietor’s licensing offer
      The court’s general considerations are identical to those in the decision LG Mannheim, 29 January 2016 - 7 O 66/15 (cf. above): The court’s general understanding of the Huawei rules of conduct (cf. above) has a considerable impact on the way it intends to react to a SEP proprietor’s licensing offer: [141] The offer must specify the relevant conditions in a way that, in order to conclude a licensing agreement, the standard implementer has merely to state his acceptance of the offer. The calculation of the license fee, in particular, must be explained in a manner that enables the standard implementer to objectively assess its FRAND conformity. Even if the standard implementer disputes the FRAND character of the offer it is not the court’s business to determine whether the licensing conditions are actually FRAND. Neither is the SEP proprietor prohibited from offering conditions slightly above the FRAND threshold. A differing view of the parties on what constitutes FRAND is to be expected and provides no reason for cartel law-based intervention. An exploitative abuse of market power can, however, be present where the proprietor, after having made a FRAND declaration, offers conditions that are, under the circumstances of the case and without objective justification, manifestly less favorable (in an economic sense) than the conditions offered to other licensees. Correspondingly, the respective court is only required to determine, based on a summary assessment, whether the proprietor’s licensing offer evidently violates the FRAND concept.
      In casu the court considered Claimant’s offer as sufficient, [142] in particular because a worldwide license, granted to the parent of a group, corresponded to recognized commercial practice in the field. It was no evident FRAND violation to calculate the royalties based on the licensing conditions of the patent pool “A” and Claimant’s share in the patents of this pool. It was further appropriate to demand a lump sum for past use of the patents to be licensed without specifying (in the licensing offer) the exact amount for lack of accessible information on the extent of the use. The information provided by Claimant on how the royalties were calculated was deemed sufficient. It was not necessary to impart to Defendant licensing contracts concluded with other market participants since “A” ’s model contracts were accessible on the Internet and no circumstances indicated unequal treatment of licensees absent objective justification such as differing turnovers.
    4. The standard implementer’s reaction
      The court’s general considerations are identical to those in the decision LG Mannheim, 29 January 2016 - 7 O 66/15 (cf. above). In casu the court considered Defendant’s counter-offer to be evidently non-FRAND, mainly because the license would have—inappropriately, given the facts of the case and recognized commercial practice—been limited to Germany. [143] Furthermore, Defendant neither rendered account nor provided security for its use of the patent in the past. The fact that Defendant has—allegedly—terminated its use of the patent does not remove these obligations for past periods of use. [144] As the court explains in some detail, [145] an overall assessment of the conduct of the parties indicates that Defendant engaged in delaying tactics while Claimant was not trying to use the infringement action for extorting excessive royalties.
  3. Other important issues
    The court underlines that a SEP proprietor has to respect the Huawei rules of conduct only with regard to an action for prohibitory injunction or the recall of products (cf. LG Mannheim, 29 January 2016 - 7 O 66/15, above). Regarding claims for rendering of accounts it mentions, but does not decide the question whether the existence of a FRAND declaration has an impact on the content of such claims. [146]
    Even if the standard-setting at issue had—due to the lack of a timely FRAND commitment by Claimant—violated Art. 101 TFEU, this would not bar Claimant from enforcing its patents within the limits set by Art. 102 TFEU and the Huawei ruling. [147]
    Neither competition law nor the general principle of good faith required Claimant to primarily address entities that produce standard-implementing components of Defendant’s products. [148] On the contrary, Claimant was free to immediately demand the taking of a license from Defendant, all the more so because Defendant was not only engaged in marketing and selling third-party devices but also devices produced by Defendant’s group of companies using the standard-implementing components.
  • [137] Case No. 7 O 96/14, para. 84-107
  • [138] Case No. 7 O 96/14, para. 81-83
  • [139] Case No. 7 O 96/14, para. 109 et seq.
  • [140] Case No. 7 O 96/14, para. 114-117
  • [141] LG Mannheim, 29 January 2016 – Case No. 7 O 66/15, para. 58
  • [142] Case No. 7 O 96/14, para. 118-129
  • [143] Case No. 7 O 96/14, para. 131-133
  • [144] Case No. 7 O 96/14, para. 134 et seq.
  • [145] Case No. 7 O 96/14, para. 136-141
  • [146] Case No. 7 O 96/14, para. 142
  • [147] Case No. 7 O 96/14, para. 144 et seq.
  • [148] Case No. 7 O 96/14, para. 146

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, [183] 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. [184] The court declared the Huawei rules applicable to claims for the recall of products. [185]
      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. [186] 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. [187] In non-transitional cases, however, the court doubts whether it is possible to rectify an omitted infringement notification without withdrawing the action. [188]
      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. [189]
      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. [190] 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. [191]
      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. [192] 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. [193] 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. [194]
      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. [195]
      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. [196]
    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. [197] Whether the Intervener satisfied the ECJ criteria was left undecided. [198]
      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. [199] 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. [200] 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. [201]
      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. [202] 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. [203]
      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. [204] 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. [205]
  3. Other important issues
    According to the court, the Huawei requirements apply to both non-practicing entities and other market participants. [206]
    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. [207]
    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. [208]
  • [183] 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.
  • [184] Case No. 4a O 73/14, para. 184
  • [185] Case No. 4a O 73/14, para. 187
  • [186] Case No. 4a O 73/14, para. 195 et seq.
  • [187] Case No. 4a O 73/14, para. 208-210
  • [188] Case No. 4a O 126/14, para. IV, 3, a, bb, 2, c
  • [189] Case No. 4a O 73/14, para. 193
  • [190] Case No. 4a O 73/14, para. 270 et seq.
  • [191] Case No. 4a O 73/14, para. 222 et seq.
  • [192] Case No. 4a O 73/14, para. 225 et seq.
  • [193] 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.
  • [194] 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.
  • [195] Case No. 4a O 73/14, para. 256 et seq.
  • [196] Case No. 4a O 73/14, para. 279 et seq.
  • [197] Case No. 4a O 73/14, para. 214-220
  • [198] Case No. 4a O 73/14, para. 214-220; 278
  • [199] Case No. 4a O 73/14, para. 266
  • [200] Case No. 4a O 73/14, para. 185 et seq.; 262 et seq.
  • [201] Case No. 4a O 73/14, para. 264.
  • [202] Case No. 4a O 73/14, para. 291 et seq.
  • [203] Case No. 4a O 73/14, para. 278
  • [204] Case No. 4a O 73/14, para. 267 et seq.; 299 et seq.
  • [205] Case No. 4a O 73/14, para. 304
  • [206] Case No. 4a O 73/14, para. 189
  • [207] Case No. 4a O 73/14, para. 309-313
  • [208] Case No. 4a O 73/14, para. 317 et seq.

Updated 17 January 2018

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

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

A. Facts and Main Judgment

The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue relate to telecommunication network coding and procedures. In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents and one non-technical trial relating to competition law issues, FRAND issues, injunctive relief and damages for past infringements.Unwired Planet v. Huawei [2017] EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html In its decision on 5 April 2017 (the ‘main judgment’), the Patents Court (Birrs J) held that two patents were valid and that they had been infringed, and that the claimant was in a dominant position, but had not abused this position. The court stated that a final decision about an injunction to restrain patent infringements should be made separately. A few weeks after the main judgment, a license representing the FRAND terms between the two parties was prepared (the ‘settled license’), but had not yet been entered into. [40] Further, the defendant offered to give an undertaking to the court to enter into the license settled by the Patents Court or any other court. [41]

In its subsequent decision on 7 June 2017 (the case at hand), the parties argued whether the court should grant an injunction order given the existence of the settled license. Other minor issues of the case related to damages, declaratory relief, costs and permission to appeal. [42] The court granted an injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 (the ‘final order’). [43] The injunction order would be discharged if the defendant entered into a FRAND license and it would be stayed pending appeal. The court also declared that the settled license represented the FRAND terms in the given circumstances between the parties and that the defendant had to pay GBP 2.9 million of the claimant’s costs. Permission to appeal was granted to the defendant in respect of three issues and to the claimant in respect of one issue. [43]

B. Court’s Reasoning

1. Injunction

The main issue considered by the court was the interplay between the injunction, the settled license and the undertaking offered by the defendant. Patent EP (UK) 2 229 744 will expire in 2028. The settled license’s expiry date is 31 December 2020, [44] which would put the defendant in a difficult position if it attempts to renegotiate the license while the injunction is still in place. The defendant would even risk being in contempt of court if it continued to sell equipment if there was an argument that the license had come to an end for other reasons (e.g. repudiatory breach of contract). [45] However, the court took the view that it cannot be said that the defendant must be free to sell products if the license has ceased to exist. [44] Similarly, it cannot be said with certainty that the claimant must have an injunction at that date.

Thus, the court considered what the correct form of injunction in respect of a FRAND undertaking should be when a court has settled a license but the defendant has not entered into it (‘FRAND injunction’). [46] The court held that the FRAND injunction should contain a proviso that it will cease to have effect as soon as the defendant enters into the FRAND license. The injunction should also be subject to an express liberty to either party to return to court in the future if the FRAND license ceases to exist or expires while the patent is still valid. [46]

The court also held that despite the court’s discretion as to whether an injunction is granted, an injunction is normally effective, proportionate and dissuasive in IP cases. [47] Although the practical effect of a defendant’s undertaking and an injunction are similar, rights holders usually insist on an injunction. [48] One reason is that it involves a public vindication of the claimant’s rights. [48] As the claimant has been forced to come to court, an offer of undertaking after judgment is usually considered too late. [48] In this case, the defendant had maintained throughout the negotiations and the trial that it was under no obligation to accept a worldwide license. [49] Thus, according to the court, the right thing to do was to grant a FRAND injunction which will be stayed on terms pending appeal.

2. Other Issues

The court held that the issue of damages is closely related to the main issue. [50] If the defendant entered into the settled license, all payments would be covered by the license. If the defendant did not enter into the settled license, an order for damages is required. As a consequence, the court order should be in the same form as the FRAND injunction (stayed pending appeal and ceasing to have effect if the parties enter into the settled license). [50]

The parties also disagreed about the wording of the court declaration regarding the FRAND terms of the settled license. [51] The court dismissed the defendant’s suggestion as too complicated and the claimant’s suggestion as incomprehensive. Instead, the court declaration would be ‘the license annexed to the judgment represents the FRAND terms applicable between the parties in the relevant circumstances’. [52] Further, the court rejected the defendant’s petition to make a declaration that the claimant had not abused its dominant market position. [53] It took the view that the main judgment made a clear finding on this issue in summary paragraph 807(17).

Further, the parties disagreed about the extent of the defendant’s obligation to bear the claimant’s costs. The claimant argued that it should be regarded as the successful party so that the defendant had to pay its costs (GBP 6.4million). [54] The defendant argued the claimant had been clearly wrong regarding the applicable FRAND rate [55] and the appropriate thing would be to make no cost order. The court rejected the idea that there was no overall winner (as argued by the defendant) because the claimant was successful on the issues of the nature of the license and the existence and abuse of market dominance. [56] The ensuing question was whether any deductions were appropriate. [57] The court held that neither party had offered terms that were essentially FRAND. [58] However, the rates offered by the claimant were significantly further away from the end result than the rates offered by the defendant. [58] Thus, the defendant’s costs in relation to the FRAND rate issue were not recoverable by the claimant.

