〈日本知財学会誌〉Vol. 17 No. 3― 2021 : 15 26-

The Power Balance Between SEP Owners
and Implementers in SEP/FRAND Litigation in Europe : Analysis of Four Key Characteristics of the European Judicial LandscapeRalph Nack （Partner, Noerr Attorneys-at-Law, Munich/Germany）【Abstract】 This article analyzes the following four key characteristics of the European judicial landscape which heavily
impact the power balance between the owners of standard-essential patents (“SEPs”), and the implementers,
respectively, in SEP-related litigation.
・Procedural restrictions regarding the judicial enforcement of SEPs.
・Material definition of a “fair and reasonable” licensing practice.
・Material definition of a “non-discriminatory” licensing practice.
・The question whether courts are prepared to determine what a fair, reasonable and non-discriminatory (“FRAND”)
licensing rate in a particular case is.
The SEP owner is currently in a quite powerful position in Germany and the UK. However, this may change if therequest for a preliminary ruling of the CJEU in Nokia v. Daimler proceeds. Due to this CJEU referral, it also seems to
be a high risk strategy to restrict availability of licenses to the OEM level (“Nokia v. Daimler issue”).
When starting a new SEP litigation campaign, the UK might be the preferable forum, as the court will calculate andset a FRAND rate, leading to a strong precedent for future cases in other jurisdictions. In contrast, the German
jurisdiction might be the more efficient venue to run bulk litigation in established SEP licensing/monetization programs.
【Keywords】 FRAND

1.

SEP

Litigation

Europeimplementer

mobile telecommunication standard started to retreat

Introduction

from the business of manufacturing cellular equipment,
especially mobile phones.

Instead of seeking return

In this article, we are going to analyze four key char-on investment on the product market, these early pio-

acteristics of the European judicial landscape whichneers switched to patent monetization strategy, in par-heavily impact the power balance between the owners

ticular based on the wealth of their portfolio of SEPs.

of standard-essential patents (“SEPs”), and the imple-

One of the first players taking this approach was Rob-menters, respectively, in SEP-related litigation.

ert Bosch, selling their mobile phone patent portfolio

In Europe, SEP litigation took off when the 2G

to the Fortress-funded patent monetization vehicle IP-(GSM/GPRS) mobile telecommunication standard be-

Com in 2007.

came mature, and some of the companies initially in-courts, fueling the appetite of many other patent hold-volved in the development of this first European digitaling entities to follow this trend which never ceased to

ISSN 1349-421X© 2021IPAJ

All rights reserved.

IPCom then sued Nokia in various

15

〈日本知財学会誌〉 Vol.17 No.3― 2021

grow until today.

As a second early leitmotif, chipset

tion/punishment under antitrust law.

manufacturers started to enforce their SEPs against

Lastly, the power balance is impacted by the ques-

implementers who sourced chips from competing man-tion whether courts are prepared to determine FRAND

ufacturers and/or refused to take an (additional) li-

royalty rates in their own capacity, independent fromcense.

This second megatrend also started in 2007

what the parties may consider as being FRAND, or(e.g. with the global Qualcomm vs. Nokia battle), andwhether the courts restrict their role to reviewing therecently got further momentum in the connected-car

licensing offers submitted by the parties, but refrain

battles (e.g. Broadcom vs. Audi). The connected-car

from making their own calculation.

battles eventually put SEP/FRAND litigation in Europe

court on the structural level of the judicial system may“on steroids” leading to a new quality litigation, as theeither balance out the parties’ power level by replacing

traditional giants of the German post-war industry, thethe FRAND assessment of the parties, or rather ac-

automotive OEMs are confronted with a very serious

cepts the power balance between the parties when re-attack of their well-established strictly horizontal li-

viewing the submitted FRAND offers, at least as acensing model, putting their high-price products understarting point.

the threat of an injunction for alleged SEP infringement, no different to a budget smartphone for a frac-This role of the

In summary, we will analyze the following four key
characteristics :· Procedural restrictions regarding the judicial en-tion of the price.
In the course of these roughly 15 years of SEP liti-

forcement of SEPs.

gation, the power balance between the SEP owners· Material definition of a “fair and reasonable” li-and the implementers shifted repeatedly. This power

censing practice.

balance depends on a large number of variables, includ-· Material definition of a “non-discriminatory” li-ing the financial capability and level of sophistication ofcensing practice.

the parties involved in the concrete cases.