The fifth and final issue was in respect of permission to appeal. The court granted the defendant permission on three grounds: first, the necessity of granting a global license (including the court’s view that there is only one applicable license fee); [59] second, the hard-edged non-discrimination point; [60] and third, the issue of injunctive relief and abuse of market dominance under the CJEU ruling Huawei v. ZTE. [61] Conversely, the claimant was granted permission to appeal on the blended global benchmark issue (using a blended global rate as a benchmark, leading to the question whether another discount for the Chinese market should given). [62]

  • [39] Unwired Planet v. Huawei [2017] EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html
  • [40] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 2.
  • [41] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 8.
  • [42] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 1.
  • [43] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 70.
  • [44] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 22.
  • [45] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 19.
  • [46] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 20.
  • [47] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 25.
  • [48] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 26.
  • [49] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 29.
  • [50] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 33.
  • [51] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 34.
  • [52] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 36.
  • [53] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 38.
  • [54] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), paras 39-40.
  • [55] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 41.
  • [56] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 44.
  • [57] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 45.
  • [58] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 56.
  • [59] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 170 et seqq.
  • [60] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 177 and 481 et seqq.
  • [61] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 627 et seqq.
  • [62] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 537 et seqq.

Updated 7 April 2021

Sisvel v Wiko

OLG Karlsruhe
9 December 2020 - Case No. 6 U 103/19

A. Facts

The claimant, Sisvel, holds patents declared as (potentially) essential to the practice of the UMTS and LTE wireless telecommunications standards, which are subject to a commitment to be made accessible to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions (standard-essential patents or SEPs). Sisvel also administrates a patent pool, comprising patents of several SEP holders, including Sisvel's own SEPs (patent pool).

The defendants are two companies that are part of the Wiko group (Wiko). [250] Wiko sells mobile phones complying with the LTE standard - among other markets- in Germany.

In June 2015, the patent pool informed Wiko for the first time about the need to obtain a licence. On 1 June 2016, Sisvel (as the patent pool's administrator) offered Wiko a portfolio licence, which also covered the patent in suit. Agreement was, however, not reached.

On 22 June 2016, Sisvel brought an action against Wiko before the District Court (Landgericht) of Mannheim in Germany (District Court) based on one patent reading on the LTE standard (infringement proceedings). Sisvel requested a declaratory judgment confirming Wiko's liability for damages on the merits, as well as information and rendering of accounts.

On 23 June 2016, Sisvel made an offer for a bilateral licence limited to its own SEP portfolio to the German subsidiary of Wiko. This offer was not accepted. Moreover, Wiko filed a nullity action against the SEP in suit before the German Federal Patent Court (nullity proceedings).

In October 2016, Sisvel extended the lawsuit. Claims for injunctive relief as well as the recall and destruction of infringing products were added to the other claims initially asserted.

On 11 November 2016, Wiko made a counteroffer to Sisvel. Some days prior to the oral hearing in the infringement proceedings, Wiko informed the Court that it had provided information to Sisvel and had also deposited a security amount for past uses.

On 8 November 2017, Sisvel made a new offer to Wiko with reduced royalty rates. Wiko did not immediately react to this offer.

On 22 December 2017, Sisvel asked the District Court to order a stay of the infringement proceedings, until the decision of the Federal Patent Court in the parallel nullity proceedings. Wiko agreed with Sisvel's motion. On 30 January 2018, the infringement proceedings were stayed.

On 9 February 2018, Sisvel sent a reminder to Wiko regarding the offer made on 8 November 2017. Wiko responded on 16 February 2018, requesting further claim charts and more time to examine the patents covered by the offer.

On 26 June 2018, during the stay of the infringement proceedings, Sisvel made another licensing offer to Wiko based on a new restructured licensing program (2018 offer). Along with the 2018 offer, Sisvel provided Wiko with claim charts regarding 20 selected patents and a list of existing licensees of both its new licensing program and two pre-existing programs. The list contained the date of the conclusion of each agreement as well as the agreed licence fees. The names of the licensees were, however, redacted.

Wiko did not react to the 2018 offer for more than three months. On 15 October 2018, following a respective reminder sent by Sisvel on 14 September 2018, Wiko replied, without, however, commenting the 2018 offer; it just referred back to its counteroffer dated 11 November 2016. Wiko also criticized the fact that Sisvel did not disclose the names of the existing licensees so far.

In response to that claim, Sisvel shared a draft Non-Disclosure Agreement (NDA) with Wiko on 22 October 2018, based on which it would be willing to disclose the names of the existing licensees. Wiko refused to sign the NDA proposed by Sisvel.

In October 2018, the Federal Patent Court upheld the SEP in suit in part. Subsequently, the District Court moved on with the infringement proceedings. After the end of the oral hearings in July 2019, Wiko made a new counteroffer to Sisvel and provided the latter with additional information. However, Wiko did not increase the amount of security deposited after its first counteroffer dated 11 November 2016.

In the beginning of September 2019, Sisvel set up an electronic data room containing redacted versions of Sisvel's existing licensing agreements with third parties and granted Wiko respective access rights. Wiko did not make use of this data room at any point in time.

On 4 September 2019, the District Court granted an injunction against Wiko and ordered the removal and destruction of infringing products from the market. It also confirmed Wiko's liability for damages on the merits and ordered Wiko to provide Sisvel with information required for the calculation of damages. Wiko appealed the decision of the District Court.

Shortly after the District Court rendered its decision, the term of the patent-in-suit expired. Sisvel, however, enforced the injunction granted by the District Court.

With the present judgment [251] (cited by http://lrbw.juris.de/cgi-bin/laender_rechtsprechung/list.py?Gericht=bw&GerichtAuswahl=Oberlandesgerichte&Art=en&sid=2b226ea73cc9637362d8e1af04a34d05), the Higher District Court (Oberlandesgericht) of Karlsruhe (Court) predominantly upheld the judgment of the District Court [252] .
 

B. Court's reasoning

The Court found that Wiko could not successfully raise a so-called 'FRAND-defence' based on an alleged abuse of market dominance (Article 102 TFEU) against the claims for injunctive relief and the recall and destruction of infringing products asserted by Sisvel. [253]

This question was still decisive in the present case, despite the fact that the patent-in-suit expired before the start of the appeal proceedings. The Court explained that the expiration of a patent affects only future acts of use (which, then, no longer constitute infringement): On the contrary, claims that had arisen prior to expiration based on acts of use during the lifetime of the patent are not impaired. [254] Whether claims were given before the expiration of the patent-in-suit is of particular importance, especially when the patent holder has enforced a (first-instance) judgment delivered in proceedings conducted within the term of protection of the patent, as it was the case here. [255]
 

Dominant market position

Having said that, the Court agreed with the finding of the District Court that Sisvel had a market dominant position in terms of Article 102 TFEU with respect to the patent-in-suit in the relevant time period prior to its expiration. [256]

The Court followed the District Court also insofar, as it confirmed that, by filing an infringement action, Sisvel had not abused its market dominance.
 

Notification of infringement

In the eyes of the Court, Sisvel had sufficiently notified Wiko about the infringement of the patent-in-suit prior to filing a court action. [257] The purpose of the notification of infringement is to draw the implementer's attention to the infringement and the necessity of taking a license on FRAND terms and conditions. [258] In terms of content, the notification must identify the patent infringed, the form of infringement and also designate the infringing embodiments. [258] Detailed technical or legal analysis of the infringement allegation is not required. [258] The production of so-called 'claim charts', which is common in practice, will, as a rule, suffice, but is not mandatory. [258] If the patent holder offers a portfolio licence, respective extended information duties occur. [258]

In the present case, it was not disputed that Sisvel had notified Wiko about the patent-in-suit prior to litigation. [259] As far as Wiko complained that no claim charts were presented before trial, the Court reiterated that no respective obligation of Sisvel existed. [260] What is more, the Court held that the court action initially filed by Sisvel, which did not include claims for injunctive relief and the recall and destruction of infringing products, could also be seen as an adequate notification of infringement. [259]
 

Willingness to obtain a licence

The Court then found that Wiko behaved as an unwilling (potential) licensee both prior and during the infringement proceedings [261] . The Court agreed with the assessment of the District Court that Wiko delayed the licensing negotiations between the parties with the goal to avoid taking a licence for as long as possible, in order to gain economic benefits. [262]

According to the Court, the 'expression of a general willingness to license' is not sufficient for assuming that an implementer is a 'willing licensee'. [263] Moreover, the implementer must 'clearly and unambiguously' declare willingness to conclude a license agreement on FRAND terms, 'whatever FRAND terms may actually look like" [263] . The respective declaration must be 'serious and unconditional'. [263]

The Court highlighted that for the assessment of willingness the overall facts and the particular conduct of the implementer shall be taken into account. [263] Willingness is not 'static': the finding that an implementer was willing (or unwilling) at a certain moment in time does not remain unchanged henceforth. [263]

The implementer must always be willing to obtain a licence and participate in negotiations in a 'target-oriented manner'; since implementers might be inclined to delay negotiations until the expiration of the patent-in-suit, there is a need to make sure that their behaviour in negotiations will not lead to delays. [264] Moreover, it should be expected that a willing implementer would seek a license as soon as possible, in order to shorten the period, in which it makes use of the patent-in-suit or the SEP holder's portfolio without authorisation and without paying licensing fees. [265] Accordingly, a willing licensee would not consider the 'negotiation obligations' of the SEP holder primarily as a means to defend itself against a court action, but as a means to utilize in order to reach a FRAND agreement, if needed. [265]

In the view of the Court, the above requirements are in line with the Huawei v ZTE judgment (Huawei judgment or Huawei) [266] of the Court of Justice of the EU (CJEU). [267] In Huawei, CJEU focused on the will of the infringer to conclude a license agreement on FRAND terms and emphasized that the latter must not pursue 'delaying tactics'. The Court explained that, although in Huawei the requirement to refrain from 'delaying tactics' is expressly mentioned only with respect to the duty of the implementer to react to a licensing offer of the SEP holder, it applies 'at all times' as long as the implementer uses the patents without a licence; otherwise, the suspension of SEP holder's right to the injunctive relief cannot be justified. [268]

In this context, the Court pointed out that not every 'reluctant involvement' of the implementer in licensing discussions will necessarily allow for the assumption of unwillingness. [269] Such behaviour could be justified in individual cases, especially when the SEP holder does not act in a 'target-oriented' manner itself. [269] Nevertheless, implementers must, as a rule, react timely even to a belated action of the SEP holder. [269] Furthermore, implementers must, in principle, inform the SEP holder of any objections at an early stage and should not wait to raise those much later in court proceedings. [269]

Looking at Wiko's conduct, the Court criticized especially the fact that it became active mostly as a reaction to new developments in the pending infringement proceedings. [270] A willing implementer would have, however, sought a licence independently of the initiation of legal steps and independently of the course of litigation. [271] As an example, the Court highlighted the fact that Wiko's counteroffer dated 11 November 2016 was made only shortly after Sisvel extended the infringement suit by adding a claim for injunctive relief. [272] Wiko also provided information on past acts of infringement only a few days prior to the first oral hearing in February 2017 (and refrained from constantly updating this information afterwards, as it would be expected by a willing licensee). [273]

The Court identified also further facts that indicate that Wiko engaged in delaying tactics. [274] Wiko reacted to Sisvel's licensing offers made during the course of the proceedings always belatedly and only after a reminder by Sisvel (for instance, it took Wiko more than three months to react to the 2018 offer) [275] . It also demanded further claim charts in February 2018, years after the action was filed. [276]

Wiko's refusal to sign the NDA offered by Sisvel -despite multiple reminders of the latter- without providing any reasons was also considered as a sign of unwillingness. [277] According to the Court, it should be expected by a willing licensee, who is not interested in delaying negotiations, to swiftly raise any criticisms regarding an NDA proposed by the SEP holder in writing or by e-mail, and not wait to raise any concerns several months later in the infringement proceedings, as Wiko had done here. [278] The Court also considered the fact that Wiko did not access the electronic data room set up by Sisvel containing redacted versions of Sisvel's third party agreements as an additional indication of unwillingness. [279]

Furthermore, the Court clarified that -contrary to Wiko's view- school holidays and/or staff shortages cannot provide sufficient justification for delays in negotiations. [280] Even if such circumstances occur, a willing implementer would have communicated any obstacles immediately. [280] Wiko failed to do so.
 

SEP holder's offer

Since Wiko was found to have been an unwilling licensee, the Court explained that the question whether Sisvel fulfilled its duty to make and adequately elaborate a FRAND licensing offer, was no longer decisive. [281] In fact, no such duty had arisen in the present case, due to Wiko's unwillingness to obtain a licence. [281] Notwithstanding the above, the Court provided guidance on the content and extend of the respective obligation of the SEP holder.

The Court first explained that FRAND is a 'range', which leaves room for flexibility. [282] As a rule, FRAND is determined in bilateral good faith negotiations between SEP holders and implementers, taking into account the specific circumstances of each individual case [282] ; indeed, parties are best situated to determine the exact content of FRAND in a specific setting. [282]

In order to meet its obligation, an SEP holder must present an offer to a willing licensee, which 'in general' complies with FRAND requirements and is fair, reasonable and not discriminatory with respect to the 'average licensee'. [283] The SEP holder shall further explain its offer in a way that permits the licensee to understand the assumptions, on which the offered rate and further conditions are based. [284] The rationale behind this obligation is to create a sufficient basis of information for the implementer for assessing the offer and eventually formulating a counteroffer. [285]

In this context, the Court made clear that implementers should not expect that the SEP holder individually adapts its (first) offer to the specific circumstances of each particular case. [286] The SEP holder's FRAND commitment does not give rise to such obligation. [286] The (first) offer is intended to launch the negotiations and provide an adequate information basis to the implementer, who will then be in a position to suggest necessary amendments by means of a counteroffer. [286] Accordingly, it will regularly be acceptable that the SEP holder's offer is 'not clearly and evidently' non-FRAND and sufficient information was provided to the implementer. [287]

The Court dismissed the notion that the implementer is obliged to negotiate (and eventually) make a counteroffer, only when the SEP holder's offer was fully FRAND-compliant. [287] This would bring the negotiations to a stand-still and, therefore, conflict with the spirit of the Huawei judgment, which is to encourage the parties to reach agreement on the licensing terms. [288] Moreover, the Court explained that –irrespective of whether the offer triggers an obligation of the implementer to submit a counter-offer– the latter will be regularly required, at least, to analyse the SEP holder's offer in due course and express any objections and queries without delay. [289]

Against this background, the Court found that none of the offers made to Wiko during the infringement proceedings was 'clearly and evidently' non-FRAND. [290] The fact that the offers did not define the start of the contract or the amount of royalties payable for past uses was not considered problematic. [291] The Court also found that the royalty rates offered were not 'evidently non-FRAND', since they were sufficiently substantiated by reference to existing licensing agreements and calculated on basis of a 'top-down' method. [292] A need to calculate royalties on grounds of the costs that incurred for the creation of the patented invention (cost-based approach) was not given, since this factor was not relevant for establishing value. [293]

In addition, the Court did not raise any concerns against the fact that Sisvel's offer concerned a worldwide portfolio licence: On the one hand, agreements with such scope are common in the telecommunications industry. [294] On the other hand, Wiko had worldwide activities, so that a licence with a limited scope would not provide sufficient coverage. [294]

The fact that some of the patents included in Sisvel's portfolio were -allegedly- not standard-essential did not render the offers 'un-FRAND'. [295] The Court stressed that, for the purpose of licensing negotiations and the conclusion of a licence, it is not necessary to conclusively clarify whether each portfolio patent is standard-essential. [296] Implementers can reserve the right to challenge the validity and essentiality of affected patents even after the conclusion of a licensing agreement. [296]

Similarly, the Court had no objections against a clause placing the burden of proof with regard to the exhaustion of licenced patents on Wiko. [297] This rule corresponds with the common allocation of the burden of proof under German law and does not place unreasonable weight on the licensee, since it will be better situated to trace the licensing chain by engaging with its suppliers. [298]

The question whether an adjustment clause is necessary for an offer to be considered FRAND was left unanswered by the Court. [299] Such clause would allow the implementer to adapt the agreed royalties, in case that patents fall out of the scope of the licence (e.g. due to expiration or invalidation). The Court saw no need for a respective contractual provision, since the licences offered by Sisvel would expire and, therefore, be re-negotiated after five years. [299] The Court did not express any concerns against the term of the offered licence or the termination clauses contained therein, either. [300]

Furthermore, the Court made clear that Sisvel had adequately elaborated the licensing rates offered to Wiko. [301] In the infringement proceedings, Sisvel responded to the 'top-down' calculation of Wiko in detail and made relevant clarifications. [302] According to the Court, Sisvel was under no circumstances obliged to elaborate on a cost-based calculation of royalties, as requested by Wiko; such demand was considered just another means to delay negotiations. [303]
 

Implementers' counteroffer

The Court also found that the counteroffers made by Wiko during the course of the first instance infringement proceedings were not FRAND. [304]

The Court highlighted that the obligation of the implementer to submit a FRAND counteroffer to the SEP holder is already triggered, when the previous licensing offer of the latter is not 'clearly and evidently' non-FRAND and sufficient information was provided, enabling the implementer to formulate its counteroffer. [305]

Having said that, the Court took the view that the royalty rates which Wiko offered were very low and, thus, not FRAND-compliant. [306] The Court criticized especially the fact that the rates were significantly lower than the rates which were considered to be adequate in previous court decisions. [307] Notwithstanding the above, the Court explained that, even if Wiko's counteroffer had been FRAND, this would not change the conclusion that Wiko had acted as an unwilling licensee. [308] According to the Court, a willing licensee would not have submitted a counteroffer around one year after receipt of the SEP holder's offer, as Wiko did. [309]
 

C. Other important issues

The Court stressed that for generating pressure-free licensing negotiations during pending infringement proceedings, it will, as a rule, be sufficient, if the proceedings are stayed with a view to parallel nullity proceedings concerning the patent-in-suit. [310] This is particularly true, when the SEP holder takes the respective initiative, as it was the case here. [310] Nevertheless, even if a pressure-free negotiation situation is not given, the infringers is not released from the obligation to act in good faith and engage in licensing negotiations, for instance by analysing a licensing offer of the SEP holder. [310] The refusal of the infringer to act accordingly could, in the eyes of the Court, allow the conclusion that it is an unwilling licensee. [310]

Apart from that, the Court confirmed that Wiko had no legal ground for requesting full disclosure of Sisvel's third party agreements [311] . Even if one would recognize a duty of the SEP holder to share information about the core content of existing licensing agreements (that are still in force), it is questionable whether this duty would also extend to agreements signed by previous patent holders. [312] The Court expressed particular doubts that this applies in cases in which a portfolio was assembled from patents acquired from different patent holders, since the relevance of bilateral or pool licensing agreements of the former patent holder can be limited in this case. [313]

Furthermore, the Court expressed the view that under German law a so-called 'covenant not to sue' does not have the effect of a (royalty-free) licence: such agreements will, as a rule, have only a procedural effect in terms of a pactum de non petendo, excluding only the initiation of court proceedings. [314]

Finally, the Court denied Wiko's motion to order a stay in the appeal proceedings due to the recent referral of several questions regarding the interpretation of the Huawei framework to the CJEU by the District Court of Düsseldorf in the matter Nokia v Daimler [315] . [316] According to the Court, it appears unlikely that the CJEU will establish criteria, by which SEP-based court actions against implementers engaging in delaying tactics would amount to an abuse of market dominance. [317]
 

  • [250] The action was extended to a third defendant, an individual person, who had served as a managing director for both aforementioned companies.
  • [251] Sisvel v Wiko, Higher Regional Court Karlsruhe, judgment dated 9 December 2020, Case-No. 6 U 103/19
  • [252] The claims for injunctive relief, rendering of accounts and damages asserted against the former managing director of the two Wiko companies were limited to the period of time until the end of its tenure; ibid, paras. 265-288.
  • [253] Ibid, para. 289.
  • [254] Ibid, paras. 284 et seqq.
  • [255] Ibid, para. 287.
  • [256] Ibid, paras. 290 et seq. Insofar, the Court made clear that a market dominant position ceases to exist after the expiration of the relevant patent.
  • [257] Ibid, paras. 292 et seqq.
  • [258] Ibid, para. 293.
  • [259] Ibid, para. 297.
  • [260] Ibid, paras. 297 et seq.
  • [261] Ibid, para. 299.
  • [262] Ibid, para. 299 and paras. 320 et seqq.
  • [263] Ibid, para. 301.
  • [264] Ibid, para. 302.
  • [265] Ibid, para. 303.
  • [266] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case-No. C-170/13.
  • [267] Sisvel v Wiko, Higher Regional Court of Karlsruhe, judgment dated 9 December 2020, para. 304.
  • [268] Ibid, para. 304.
  • [269] Ibid, para. 305.
  • [270] Ibid, paras. 321 et seqq.
  • [271] Ibid, para. 321.
  • [272] Ibid, para. 322.
  • [273] Ibid, paras. 323 et seq.
  • [274] In addition, the Court found that Wiko’s lack of willingness to obtain a license is also manifested in the fact that it (i) attempted to impede the enforcement of the first instance ruling of the District Court by questionable means (para. 335) and (ii) did not accept the offer of the District Court of The Hague, in which proceedings between the parties were pending in parallel, to engage in settlement negotiations (para. 336).
  • [275] Ibid, paras. 325, 328 and 331.
  • [276] Ibid, para. 327.
  • [277] Ibid, paras. 333 et seqq.
  • [278] Ibid, paras. 334 and 338.
  • [279] Ibid, paras. 337 and 341 et seqq.
  • [280] Ibid, para. 330.
  • [281] Ibid, para. 342.
  • [282] Ibid, para. 307.
  • [283] Ibid, para. 308.
  • [284] Ibid, paras. 308 and 310.
  • [285] Ibid, para. 309.
  • [286] Ibid, para. 310.
  • [287] Ibid, paras. 311 et seqq.
  • [288] Ibid, paras. 311 and 313 et seqq.
  • [289] Ibid, paras. 316 et seqq.
  • [290] Ibid, para. 352.
  • [291] Ibid, para. 353.
  • [292] Ibid, paras. 354 et seqq.
  • [293] Ibid, para. 358.
  • [294] Ibid, para. 359.
  • [295] Ibid, para. 360.
  • [296] Ibid, para. 361.
  • [297] Ibid, para. 362.
  • [298] Ibid, para. 363.
  • [299] Ibid, paras. 365 et seqq.
  • [300] Ibid, paras. 367 et seqq.
  • [301] Ibid, para. 366.
  • [302] Ibid, para. 344.
  • [303] Ibid, para. 346.
  • [304] Ibid, paras. 379 et seqq.
  • [305] Ibid, para. 311.
  • [306] Ibid, paras. 379 et seqq.
  • [307] Ibid, para. 380.
  • [308] Ibid, para. 378.
  • [309] Ibid, para. 384.
  • [310] Ibid, para. 348.
  • [311] Ibid, para. 389.
  • [312] Ibid, paras. 389 et seq.
  • [313] Ibid, para. 391.
  • [314] Ibid, paras. 260 et seqq.
  • [315] Nokia v Daimler, District Court of Düsseldorf, order dated 26 November 2020, Case No. 4c O 17/19.
  • [316] Sisvel v Wiko, Higher Regional Court of Karlsruhe, judgment dated 9 December 2020, para. 395.
  • [317] Ibid, para. 395.

Updated 3 December 2018

District Court, LG Düsseldorf

LG Düsseldorf
11 July 2018 - Case No. 4c O 81/17

A. Facts

The Claimant holds a patent essential to the data communication standards ADSL2+ and VDSL2 (Standard Essential Patent or SEP) [334] . The previous holder of the patent in question had declared towards the standardization organisation International Telecommunication Union (ITU) its willingness to make the patent accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [335] .

The Defendant offers communication services in Germany to retail and wholesale clients, including DSL connections using the standards ADSL2+ and VDSL2 [336] .