However,· The question whether courts are prepared to de-leaving aside specific party-related and other “soft”

termine what a fair, reasonable and non-discrimi-

factors, the relevant legal framework has the most sig-

natory (“FRAND”) licensing rate in a particularnificant impact on the power balance.

case is, or whether the courts restrict their juris-

Within the legal framework, procedural restrictions

diction to an evaluation of the FRAND licensing

regarding the judicial enforcement of SEPs (based on
antitrust/cartel law) are likely the most important key
characteristic impacting the power balance as they de-offers submitted by the parties.

2.

Analysis of the four key characteristics

2.1

Procedural restrictions regarding thefine the strength of the starting position of the SEP
owner and the implementer, respectively, in judicial litigation.
Next to these procedural key characteristics, thescope and definition of material obligations of the SEP

judicial enforcement of SEPs

The first key characteristic defines the strength ofowner to grant fair, reasonable and non-discriminatory

the starting position of the SEP owner and the imple-(FRAND) licenses form further key characteristics de-menter, respectively, in judicial litigation.

fining the power balance ; if the SEP owner does notidea of procedural restrictions regarding the availability

stay in compliance with these material obligations, var-of injunctive relief based on SEPs is that the imple-

ious adverse consequences may kick in, including de-menter has a claim for a FRAND license against thenial of injunctive relief in patent litigation, and prosecu-

SEP owner which potentially stops the SEP owner

16

The basic

The Power Balance Between SEP Owners and Implementers in SEP/FRAND Litigation in Europe

from preventing the implementer to use the SEP basedrisk that the implementer picked an over-FRAND li-

on the exclusivity normally provided by a patent (dolocensing rate, as an under FRAND rate would have re-agit).

sulted in an instant loss of the FRAND defense.

Therefore, the claim of the SEP owner (injunc-

tive relief) and the conflicting claim of the implementer

Consequently, the FRAND defense according to(availability of a FRAND license) need to be recon-“Orange-Book-Standard” was essentially a kneeling of

ciled.

the implementer before the SEP owner.

Such reconciliation is aimed by imposing spe-

It is appar-cific procedural acts on the parties involved in SEP liti-

ent that even the most abusive licensing behavior ofgation, assuming that the overall corset of required

the SEP owner did not meet automatic sanctions,acts results in an appropriate power balance between

while the implementer’s failure to land on a FRAND

the parties (like the rules of a complex game, e.g.

rate (or any other FRAND “offense”) resulted in an in-chess).

stant loss of defensive rights.

(a) “Orange-Book-Standard”in 2009

From today’s perspective, the “Orange-Book-Stan-

The 2009 decision of the German Federal Court of
1

dard” regime may look harsh ; however, this initial

Justice “Orange-Book-Standard” set the opening(dis-)balance of power between the SEP owner and thescene of the epic European FRAND tale.

From theimplementer still serves as a very good reference point

implementer’s view, this opening scene looked rather

when seeking an objective assessment of the situation

sinister, as it put the implementer in a purely defensive

evolving in the next acts of this epic tale.

position.

“Orange-Book-Standard” remains to be the “standard

Literally standing with its back to the wall, the implementer had very little chance to escape an SEPbased injunction.

2

The newly created term “FRAND

Therefore,zero” when assessing subsequent and current FRAND
regimes.
(b) “Huawei v. ZTE”in 2015

defense” was actually a precise description of the

In 2015, following to a referral of the Dusseldorf Re-

then-applicable rule : as a starting point, “Orange-

gional Court, the Court of Justice of the European

Book-Standard” implicitly assumed that the SEP own-

Union (CJEU) took over the lead in the FRAND debate

er is free to enforce its SEP without any restrictions,in “Huawei v. ZTE”.3

including injunctive relief.

In other words, absent any

this landmark decision is still highly disputed, it seems

FRAND-specific “re”-action of the implementer, thefair to say that the CJEU envisaged a ping-pong-ask

right owner can enforce its SEP like any other patent,

sequence of steps both the SEP owner and the imple-

and if the court finds the patent to be essential, suchmenter must observe in SEP litigation :While the “correct” reading ofaction will result in an enforceable injunction (and dam-· The SEP holder must notify the user of the in-ages, of course).

fringement and must identify the SEP and indicate

Only if the implementer raised the FRAND defense,
additional rules kicked in.

the act of infringement.4

However, according to· The user must respond to this with a request for“Orange-Book-Standard” raising the FRAND defense

licensing and must thereby indicate his willingness

put a massive initial burden on the implementer. The

to license.5

implementer, not the SEP owner, had to submit a· The SEP holder must submit a written license of-(draft) licensing agreement.