The Intervener supplies the Defendant with equipment (especially DSL transceivers and DSL Boards), allowing network services based on the above standards [336] .

In January 2016, the Claimant brought an action against the Defendant before the District Court (Landgericht) of Düsseldorf (Court) requesting for a declaratory judgement recognizing Defendant’s liability for damages arising from the infringement of its SEP as well as the provision of information and the rendering of accounts (liability proceedings) [337] . During the course of these proceedings, the Claimant made two offers for a licensing agreement to the Defendant. The Defendant made a counter-offer to the Claimant and provided security for the use of the SEP [338] . The parties failed to reach an agreement.

In June 2016, the Defendant filed an action for a declaratory judgement against the Claimant before the Dublin High Court in Ireland, requesting the High Court to declare that both Claimant’s offers were not FRAND and that Defendant’s counter-offer was FRAND [339] . Taking the ongoing liability proceedings in Germany into account, the Dublin High Court stayed its proceedings [339] .

In September 2017, the Claimant brought a second action against the Defendant before the District Court of Düsseldorf, requesting for injunctive relief (injunction proceedings) [340] . In February 2018, the Claimant made another licensing offer to the Defendant in the pending injunction proceedings [338] .

With the present judgment, the Court dismissed Claimant’s action in the injunction proceedings [341] .


B. Court’s reasoning

Although the Court held that the services offered by the Defendant infringe the SEP in suit [342] , it found that the Claimant cannot enforce its patent rights for the time being [343] , since it failed to fully comply with the obligations stipulated by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTEHuaweiv ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13. (Huawei obligations or framework) with respect to dominant undertakings in terms of Article 102 of the Treaty for the Functioning of the EU (TFEU) [341] .

1. Dominant market position

The Court found that the Claimant holds a dominant market position in terms of Article 102 TFEU [345] .

In the Court’s eyes, the relevant market for assessing dominance with regards to SEPs is, as a rule, the (downstream) market for products or services implementing the standard, to which the SEP refers [346] . Each SEP outlines an own relevant (licensing) market, unless – from the SEP users’ perspective – equivalent alternative technologies for the same technical problem exist [347] . Since the Court held that, in the present case, none of the existing technological alternatives to the standards ADSL2+ and VDSL2 (e.g. HFC networks, LTE, HDSL, SHDSL, ADSL, SDSL, VDSL, fibre optic networks, radio relay technology or internet services via satellite) offers an equivalent solution to users [348] , it defined the relevant market as the market for products and services allowing for internet connections through DSL technology [349] .

Regarding to the subsequent question of whether the Claimant has a dominant position in the above market, the Court first made clear that ownership of a SEP does not per se establish such condition [350] . The fact that a patent is essential to a standard does neither give rise to the (rebuttable) presumption that the SEP holder can distort competition in downstream markets, because products complying with the standard need to use the SEP [350] . Since a high number of patents is usually declared as standard essential, not every SEP can actually (significantly) affect the competitiveness of products or services in downstream markets; the effect of each SEP on a downstream market has, therefore, to be established on a case-by-case basis by taking into account the circumstances of each individual case [350] .

The Court explained that a dominant market position is given, when the use of the SEP is required for entering the market, particularly for securing the general technical interoperability and compatibility of products or services under a standard [350] . The same is true, if the patent user could not market competitive products or services without a licence (for instance, because only a niche market exists for non-compliant products) [350] . No market dominance exists, however, when the SEP covers a technology which is only of little importance to the majority of the buyers in the relevant market [350] .

According to the Court, the latter was not the case here; on the contrary, the Defendant cannot offer competitive products or services in the market for DSL internet connections, without using the SEP in suit [351] .

2. Huawei framework

In the Court’s view, the parties to SEP licensing negotiations need to fulfill the mutual conduct obligations under the Huawei framework step by step and one after another [352] . The Court did not see any flaws in the parties’ conduct with respect to the first two steps of the Huawei framework (SEP holder’s notification of infringement and SEP user’s declaration of willingness to obtain a licence), held, however, that the Claimant did not meet its consequent obligation to make a FRAND licensing offer to the Defendant [353] .

Notification of infringement

The Court found that the Claimant had fulfilled its obligation to notify the Defendant about the infringing use of the SEP in suit prior to the commencement of the injunction proceedings [354] .

First, the Court pointed out that a respective notification (as well as a later licensing offer) can be made by the SEP holder itself, or by any other affiliated company within the same group of companies, especially by the patent holder’s parent company [355] . On the other hand, it is not required that the infringement notification is addressed to the company that will later be party to the infringement proceedings; in general, it is sufficient to address the notification to the parent company within a group of companies [355] .

In terms of content, the notification of infringement must name the patent in suit (including the patent number) and indicate the contested embodiments as well as the (allegedly) infringing acts of use [356] . A detailed (technical and/or legal) explanation of the infringement (particularly an analysis of how the individual features of the patent claims are infringed) is not required; the addressee needs just to be put in the position to assess the infringement allegations, if necessary by seeking expert advice [356] . In this context, the Court disagreed with the District Court of Mannheim which had requested the SEP holder to inform the user about the essentiality of the patent to the standard and/or attach claim charts to the notification of infringement [356] .

In terms of timeliness, the Court took the view that the notification of infringement can be made alongside with SEP holder’s offer for a FRAND licence to the user (prior to the initiation of court proceedings) [357] . In this case, the second step under the Huawei framework will be skipped (that is the SEP user’s declaration of its willingness to obtain a licence). According to the Court, this fact does not, however, have an impact on the SEP holder’s position: If the SEP user is willing to enter into a licence, this approach would safe time (although the SEP user should be granted more time than usual to assess and react to both the notification of infringement and the FRAND offer) [357] . If, on the other hand, the SEP user is unwilling to obtain a FRAND licence, then the SEP holder will just have made a licensing offer absent a respective obligation under the Huawei framework [357] .

In the present case, the fact that the Claimant did not make a separate notification of infringement prior to the initiation of the injunction proceedings, was not considered problematic. The Court pointed out that the Defendant was fully informed about the infringement allegation by the action for damages raised by the Claimant long before the injunction proceedings, so that a separate notification was not required [358] .

Willingness to obtain a FRAND licence

The Court further found that the Defendant had fulfilled its Huawei obligation to express its willingness to obtain a FRAND licence [359] .

In terms of content, no high demands should be placed on the SEP user’s respective declaration; it is not subject to formal requirements and can be of a general nature, as long as the willingness to obtain a licence is clearly stated [360] . Given the circumstances of the specific case, even an implicit behaviour can suffice [360] .

In terms of timeliness, the Court held that a strict deadline, within which the SEP user ought to make its declaration, cannot be set [361] . The respective time frame must be determined on a case-by-case basis under consideration of the circumstances of each case [361] . If the SEP holder’s notification of infringement contains only the minimum required information, a reaction within a period of five or even three months at the most could be expected [361] . In case that the infringement notification contains information going beyond the required minimum, an even quicker reaction could be required from the SEP user under certain circumstances [361] .

In the present case, the Court held that the Defendant has implicitly declared its willingness to enter into a FRAND licence with the Claimant at the latest at the point in time, in which the injunction proceedings were initiated [362] . At that time, the Defendant had already made a counter-offer for a FRAND licence to the Claimant and had also provided security for the use of Claimant’s patents [363] .

In this context, the Court noted that neither the fact that the Defendant contested Claimant’s claims in the parallel liability proceedings not the fact that it raised an action for declaratory judgement against the Claimant before the Dublin High Court can support the argument that the Defendant has deviated from its previous declaration of willingness [364] .

SEP holder’s licensing offer

The Court held that the offer which the Claimant made to the Defendant in course of the injunction proceedings was not FRAND [365] . Since the Claimant expressly relied only on this offer to establish its compliance with the Huawei framework, the Court did not assess the FRAND conformity of the two previous offers of the Claimant to the Defendant [338] .

In terms of timeliness, the Court stressed out that the SEP holder must make a FRAND licensing offer to the user before the initiation of infringement proceedings [366] . Under German procedural law, proceedings are initiated after the claimant has made the required advance payment on costs, even if the statement of claims has not been served to the defendant, yet [367] .

The Court did not rule out that SEP holder’s failure to fulfil its Huawei obligations prior to the commencement of infringement proceedings can be remedied during the course of the proceedings [368] . Depending on the circumstances of each case, the SEP holder should be given the opportunity – within the limits of procedural deadlines – to react to (justified) objections of the SEP user and eventually modify its offer [368] . Denying the SEP holder this opportunity without exceptions would be contrary to the principle of procedural economy; the patent holder would be forced to withdraw its pending action, make a modified licensing offer to the patent user and, subsequently, sue the latter again [368] . In this context, the Court explained that failure to meet the Huawei obligations does not permanently impair SEP holder’s rights [369] . Notwithstanding the above, the Court made, however, clear that the possibility of remedying a flawed licensing offer is subject to narrow limits; the CJEU intended to relieve licensing negotiations between SEP holder and SEP user from the burden imposed on parties by ongoing infringement proceedings, and particularly the potential undue pressure to enter into a licensing agreement which such proceedings can put on the SEP user [370] .

Against this background, the Court expressed doubts that the Claimant’s licensing offer, which was made in the course of the pending injunction proceedings could be considered as timely [340] . Nevertheless, the Court left this question open, because, in its eyes, the Claimant’s offer was not FRAND in terms of content [371] .

The Court did not deem necessary to decide whether the FRAND conformity of the SEP holder’s offer must be fully assessed in infringement proceedings, or whether only a summary assessment of its compatibility with FRAND suffices [372] . In the Court’s view, Claimant’s offer was anyway both not fair and discriminatory [373] .

Fair and reasonable terms

The Court held that the licensing terms offered by the Claimant to the Defendant were not fair and reasonable [374] .

First, the terms did not adequately consider the effects of patent exhaustion [375] . As a rule, FRAND requires licensing offers to contain respective provisions [376] . The clause contained in Claimant’s offer, establishing the possibility of a reduction of the royalties owed by the Defendant in case of the exhaustion of licensed patents, is not fair, because it puts the burden of proof regarding to the amount of the reasonable reduction of the royalties on the Defendant’s shoulders [377] .

Second, the clause, according to which Defendant’s payment obligations regarding to past uses of the SEP in suit should be finally settled without exceptions and/or the possibility to claim reimbursement, was also considered not fair [378] . The Defendant would be obliged to pay royalties for past uses, although it is not clear whether the Claimant is entitled to such payments [379] .

Third, the Court found that the exclusion of the Defendant’s wholesale business from Claimant’s licensing offer was also not fair [380] . According to the principle of contractual autonomy, patent holders are free to choose to which stage of the distribution chain they offer licences [381] . In the present case, however, excluding a significant part of the Defendant’s overall business, namely the wholesale business, from the licensing offer, hinders a fair market access [381] .

Non-discrimination

Besides from the above, the Court ruled that the Claimant’s offer was discriminatory [382] .

To begin with, the Court stressed out that FRAND refers to a range of acceptable royalty rates: As a rule, there is not only a single FRAND-compliant royalty rate [372] . Furthermore, as far as a corresponding commercial/industry practice exists, offers for worldwide portfolio licences are, in general, in line with the Huawei framework, unless the circumstances of the individual case require a different approach (for instance a limitation of the geographical scope of the licence, in case that the user is active only in a single market) [383] .

Furthermore, the Court explained that the non-discriminatory element of FRAND does not oblige the SEP holder to treat all users uniformly [384] . The respective obligation applies only to similarly situated users, whereas exceptions are allowed, provided that a different treatment is justified [384] . In any case, SEP holders are obliged to specify the royalty calculation in a manner that allows the user to assess whether the offered conditions are non-discriminatory or not. The respective information needs to be shared along with the licensing offer; only when the SEP user has obtained this information a licensing offer triggering an obligation of the latter to react is given [385] .

In the Court’s view, presenting all existing essential licensing agreements concluded with third parties, covering the SEPs in suit or a patent portfolio including said SEPs (comparable agreements), has priority over other means for fulfilling this obligation [386] . In addition, SEP holders have to produce also court decisions rendered on the FRAND-conformity of the rates agreed upon in the comparable agreements, if such decisions exist [387] .

Whether presenting comparable agreements (and relevant case law) suffices for establishing the non-discriminatory character of the offered royalty rates depends on the number and the scope of the available agreementsI [388] . In case that no or not enough comparable agreements exist, SEP holders must (additionally) present decisions referring to the validity and/or the infringement of the patents in question and agreements concluded between other parties in the same or a comparable technical field, which they are aware of [389] . If the SEP in suit is part of a patent portfolio, SEP holders must also substantiate the content of the portfolio and its impact on the offered royalty rates [390] .

Having said that, the Court pointed out that an unequal treatment resulting in a discrimination in antitrust terms is not only at hand, when a dominant patent holder grants preferential terms to specific licensees, but also when it chooses to enforce its exclusion rights under a SEP in a selective manner [391] . The latter is the case, when the SEP holder brings infringement actions only against certain competitors and, at the same time, allows other competitors to use its patent(s) without a licence [391] . However, such a conduct is discriminatory only if, depending on the overall circumstances of each case (for instance, the extend of the infringing use and the legal remedies available in the country, in which claims need to be asserted), it would have been possible for the SEP holder with reasonable efforts to enforce its patent rights against other infringers (which it was or should have been aware of) [391] . In favour of an equal treatment of competitors, the level of action which must be taken by the SEP holder in this respect should not be defined narrowly [391] . However, it has to be taken into account, that – especially in the early stages of the implementation of a standard – the SEP holder will usually not have the means required to enforce its rights against a large number of infringers; in this case, the choice to enforce its rights only against infringers with market strength first appears reasonable [392] .

Based on the above considerations, the Court ruled that the Claimant’s choice to sue only the Defendant and its two main competitors, without asserting the SEP in suit against the rest of their competitors, respectively against their suppliers, was discriminatory [393] . The Claimant should have already, at least, requested the companies, against which no action was filed, to obtain a licence, particularly since the remaining period of validity of the SEP in suit is limited [394] . Furthermore, the Court found that the Claimant’s refusal to make a licensing offer to the Intervener, although the latter had requested for a licence, was also discriminatory; in the Court’s view, the Claimant failed to provide an explanation justifying this choice [395] .

Since the Claimant’s offer was found to be non-compliant with FRAND, the Court refrained from ruling on the conformity of Defendant’s counter-offer and the security provided with the Huawei framework [396] .


C. Other issues

The Court ruled that in accordance with Article 30 para. 3 of the German Patent Law (PatG) the registration in the patent register establishes the presumption of ownership, allowing the entity which is registered as patent holder to assert the rights arising from the patent before court [397] .

  • [334] District Court of Düsseldorf, 11 July 2018, Case-No. 4c O 81/17Ibid, paras. 3 and 82.
  • [335] Ibid, para. 13.
  • [336] Ibid, para. 12.
  • [337] Ibid, paras. 14 and 211.
  • [338] Ibid, para. 15.
  • [339] Ibid, para. 16.
  • [340] Ibid, para. 236.
  • [341] Ibid, paras. 140 and 313 et seqq.
  • [342] Ibid, paras. 114 et seqq.
  • [343] Ibid, paras. 60 and 140.
  • [344] Huaweiv ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
  • [345] Ibid, para. 142.
  • [346] Ibid, para. 148.
  • [347] Ibid, paras. 153 and 146.
  • [348] Ibid, paras. 159 - 181.
  • [349] Ibid, para. 158.
  • [350] Ibid, para. 147.
  • [351] Ibid, paras. 183 et seqq.
  • [352] Ibid, para. 191.
  • [353] Ibid, para. 188.
  • [354] Ibid, paras. 195 et seqq.
  • [355] Ibid, para. 199.
  • [356] Ibid, para. 198.
  • [357] Ibid, para. 200.
  • [358] Ibid, para. 203.
  • [359] Ibid, para. 205.
  • [360] Ibid, para. 208.
  • [361] Ibid, para. 207.
  • [362] Ibid, para. 210.
  • [363] Ibid, para. 212.
  • [364] Ibid, paras. 215 et seq.
  • [365] Ibid, para. 220.
  • [366] Ibid, paras. 222 et seqq.
  • [367] Ibid, para. 225.
  • [368] Ibid, para. 233.
  • [369] Ibid, para. 228.
  • [370] Ibid, para. 230.
  • [371] Ibid, para. 237.
  • [372] Ibid. para. 241.
  • [373] Ibid, para. 242.
  • [374] Ibid, paras. 283 et seqq.
  • [375] Ibid, para. 285.
  • [376] Ibid, para. 288.
  • [377] Ibid, paras. 292 et seq.
  • [378] Ibid, paras. 298 et seqq.
  • [379] Ibid, para. 301.
  • [380] Ibid, para. 306.
  • [381] Ibid, para. 311.
  • [382] Ibid, para. 271.
  • [383] Ibid, para. 250.
  • [384] Ibid, para. 248.
  • [385] Ibid, para. 267.
  • [386] Ibid, paras. 256 and 259 et seq.
  • [387] Ibid, para. 262.
  • [388] bid, paras. 258 and 264.
  • [389] Ibid, paras. 263 and 265.
  • [390] Ibid, para. 265.
  • [391] Ibid, para. 273.
  • [392] Ibid, para. 274.
  • [393] Ibid, para. 276.
  • [394] Ibid, para. 277.
  • [395] Ibid, para. 281.
  • [396] Ibid, para. 315.
  • [397] Ibid, paras. 75 et seq.

Updated 1 November 2017

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

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

  1. Facts
    The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue (EP (UK) 2 229 744, EP (UK) 2 119 287, EP (UK) 2 485 514, EP (UK) 1 230 818, EP (UK) 1 105 991, EP (UK) 0 989 712) relate to telecommunication network coding and procedures [63] . Most were part of a large patent portfolio that the claimant had acquired from a major telecommunications company in 2013. [64] In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents. This summary focuses on the non-technical trial addressed competition law issues, FRAND issues, injunctive relief and damages for past infringements. [65]
    In April 2014 the claimant made an open offer to the defendant, a major international smartphone manufacturer, to grant a license in respect of the claimant’s entire global patent portfolio (containing SEPs and non-SEPs). The defendant refused the offer, contending that there was no patent infringement, that the patents were not essential, and that they were invalid. The defendant also argued that the offer was not FRAND and thus did not constitute an abuse of a dominant market position under Art. 102 TFEU. In July 2014 the claimant made a further offer, limited to the claimant’s SEPs. Again, the defendant refused, arguing that the license conditions were not FRAND. [66] In June 2015 both parties made further offers. These offers were the result of directions from the court. The claimant offered a worldwide portfolio license while the defendant wanted to limit the territorial scope to the United Kingdom. [67] Between August and October 2016 the parties exchanged further offers without reaching an agreement. [68]
    The Patents Court (Birrs J) held that the claimant was in a dominant position, but did not abuse this position. [69] The defendant was not prepared to take a license on FRAND conditions and the claimant was not in breach of competition law. Thus, the court held that a final injunction to restrain patent infringements should be granted. An injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 was granted on 7 June 2017. [70]
  2. Court’s reasoning
    1. Market power
      The court defined the relevant market for assessing dominance as a distinct market for licensing each SEP individually. [71] European case law indicated that owning an SEP could be a rebuttable presumption for the existence of a dominant position. [72] The claimant’s pleaded position was a non-admission of dominance rather than a denial coupled with a positive case to the contrary. It was the view of the court that this was insufficient to rebut the presumption. In particular, the claimant’s argument of countervailing buyer power was unconvincing because it had not been supported by a proper economic analysis. [73]
    2. SEP Proprietor’s Licensing Offer
      1. FRAND Declaration as Conceptual Basis
        The court pointed out that that the FRAND undertaking also applied in the case that the SEP proprietor was not in a dominant position. It held that the FRAND undertaking operated as a practical constraint on a SEP owner’s market power. [74] The ETSI declaration made by the SEP proprietor is also the starting point for determining the FRAND rate. The underlying issue, which is discussed at length by the court, [75] is if such a declaration forms a contract and whether that contract can benefit third parties. The court acknowledged that the legal effect of this declaration, in particular its enforceability, is a controversial issue under French law. [76] However, the court reasoned that the FRAND declaration is an important aspect of technology standardisation. Holders of SEPs are not compelled to give a FRAND declaration. If they do, the undertaking would be enforceable and irrevocable due to public interest. [76]
        The court applied a procedural approach to FRAND. It emphasised that FRAND describes not only a set of license terms, but also the process by which a set of terms are agreed. [77] It applies to both the SEP-holder and the implementer/defendant. In particular, this approach allows for starting offers that leave room for negotiation. On the other hand, making extreme offers and taking an uncompromising approach which prejudices fair, reasonable, and non-discriminatory negotiation is not a FRAND approach. [78] This approach also means that the SEP proprietor is under an obligation to make a FRAND offer and to enter into FRAND license agreements. [79]
      2. ‘True FRAND Rate’
        The court considered that there is only a single set of terms for a given set of circumstances that would meet FRAND conditions (‘true FRAND rate’). [80] This eliminates the so-called Vringo-problem, [81] i.e. if FRAND were a range there would be two different but equally FRAND offers. Thus, if the court would grant or not an injunction, it would be unfair for the alleged infringer or SEP holder respectively. [82]
        The court was of the opinion that the true FRAND rate approach does not cause problems under competition law. Theoretically, if only one set of terms is truly FRAND, and if FRAND also represents the line between abusive and non-abusive conduct under Art. 102 TFEU, then every agreed SEP-licence could be at serious risk of being abusive. [83] However, the court took the view that FRAND-compliance and compliance with Art. 102 TFEU are not the same thing (the court pointed out that the CJEU in the Huawei ruling appears to equate an obligation to make a FRAND offer with compliance with Art 102 TFEU). [84] Since Art. 102 TFEU condemns excessive pricing, [85] a royalty rate can be somewhat higher than the true FRAND rate and still not be contrary to competition law. Conversely, for a breach of competition law, it will be necessary but not sufficient that the rate is not the true FRAND rate. [85]
      3. Discrimination
        The court held that the correct approach is to start from a global rate as a benchmark and to then adjust this rate as appropriate. [86] It distinguished between two concepts of discrimination. First, the ‘general’ concept of non-discrimination describes an overall assessment of FRAND which can be used to derive the benchmark mentioned above. [87] It is based on the intrinsic value of the patent portfolio, but it does not depend on the licensee. The court held that this benchmark should be applied to all licensees seeking the same kind of license. [88]
        Second, the ‘hard-edged’ non-discrimination obligation, which takes into account the nature of the potential licensee, [87] is a distinct concept that could be used to adjust license terms. However, the court held that the FRAND declaration does not introduce such a hard-edged non-discrimination concept. [89] If, contrary to the view taken by the court, the FRAND undertaking did include hard-edged non-discrimination, a licensee could only have the right to a lower rate granted to another licensee (i.e. a specific non-discrimination obligation resulting from the FRAND declaration) if the difference would otherwise distort competition between the two licensees. [88]
      4. Territorial Scope of License
        The court held that the defendant’s offer that was limited to UK licenses was not FRAND. In the court’s opinion country by country licensing is inefficient for goods such as mobile telecommunications devices that are distributed across borders. [90] It would also be inefficient to negotiate many different licenses and then to keep track of so many different royalty calculations and payments. No rational business would do this, if it could be avoided. [90] This was illustrated by the fact that the vast majority of licenses introduced in the trial were worldwide licenses. [91] Further, it is common ground that the industry assesses patent families rather than individual patents within the family. Assessing portfolios on a family basis inevitably involved tying a patent in one jurisdiction with a patent in another. [92] Thus, according to the court, a worldwide license would not be contrary to competition law. As willing and reasonable parties would agree on a worldwide licence, the insistence by the defendant on a license which was limited to the UK was not FRAND. [93]
  3. Court’s reasoning
    1. Comparable agreements and reasonable aggregate royalty rate
      The court held that for determining the royalty rate, the evidence of the parties would be relevant, including evidence of how negotiations actually work in the industry. [94] Other freely-negotiated license agreements might be used as comparables. [95] This may be compared with a top down approach [96] can also be used in which the rate is set by determining the patentee’s share of relevant SEPs and applying that to the total aggregate royalty for a standard, but this may be more useful as a cross-check. [97] Royalty rates determined by other courts might be useful as persuasive precedents. However, in the eyes of the court, a license rate determined at a binding arbitration does not carry much weight as to what parties are usually paying. [94] License agreements must meet certain criteria to be comparable. [98] First, the licensor is the claimant. Second, the license agreement is recent. However, it is not necessary that the licensee is the defendant or a comparable company because different market participants have different bargaining powers, which is reflected in the negotiations and the resulting royalty rates. [98] Finally the court confirmed that a royalty based on the handset price was appropriate and implied a reasonable aggregate royalty rate of 8.8%of the handset price. The court found that the 8.8% was reasonable, in part, because the aggregate implied by either party’s case was higher (10.4% and 13.3%). [99]
    2. Principles derived from Huawei v. ZTE
      The court also provided a compiled overview of its interpretation of the Huawei v. ZTE ruling. [100] In the eyes of the court, the ‘willingness to conclude a licence on FRAND terms’ refers to a willingness in general. The fact that concrete proposals are also required does not mean it is relevant to ask whether the proposals are actually FRAND or not. If the patentee complies with the procedure as set out by the CJEU, then bringing a claim for injunction is not abusive under Art 102. But even if sufficient notice is given, bringing a claim can constitute an abuse because complying with the procedure does not mean that a patentee can behave with impunity. In other words, there might be other aspects that make the claim abusive. Conversely, bringing such a claim without prior notice will necessarily be abusive. Significantly, the court held, the legal circumstances of this case differ from the circumstances assumed by the CJEU in a crucial respect. A FRAND undertaking can be effectively enforced irrespective of Art 102. The defendant does not need Art 102 TFEU to have a defence to the injunction claim.
  • [63] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 2
  • [64] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 54 et seqq.
  • [65] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 3
  • [66] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 5
  • [67] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 7-8
  • [68] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 11-14
  • [69] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 807
  • [70] Unwired Planet v Huawei, EWHC 1304 (Pat)
  • [71] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 631
  • [72] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 634
  • [73] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 636-646
  • [74] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 656
  • [75] Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 108-145
  • [76] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 146
  • [77] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 162
  • [78] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 163
  • [79] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 159
  • [80] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 164
  • [81] See Vringo v ZTE [2013] EWHC 1591 (Pat) and [2015] EWHC 214 (Pat)
  • [82] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 158
  • [83] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 152
  • [84] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 154
  • [85] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 153
  • [86] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 176
  • [87] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 177
  • [88] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 503
  • [89] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 501
  • [90] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 544
  • [91] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 534
  • [92] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 546
  • [93] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 572
  • [94] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 171
  • [95] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 170
  • [96] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 178
  • [97] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 806 (10)
  • [98] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 175
  • [99] Unwired Planet v. Huawei [2017] EWHC 711(Pat), para 476
  • [100] Unwired Planet v. Huawei [2017] EWHC 711(Pat), 744