Without any access to

fer on FRAND terms and conditions, specifying in(potentially) existing licensing agreements of the SEP

particular the method of calculating the licenseowner (or its predecessor in title), the implementer

fee.6

had to formulate licensing terms meeting FRAND con-· The user must respond to the offer carefully andditions.

within a reasonable time.

On the monetary side, this created a highIf he rejects it, the17

〈日本知財学会誌〉 Vol.17 No.3― 2021

FRAND objection can only be raised if he in turnof injunctive relief and a much more balanced distribu-

submits a written offer on FRAND terms within ation of power between the SEP owner and the imple-

7

short period of time.

menter, imposing obligations on both sides.

· In addition, if the user continues to use the SEP

seemed to end the era where absent any FRAND-spe-

without a corresponding license agreement, hecific reaction of the implementer, the right owner canmust provide security in an appropriate amountenforce its SEP like any other patent.

from the time his counter offer was rejected.

8

This

This basic achievement of “Huawei v. ZTE” is often

By handing down this decision, the court distanced it-

overlooked in today’s debate.

self from the point of view of the German Federal

fair to consider “Huawei v. ZTE” as the counter swing

Court of Justice that put almost all responsibility onof the pendulum after “Orange Book Standard”.

the shoulders of the licensee.

takes us now to the third act of the FRAND saga – andHowever, as it turned out in the reception of this decision by the European national courts (see below), theConsequently, it seems
This

guess where to the pendulum starts to swing now.
(c)Interpretation of the “Huawei vs. ZTE”
mechanism by European national courts

CJEU has not clearly stated whether the above mechanism should be understood as a strict script for SEP(i)Court of Appeal of the Hague in 2019

litigation, and if so, whether or not omissions of either

The first Dutch appeal court decision addressing aparty can be cured during litigation, or whether the im-

FRAND-defense in infringement proceedings after

plementer’s failure to comply with any of its obliga-“Huawei v. ZTE” was handed down by The Hague

tions would result in a loss of the FRAND defense, ir-

Court of Appeal in May 2019.11

In this decision, in

9

the court heavily focuses on the willingness of the im-

Further, it remained open whether an injunction is still

plementer to conclude a license agreement on FRAND

available if both the SEP owner and the implementerterms.

submit licensing offers which fall into a corridor ofoutstanding relevance that it does not even matter

FRAND conditions (so-called FRAND v. FRAND sit-

whether or not the patent proprietor himself fulfilledrespective of the behavior of the right owner.

uation).

10

According to the court, this aspect is of suchany of his FRAND obligations.12 The implementer is

As a leitmotif of this decision, the Court emphasizes

stopped from raising the FRAND defense in case he is

the notion of the FRAND declaration made by the SEP

not considered to be “willing”, no matter whether theowner during standardization, which implementers can

SEP owner is in compliance with any of its obligations

rightfully rely on.

under “Huawei v. ZTE”. This view was reaffirmed in

While this reasoning of course

avoids a more profound analysis of any restrictions di-a further decision by the same court.13

rectly obtained from Articles 101, 102 TFEU (even if

The Dutch court therefore deviates from the proce-no FRAND declaration exists at all, or the current

dure established in “Huawei v. ZTE”, heavily shifting

owner is not the entity who made this FRAND declara-

the procedural power to the SEP owner.

tion), it nevertheless becomes clear that the imple-(ii) German Federal Court of Justice in 2020

menter is no longer in a purely defensive position like

Similar to the Dutch case law, the German Federal

under “Orange Book Standard”, but rather has clear

Court of Justice held in “SISVEL v. Haier”14 that theand powerful legal means to force the right holder into

implementer has to fulfill several requirements to betransparent negotiations at eye level.

Despite re-considered as “willing” licensee which is entitled tomaining unclarity of “Huawei v. ZTE”, it therefore

the FRAND defense, citing the UK High Court Judge

seems to be a fair understanding of this decision that

Birss : “A willing licensee must be one who is willing

the CJEU was striving for a much restricted availability

to take a FRAND license on whatever terms are in fact

18

The Power Balance Between SEP Owners and Implementers in SEP/FRAND Litigation in Europe

FRAND”.15 The licensee has to make clear that he is

The UK Supreme Court issued a similar opinion isprepared to accept any licensing rates and conditions,

his long-awaited judgment “Unwired Planet v. Hua-no matter how unsatisfying they seem to be, as long aswei” of 2020.20 It found that the duty for a SEP-hold-they are FRAND.