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. [53] 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. [54]

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. [55] 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. [56]

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. [59] 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. [59]

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. [60] 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. [56] Besides that, the Court also held that the defendants’ failed to establish that the Chinese courts would be the appropriate forum for the dispute. [61] 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. [62]

  • [52] Conversant v. Huawei and ZTE[2018] EWHC 808 (Pat) para 5.
  • [53] ibid, para 7.
  • [54] ibid, para 8.
  • [55] ibid, paras 9, 12 and 13.
  • [56] ibid.
  • [57] Unwired Planet v. Huawei[2017] EWHC 711 (Pat) paras 565-67
  • [58] Conversant v. Huawei and ZTE(n. 1) paras 17 et seq.
  • [59] ibid, para 28.
  • [60] ibid, para 69.
  • [61] ibid, paras 72 et seq.
  • [62] ibid, para 63.

Updated 30 October 2018

Unwired Planet v Huawei, UK Court of Appeal

English court decisions
23 October 2018 - Case No. A3/2017/1784, [2018] EWCA Civ 2344

A. Facts

The Claimant, Unwired Planet International Limited, holds a significant portfolio of patents which are essential for the implementation of the 2G/GSM, 3G/UMTS and 4G/LTE wireless telecommunications standards (Standard Essential Patents, or SEPs). The Defendants, Huawei Technologies Co. Ltd. and Huawei Technologies (UK) Co. Ltd., manufacture and sell mobile devices complying with the above standards worldwide.

Starting in September 2013, the Claimant contacted the Defendants several times, requesting the latter to engage in discussions for a licence regarding its SEP portfolio. [521] In March 2014, the Claimant sued the Defendants as well as Samsung and Google for infringement of five of its UK SEPs before the UK High Court of Justice (High Court). [522] The Claimant also initiated parallel infringement proceedings against the Defendants in Germany. [523]

The High Court conducted three technical trials first, focusing on the validity and essentiality of four of the SEPs in suit. [524] By April 2016, these trials were completed; the High Court held that two of the SEPs in suit were both valid and essential, whereas two other patents were found to be invalid. [524] The parties agreed to postpone further technical trials indefinitely. [524]

In July 2016, Samsung took a licence from the Claimant covering, among other, the SEPs in suit. [525] The Claimant also settled the infringement proceedings with Google. [526]

In late 2016, the trial concerned with questions regarding to the licensing of the SEPs in suit commenced between the Claimant and the Defendants. Over the course of these proceedings the parties made licensing offers to the each other. However, they failed to reach an agreement. The Defendants indicated they were willing to take a licence under Claimant’s UK patent portfolio, whereas the Claimant contended that it was entitled to insist upon a worldwide licence. [527]

In April 2017, the High Court granted an UK injunction against the Defendant, until such time as it entered into a worldwide licensing agreement with the Claimant on the specific rates, which the court determined to be Fair, Reasonable and Non-Discriminatory (FRAND) [528] in accordance with the undertaking given by the Claimant towards the European Telecommunications Standards Institute (ETSI). [529] Pending appeal, the High Court stayed the injunction. [530]

Shortly after the High Court delivered its decision, the Defendants began proceedings against the Claimant in China, which are still pending. [531]

With the present judgment, the UK Court of Appeal dismissed the Defendants’ appeal against the decision of the High Court. [532]


B. Court’s reasoning

The Defendants appealed the decision of the High Court on the following three grounds:

1. The High Court’s finding that only a worldwide licence was FRAND is erroneous; the imposition of such a licence on terms set by this court based on a national finding of infringement of UK patents is wrong in principle. [533]

2. The offer imposed to the Defendants by the High Court is discriminatory in violation of Claimant’s FRAND undertaking, since the rates offered are higher than the rates reflected in the licence granted by the Claimant to Samsung. [534]

3. The Claimant is not entitled to injunctive relief; by bringing the infringement proceedings against the Defendants, without meeting the requirements established by the Court of Justice of the European Union (“CJEU”) in the matter Huawei v ZTE [535] (Huawei judgment) before, the Claimant abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the European Union (“TFEU”). [536]

Notably, the High Court’s determination of the rates which apply to the worldwide licence that the court requested the Defendants to take was not challenged by any of the parties to the proceedings. [537]


1. Worldwide licences

The Court of Appeal disagreed with the Defendants’ notion that imposing a worldwide licence on an implementer is wrong, because it amounts to an (indirect) interference with foreign court proceedings relating to patents subsisting in foreign territories, which would have been subject to materially different approaches to the assessment of FRAND royalty rates and could, therefore, lead to different results (particularly the ongoing litigation between the parties in China and Germany). [538]

The Court of Appeal explained that in imposing a worldwide licence the High Court did neither adjudicate on issues of infringement or validity concerning any foreign SEPs, nor was it deciding what the appropriate relief for infringement of any foreign SEPs might be (particularly since it made clear that a FRAND licence should not prevent a licensee from challenging the validity or essentiality of any foreign SEPs and should make provision for sales in non-patent countries which do not require a licence) [539] . [540]

Moreover, the High Court simply determined the terms of the licence that the Claimant was required to offer to the Defendants pursuant to its FRAND undertaking towards ETSI. [541] Such an undertaking has international effect. [542] It applies to all SEPs of the patent holder irrespective of the territory in which they subsist. [543] This is necessary for two reasons: first, to protect implementers whose equipment may be sold and used in a number of different jurisdictions. [543] Second, to enable SEP holders to prevent implementers from “free-riding” on their innovations and secure an appropriate reward for carrying out their research and development activities and for engaging with the standardisation process. [544]

Accordingly, the High Court had not erred in finding that a worldwide licence was FRAND. On the contrary, there may be circumstances in which only a worldwide licence or at least a multi-territorial licence would be FRAND. [545] German Courts (in Pioneer Acer [546] and St. Lawrence v Vodafone [547] ) as well as the European Commission in its Communication dated 29 November 2017 [548] had also adopted a similar approach. [549]

Having said that, the Court of Appeal recognized that it may be “wholly impractical” for a SEP holder to seek to negotiate a licence for its patents on a country-by-country basis, just as it may be “prohibitively expensive” to seek to enforce its SEPs by litigating in each country in which they subsist. [544] In addition, if in the FRAND context the implementer could only be required to take country-by-country licences, there would be no prospect of any effective injunctive relief being granted to the SEP holder against it: the implementer could avoid an injunction, if it agreed to pay the royalties in respect of its activities in any particular country, once those activities had been found to infringe. [550] In this way, the implementer would have an incentive to hold out country-by-country, until it was compelled to pay. [550]

In its discussion of this topic, the Court of Appeal disagreed with the view taken by the High Court that in every given set of circumstances only one true set of FRAND terms exists. Nevertheless, the court did not consider that the opposite assumption of the High Court had a material effect to the its decision. [551]

In the eyes of the Court of Appeal, it is “unreal” to suggest that two parties, acting fairly and reasonably, will necessarily arrive at precisely the same set of licence terms as two other parties, also acting fairly and reasonably and faced with the same set of circumstances. [552] The reality is that a number of sets of terms may all be fair and reasonable in a given set of circumstances. [552] Whether there is only one true set of FRAND terms or not, is, therefore, more of a “theoretical problem” than a real one. [553] If the parties cannot reach an agreement, then the court (or arbitral tribunal) which will have to determine the licensing terms will normally declare one set of terms as FRAND. The SEP holder would then have to offer that specific set of terms to the implementer. On the other hand, in case that the court finds that two different sets of terms are FRAND, then the SEP holder will satisfy its FRAND undertaking towards ETSI, if it offers either one of them to the implementer. [553]

Furthermore, the Court of Appeal dismissed Defendants’ claim that imposing a worldwide licence is contrary to public policy and disproportionate. [554] In particular, the Defendants argued that this approach encourages over-declaration of patents [555] and is not compatible with the spirit of the Directive 2004/48/EC on the enforcement of intellectual property rights, [556] which requires relief for patent infringement to be proportionate. [557]

Although the Court of Appeal recognised the existence of the practice of over-declaration and acknowledged that it is a problem, it held that this phenomenon cannot justify “condemning” SEP holders with large portfolios to “impossibly expensive” litigation in every territory in respect of which they seek to recover royalties. [558] The court also found that there was nothing disproportionate about the approach taken by the High Court, since the Defendants had the option to avoid an injunction by taking a licence on the terms which the court had determined. [559]


2. Non-discrimination

The Court of Appeal rejected the Defendants’ argument [560] that the non-discrimination component of Claimant’s FRAND undertaking towards ETSI obliges the Claimant to offer to the Defendants the same rates as those contained in the licence granted to Samsung. [561]

The Court of Appeal made clear that the obligation of the SEP holder not to discriminate is, in principle, engaged in the present case, since the Claimant’s transaction with the Defendants is equivalent to the licence it granted to Samsung. [562] In the court’s eyes, when deciding whether two transactions are equivalent one needs to focus first on the transactions themselves. Insofar, differences in the circumstances in which the transactions were entered into, particularly economic circumstances, such as the parties’ financial position [563] or market conditions (e.g. cost of raw materials), cannot make two otherwise identical transactions non-equivalent (releasing, therefore, the patent holder from the obligation not to discriminate). Changes in such circumstances could only amount to an objective justification for a difference in treatment. [564]

Considering the specific content of the SEP holder’s respective obligation, the Court of Appeal agreed with the High Court’s finding that the non-discrimination element of a SEP holder’s FRAND undertaking does not imply a so-called “hard-edged” component (imposing on the patent holder an obligation to offer the same rate to similarly situated implementers). [565] It argued that the “hard-edged” approach is “excessively strict” and fails to achieve a balance between a fair return to the SEP owner and universal access to the technology. [566] It could have the effect of compelling the SEP holder to accept a level of compensation for the use of its invention which does not reflect the value of the licensed technology and, therefore, harm the technological development of standards. [567]

Furthermore, the “hard-edged” discrimination approach should be rejected also because its effects would result in the insertion of the “most favoured licensee” clause in the FRAND undertaking. In the view of the Court of Appeal, the industry would most likely have regarded such a clause as inconsistent with the overall objective of the FRAND undertaking. [568]

Conversely, the Court of Appeal followed the notion described by the High Court as the “general” non-discrimination approach: [569] the FRAND undertaking prevents the SEP holder from securing rates higher than a “benchmark” rate which mirrors a fair valuation of its patent(s), but it does not prevent the patent holder from granting licences at lower rates. [569] For determining the benchmark rate, prior licences granted by the SEP holder to third parties will likely form the “best comparables”. [570]

The Court of Appeal argued that the “general” approach is in line with the objectives of the FRAND undertaking, since it ensures that the SEP holder is not able to “hold-up” implementation of the standard by demanding more than its patent(s) is worth. [571] However, the FRAND undertaking does not aim at leveling down the royalty owed to the SEP holder to a point where it no longer represents a fair return for its patent(s), or to removing its discretion to agree royalty rates lower than the benchmark rate, if it chooses to do so. [571]

In this context, the Court of Appeal made clear that it does not consider differential pricing as per se objectionable, since it can in some circumstances be beneficial to consumer welfare. [572] The court sees no value in mandating equal pricing for its own sake. On the contrary, once the hold-up effect is dealt with by ensuring that licences are available at the benchmark rate, there is no reason for preventing the SEP holder from charging less than the licence is worth. [572] Should discrimination appear below the benchmark rate, it should be addressed through the application of competition law; as long as granting licences at rates lower than the benchmark rate causes no competitive harm, there is no reason to assume that the FRAND undertaking constrains the ability of the SEP holder to do so. [573]


3. Abuse of dominant Position / Huawei v ZTE

The Court of Appeal further rejected Defendants’ argument that, by bringing the infringement proceedings prior to fulfilling the obligations arising from the Huawei judgment, the Claimant abused its dominant market position in violation of Article 102 TFEU. [574]

To begin with, the Court of Appeal confirmed the finding of the High Court that the Claimant held a dominant market position and dismissed the respective challenge by the latter. [575] It did not find any flaw in the High Court’s view that the SEP holder has a 100% market share with respect to each SEP (since it is “common ground” that the relevant market for the purpose of assessing dominance in the case of each SEP is the market for the licensing of that SEP [576] ) and that the constrains imposed upon the SEP holder’s market power by the limitations attached to the FRAND undertaking [577] and the risk of hold-out that is immanent to the structure of the respective market, [578] can either alone or together rebut the assumption that it most likely holds market power. [579]

Notwithstanding the above, the Court of Appeal held that the Claimant had not abused its market power in the present case. [580]

The court agreed with the finding of the High Court that the Huawei judgment did not lay down “mandatory conditions”, in a sense that that non-compliance will per se render the initiation of infringement proceedings a breach of Article 102 TFEU. [581] The language used in the Huawei judgment implies that the CJEU intended to create a “safe harbor”: if the SEP holder complies with the respective framework, the commencement of an action will not, in and of itself, amount to an abuse. [582] If the SEP holder steps outside this framework, the question whether its behaviour has been abusive must be assessed in light of all of the circumstances. [583]

In the court’s eyes, the only mandatory condition that must be satisfied by the SEP holder before proceedings are commenced, is giving notice to the implementer about the infringing use of its patents. [584] This follows from the clear language used by the CJEU with respect to this obligation. [585] The precise content of such notice will depend upon all the circumstances of the particular case. [585] In general, if an alleged infringer is familiar with the technical details of the products it is dealing and the SEP it may be infringing, but has no intention of taking a licence on FRAND terms, it will not be justified to deny the SEP holder an injunction, simply because it had not made a formal notification prior to the commencement of proceedings. [586]

On the merits, the court accepted the High Court’s assessment that the Claimant had not behaved abusively and particularly the finding, that the Defendants, who were in contact with the Claimant prior to the proceedings, had sufficient notice that the Claimant held SEPs which ought to be licensed, if found infringed and essential. [587]

Considering further that the respective conduct requirements were not established at the point in time, in which the infringement action was filed (since the present proceedings were initiated before the CJEU delivered the Huawei judgment), the Court of Appeal noted that it would very likely not be fair to accuse the Claimant of abusive behavior. [588] Insofar the court agreed with the respective approach developed by German courts in co-called “transitional” cases (Pioneer v Acer, [589] St. Lawrence v Vodafone [589] and Sisvel v Haier [590] ) [591] .

  • [521] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, Case-No. A3/2017/1784, [2018] EWCA Civ 2344, para. 233.
  • [522] Ibid, para. 6 et seqq.
  • [523] Ibid, para. 233.
  • [524] Ibid, para. 7.
  • [525] Ibid, paras. 8 and 137 et seqq.
  • [526] Ibid, para. 8.
  • [527] Ibid, para. 9 et seqq.; para. 31 et seqq.
  • [528] Ibid, para 17.
  • [529] Ibid, para 130.
  • [530] Ibid, para 18.
  • [531] Ibid, para 112.
  • [532] Ibid, para 291.
  • [533] Ibid, paras. 19 and 45 et seqq.
  • [534] Ibid, paras. 20 and 132 et seqq.
  • [535] Huawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-170/13.
  • [536] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 21, paras. 211 et seqq and para. 251.
  • [537] Ibid, para. 17.
  • [538] Ibid, paras. 74 and 77 et seq.
  • [539] Ibid, para. 82.
  • [540] Ibid, para. 80.
  • [541] Ibid, para. 79 et seq.
  • [542] Ibid, para. 26.
  • [543] Ibid, para. 53.
  • [544] Ibid, para. 54 et seq., para. 59.
  • [545] Ibid, para. 56.
  • [546] Pioneer v Acer, District Court of Mannheim, judgement dated 8 January 2016, Case No. 7 O 96/14.
  • [547] St. Lawrence v Vodafone, District Court of Düsseldorf, judgement dated 31 March 2016, Case No. 4a O 73/14.
  • [548] Communication From the Commission to the European Parliament, the Council and the European Economic and Social Committee, “Setting out the EU Approach to Standard Essential Patents”, 29 November 2017, COM(2017) 712 final.
  • [549] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 74.
  • [550] Ibid, para. 111.
  • [551] Ibid, para. 128.
  • [552] Ibid, para. 121.
  • [553] Ibid, para. 125.
  • [554] Ibid, para. 75.
  • [555] Ibid, para. 92
  • [556] Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights (Official Journal of the EU L 195, 02/06/2004, p. 16)
  • [557] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 94.
  • [558] Ibid, para. 96.
  • [559] Ibid, para. 98.
  • [560] Ibid, para. 20 and 132 et seqq.
  • [561] Ibid, paras. 207 and 210.
  • [562] Ibid, para. 176.
  • [563] Ibid, para. 173.
  • [564] Ibid, para. 169 et seq.
  • [565] Ibid, paras. 194 et seqq.
  • [566] Ibid, para. 198.
  • [567] Ibid, para. 198.
  • [568] Ibid, para. 199.
  • [569] Ibid, para. 195.
  • [570] Ibid, para. 202.
  • [571] Ibid, para. 196.
  • [572] Ibid, para. 197.
  • [573] Ibid, para. 200.
  • [574] Ibid, para. 21, paras. 211 et seqq and para. 251.
  • [575] Ibid, para. 212.
  • [576] Ibid, para. 216.
  • [577] Ibid, para. 219.
  • [578] Ibid, para. 220.
  • [579] Ibid, para. 229.
  • [580] Ibid, para. 284.
  • [581] Ibid, para. 269.
  • [582] Ibid, para. 270.
  • [583] Ibid, para. 269 and 282.
  • [584] Ibid, para. 253 and 281.
  • [585] Ibid, para. 271.
  • [586] Ibid, para. 273.
  • [587] Ibid, para. 284
  • [588] Ibid, para. 275
  • [589] See above
  • [590] Sisvel v Haier, Higher District Court of Düsseldorf, judgement dated 30 March 2017, Case No. 15 U 66-15.
  • [591] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 279.

Updated 6 October 2020

Unwired Planet v Huawei & Conversant v Huawei and ZTE, UK Supreme Court

English court decisions
26 August 2020 - Case No. [2020] UKSC 37

A. Facts

The present judgment of the UK Supreme Court (Supreme Court) addresses appeals resulting from two separate cases, both of which concern the infringement of patents declared as (potentially) essential to the practice of wireless telecommunications standards (Standard Essential Patents or SEPs) developed by the European Telecommunications Standards Institute (ETSI). Under the Intellectual Property Rights Policy of ETSI (ETSI IPR Policy), patent holders are encouraged to commit that their SEPs will be made accessible to standards users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions.

Unwired Planet v Huawei

The first case involves a dispute between Unwired Planet International Limited (Unwired Planet), a company holding a portfolio of SEPs reading on several wireless telecommunications standards, and two companies of the Huawei group (Huawei), a Chinese manufacturer and vendor of -among other things- standard compliant mobile phones.

In March 2014, Unwired Planet sued Huawei as well as Samsung and a third company for infringement of five of its UK SEPs before the High Court of Justice for England and Wales (High Court). During the course of these proceedings, Unwired Planet made several licensing offers to Huawei, which, however, did not lead to the conclusion of an agreement. On the other hand, Unwired Planet signed a licence with Samsung.

On 5 April 2017, the High Court granted an injunction against Huawei, until such time as it entered into a worldwide licensing agreement with Unwired Planet on the specific terms, which the court determined to be FRAND [592] . Huawei appealed this decision. Pending appeal, the High Court stayed the enforcement of the injunction.

On 23 October 2018, the UK Court of Appeal (Court of Appeal) dismissed Huawei's appeal against the decision of the High Court [593] . Subsequently, Huawei appealed before the Supreme Court for the United Kingdom (Supreme Court or Court).

Conversant v Huawei and ZTE

The second case revolves around a dispute between the licensing company Conversant Wireless Licensing S.A.R.L. (Conversant), on the one hand, and Huawei as well as two companies of the ZTE group (ZTE), on the other hand. ZTE is a China-based group of companies manufacturing network equipment, mobile phones, and consumer electronics sold worldwide.

In 2017, Conversant brought an infringement action against Huawei and ZTE before the High Court. Conversant requested -among other claims- injunctive relief for the infringement of four of its UK patents and also asked the High Court to determine the terms of a global FRAND licence for its SEP portfolio. Both Huawei and ZTE contested the jurisdiction of the High Court to hear and decide the case and initiated proceedings in China challenging the validity of Conversant's Chinese patents.

On 16 April 2018, the High Court confirmed its jurisdiction over the dispute, including its competence to determine the terms for a global portfolio licence [594] . Huawei and ZTE appealed the decision of the High Court.

On 30 January 2019, the Court of Appeal dismissed the appeal and affirmed the jurisdiction of UK courts to determine FRAND terms for a global licence on the basis of infringement of UK patents [595] . Huawei and ZTE appealed before the Supreme Court.

With the present judgment [596] , the Supreme Court unanimously dismissed the appeals in both cases.


B. Court's reasoning

The Supreme Court identified and addressed the following five issues raised by the appeals:

1. Jurisdiction

The Supreme Court confirmed that UK courts have jurisdiction to determine the terms of a global FRAND licence for a multinational SEP portfolio and, accordingly, grant an injunction based on UK SEPs, in case a standards implementer refuses to enter into such licence [597] .

The Court held that under the ETSI IPR Policy SEP holders are not prohibited from seeking an injunction by national courts [598] . On the contrary, the possibility to stop infringement by means of an injunction granted by a national court was considered to be 'a necessary component of the balance which the IPR Policy seeks to strike', by ensuring that implementers are incentivised to negotiate a FRAND licence [598] .

Apart from granting an injunction based on UK patents, English courts can also set the terms of a global FRAND licence. In the view of the Supreme Court, the 'contractual arrangement' established by the ETSI IPR Policy gives UK courts the jurisdiction to exercise the respective power [599] .

According to the Court, the ETSI IPR Policy is 'intended to have an international effect', as it attempts to 'mirror commercial practice in the telecommunications industry' [600] . In the telecommunications industry, it is common practice to sign global licences for a portfolio of patents, 'without knowing precisely how many of the licenced patents are valid or infringed' [601] . On the one hand, the patent holder cannot know at the time of the declaration of a patent as (potentially) essential whether it will be valid and infringed by the still developing standard [601] . The implementer, on the other hand, does not know which patents are valid and infringed when using the standard [601] .

This 'unavoidable uncertainty' is dealt with by the conclusion of portfolio licences covering all declared SEPs of the patent holder worldwide, at a price which 'ought to reflect the untested nature of many patents in the portfolio' [601] . By taking such a licence, the implementer 'buys access' to the standard and 'certainty' that it has authorisation to use all technology needed to comply with the standard [601] .

Since, according to the commercial practice, FRAND licences include 'untested' patents, the Supreme Court took the view that the determination of the terms and conditions of a global licence does not imply an assessment of the validity of all patents covered. Therefore, when setting the terms of a worldwide portfolio licence, English courts do not rule on the validity and infringement of foreign patents, which is, indeed, a question subject to the exclusive jurisdiction of the national courts of the state that granted each patent [602] . Accordingly, it will, as a rule, be 'fair and reasonable' for the implementer to 'reserve the right to challenge those patents or a sample of those patents in the relevant foreign court and to require that the licence provide a mechanism to alter the royalty rates as a result' [603] .

In this context, the Supreme Court highlighted that the above approach is not unique to UK jurisprudence, but is in line with case law delivered in other jurisdictions, particularly in the United States, Germany, China and Japan [604] .


2. Suitable forum (forum conveniens)

The second issue which the Supreme Court addressed dealt also with the jurisdiction of the English courts. In the Conversant v Huawei case, the defendants had argued that English courts should have declined jurisdiction in favour of Chinese courts or at least stayed their proceedings, until the Chinese courts have decided on validity challenges raised against Conversant's Chinese patens.

The Supreme Court found that UK Courts were not obliged to decline jurisdiction in favour of the Chinese courts [605] . The so-called 'forum conveniens' doctrine was not applicable in the present case, since -unlike the courts in England- Chinese courts had currently no jurisdiction to determine the terms of global FRAND portfolio licences in the absence of an agreement of the parties to the dispute [605] . What is more, the Court found that it could reasonably not be expected by Conversant to consent in granting jurisdiction to the Chinese courts in the current setting [605] .

In the eyes of the Supreme Court, the English courts involved in the present dispute were also not obliged to stay their proceedings in expectation of the outcome of the Chinese validity proceedings [606] . The latter concerned only the validity of Conversant's Chinese patents, whereas the proceedings initiated in England referred to the determination of the terms of a FRAND licence for Conversant's global SEP portfolio [606] .


3. Non-discrimination

The third issue examined by the Supreme Court referred to the interpretation of the non-discrimination element of FRAND. In the proceedings, the question had arisen whether Unwired Planet had breached the non-discrimination prong of FRAND by offering to Huawei licensing terms less favourable than those agreed with Samsung after the start of the trial.

The Supreme Court agreed with both the High Court and the Court of Appeal and found that this was not the case. The Court explained that FRAND does not imply a so-called 'hard-edged' non-discrimination obligation, requiring from the patent holder to offer the same or similar terms to all similarly situated licensees [607] .

Under the ETSI IPR Policy (Article 6.1.), the patent holder must commit to make licences available on FRAND terms. In the eyes of the Supreme Court, this is a 'single, unitary obligation', not three distinct obligations that the licence terms should be fair, and separately, reasonable, and separately, non-discriminatory [608] . Accordingly, the terms and conditions should be 'generally available as a fair market price for any market participant' and reflect the 'true value' of the SEP portfolio, 'without adjustment depending on the individual characteristics' of a particular licensee [609] .

The Supreme Court made further clear, that the FRAND undertaking under the ETSI IPR Policy does not imply a so-called 'most favourable licence' clause, obliging patent holders to grant licences on terms equivalent to the most favourable licence terms to all similarly situated licensees [610] . Looking in detail at the creation of the ETSI IPR Policy, the Court observed that ETSI had previously expressly rejected proposals to include such a clause in the FRAND undertaking [611] .

Furthermore, the Court noted that there is no 'general presumption' that differential pricing is harmful to private or public interests involved [612] . On the contrary, there are circumstances in which the SEP holder's choice to offer lower than the benchmark rates to specific licensees is reasonable in a commercial sense [613] . This applies, for instance, with respect to the so-called 'first mover advantage': The Court recognised that it can be 'economically rational' and 'commercially important' to agree a lower rate with the first ever licensee, because, apart from generating initial income on the SEPs, the licence signed can also 'validate' the portfolio in the market and facilitate licensing in the future [613] . The same is also true with respect to so-called 'fire sales', that is cases, in which the patent holder is forced to licence at lower rates in order to secure its commercial survival, as it has been the case at the time, in which Unwired Planet signed the licensing agreement with Samsung [614] .


4. Abuse of market dominance / Huawei framework

The fourth issue examined by the Supreme Court was whether, by bringing infringement proceedings against Huawei, Unwired Planet had abused a dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU (TFEU) and should, therefore, be denied access to injunctive relief. In particular, Huawei had argued that an injunction should be denied, because Unwired Planet had failed to comply with the conduct requirements established by the Court of Justice of the European Union (CJEU) in the matter Huawei v ZTE (Huawei judgment or scheme) [615] .

The Supreme Court held that this was not the case [616] . In the eyes of the Court, the Huawei judgment establishes an obligation of the patent holder to notify the standards implementer about the infringing use of the SEPs in question, prior to filing an action for injunctive relief, which, if breached, results in abusive behaviour in terms of Article 102 TFEU [617] . The 'nature' of this obligation depends on the circumstances of each individual case [617] . The Court held that Unwired Planet had given adequate notice to Huawei prior to filing the present infringement action [618] .

Considering the further duties established by the Huawei judgment, the Supreme Court confirmed the view previously taken by the High Court and the Court of Appeal that the Huawei scheme is not 'mandatory', but rather establishes a 'route map, which, if followed precisely, will ensure that [the patent holder] can seek an injunction without risking infringing article 102' [619] . Other than that, the Huawei judgment provides 'a number of points of reference to assist in assessing the all-important question of whether each of the parties is willing to enter into a licence on FRAND terms' [618] . Having said that, the Supreme Court found that Unwired Planet had been willing to grant a FRAND licence to Huawei, so that it had not behaved abusively [618] .


5. Damages instead of injunctive relief?

The fifth and final issue addressed by the Court concerned the proper remedies for the infringement of SEPs. In the appeal proceedings before the Supreme Court, it was argued for the first time that the most appropriate and proportionate measure to remedy the infringement of Unwired Planet's SEPs would have been an award of damages instead of an injunction.

The Supreme Court found that there is no basis for substituting an injunction by an award of damages in the present case [620] . On the one hand, neither Unwired Planet nor Conversant could employ the 'threat of an injunction' as a means for imposing 'exorbitant fees' on Huawei or ZTE, since they would be entitled to an injunction, only if they have offered a licence on terms which the court would have already confirmed as FRAND [621] .

Furthermore, the Court took the view that an award of damages is 'unlikely to be an adequate substitute for what would be lost by the withholding of an injunction', since the SEP holder would be required to bring proceedings against an implementer patent-by-patent and country-by-country, which was considered to be 'impractical' [622] . What is more, standards implementers would then have 'an incentive to continue infringing until, patent by patent, and country by country, they were compelled to pay royalties', a fact that would make FRAND licensing more difficult, since, as the Supreme Court pointed out, 'it would not make economic sense' for infringers to voluntarily take a licence [623] .

On the other hand, an injunction 'is likely to be a more effective remedy': By prohibiting infringement altogether, an injunction may give an infringer 'little option' but to accept the FRAND terms offered by the SEP holder, 'if it wishes to remain in the market' [623] . For the above reasons, the Supreme Court highlighted that an injunction is 'necessary in order to do justice' [624] .

  • [592] Unwired Planet v Huawei, High Court of Justice for England and Wales, judgment dated 5 April 2017, Case No. [2017] EWHC 711(Pat).
  • [593] Unwired Planet v Huawei, UK Court of Appeal, judgment dated 23 October 2018, Case No. [2018] EWCA Civ 2344.
  • [594] Conversant v Huawei and ZTE, High Court of Justice for England and Wales, judgment dated 16 April 2018, Case No. [2018] EWHC 808 (Pat).
  • [595] Conversant v Huawei and ZTE, UK Court of Appeal, judgment dated 30 January 2019, Case No. [2019] EWCA Civ 38.
  • [596] Unwired Planet v Huawei and Conversant v Huawei and ZTE, UK Supreme Court, judgment dated 30 January 2019, Case No. [2019] EWCA Civ 38.
  • [597] Ibid, paras. 49 et seqq.
  • [598] Ibid, para. 61.
  • [599] Ibid, para. 58.
  • [600] Ibid, para. 62.
  • [601] Ibid, para. 60.
  • [602] Ibid, para. 63.
  • [603] Ibid, para. 64.
  • [604] Ibid, paras. 68-84.
  • [605] Ibid, para. 97.
  • [606] Ibid, paras. 99 et seqq.
  • [607] Ibid, paras. 112 et seqq.
  • [608] Ibid, para. 113.
  • [609] Ibid, para. 114.
  • [610] Ibid, para. 116.
  • [611] Ibid, paras. 116 et seqq.
  • [612] Ibid, para. 123.
  • [613] Ibid, para. 125.
  • [614] Ibid, para. 126.
  • [615] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [616] Unwired Planet v Huawei and Conversant v Huawei and ZTE, UK Supreme Court, judgment dated 30 January 2019, Case No. [2019] EWCA Civ 38, paras. 149 et seqq.
  • [617] Ibid, para. 150.
  • [618] Ibid, para. 158.
  • [619] Ibid, paras. 157 and 158.
  • [620] Ibid, para. 163.
  • [621] Ibid, para. 164.
  • [622] Ibid, para. 166.
  • [623] Ibid, para. 167.
  • [624] Ibid, para. 169.