Under this rule, the implementerer to make an offer on FRAND terms arises only at thehas to seek actively a FRAND license throughout the

point where the implementer has clearly expressed his

entire litigation, showing serious engagement in li-

willingness to conclude a licensing agreement on

censing negotiations and target-orientated behavior.

FRAND terms.21

Consequently, the implementer’s overall behavior overpects the licensee to carry most of the responsibility

time is relevant.16 A simple declaration of willingness

for the successful conclusion of a FRAND licensing

17

is not sufficient ; rather a specific licensing request isThis judgment therefore also ex-

agreement.

The implementer has to adjust its position(iv) Referral to CJEU in “Nokia v. Daimler” in 2020in the course of negotiations, rather than insisting on

Against this background, the Dusseldorf Regional

expected.

its original position.

Delay tactics will be interpreted
18

Court recently stayed the proceedings in “Nokia v.

The same applies to re-Daimler” and referred a set of questions to the CJEU

quests regarding information, which can be obtainedin order to receive a preliminary ruling.22 In particu-

from public sources.

lar, the Court asked the CJEU to clarify the require-as a lack of willingness.

The implementer may request

further information, but only within a short time frame.

ments established by it in “Huawei v. ZTE” :In contrast, with regard to patentee’s obligation to· Irrespective of the fact that the SEP owner and thesend a notice of the infringement as a starting point of

implementer both have to fulfill several obligations

the procedure, the court held that such a notice only

prior to litigation, is it still possible to catch up on

needs to be given in cases in which the infringement isthese obligations during pending litigations?

not obvious to the implementer.

19

The patentee can· Is the implementer’s request for a license only rel-

generally fulfill the obligation to send a notice of theevant if, on the basis of a comprehensive assess-

infringement by pointing to the SEP and the infringing

ment of all accompanying circumstances, the im-

activity.

plementer clearly and unambiguously shows

Under these rules, the implementer faces a high risk

willingness to conclude a licensing agreement onof being considered as “unwilling implementer”, re-

FRAND terms, whatever these FRAND terms

sulting in a loss of the FRAND defense, while the SEP

may look like?

owner has little or even nothing to fear in case he ne-→ Does an implementer, who remains silent forglects his procedural obligations envisaged by “Huawei

several months in response to the infringe-

v. ZTE”.

Like the Dutch Court of Appeal of thement notice, thereby regularly indicate that heHague, the German Federal Court therefore seems to

is not interested in taking a license, so that -be moving sharply away from the mechanism devel-

despite the verbally formulated licensing re-oped by the CJEU in “Huawei v. ZTE”, heading in thequest - there is no such request, with the con-direction of the old ruled of “Orange Book Standard”,

sequence that the SEP owner is entitled towhich strongly shifts the procedural power towards theinjunctive relief?

Unless the CJEU again corrects this→ Is it allowed to conclude that the implementer

Germanic attitude to SEP litigation, the implementer’s

did not make a valid licensing request based on

legal means to force the right holder into transparent

the details of the implementer’s counter offer,

negotiations at eye level are diminishing.

resulting in an immediate dismissal of the im-

SEP owner.

(iii) Supreme Court of the United Kingdom in 2020

plementer’s FRAND defense, without prior ex19

〈日本知財学会誌〉 Vol.17 No.3― 2021

amination whether the SEP owner’s licensing

FRAND declaration towards a Standard Setting Orga-

offer complies with FRAND conditions at all?

nization (SSO) as a contract-like document which con-→ Is such a conclusion at least prohibited where

stitutes the legal basis for a claim of the implementer

the license conditions of the implementer’sagainst the SEP owner to grant a FRAND license.24

counter offer are neither obviously un-FRAND

As regards the material definition of “fair and rea-nor considered un-FRAND under the case law

sonable” licensing practice, the European discussionof the Federal Court of Justice?

focusses on three sub-issues which are briefly ex-

It remains to be seen where the pendulum is goingto swing this time.

plained below : the accepted method for calculating
FRAND rates, the question whether the FRAND royalty rate applies on the Smallest Salable Patent Practic-

2.2 Material definition of a“fair and reasonable”
licensing practiceing Unit, or rather on the Entire Market Value (“SSPPU v. EMVR”), and the question whether the SEP

Having analyzed the first – procedural – key charac-

owner is under the obligation to offer licenses to allteristic heavily impacting the power balance between

entities involved in a supply chain, or rather can re-

the SEP owners and implementers in section B above,

strict availability of licenses to the OEM level (“Nokia

we are now starting to look at two further key factors

v. Daimler issue”) ; this sub-issue is also subject mat-which are highly relevant for this power balance on theter of the aforementioned referral to CJEU in “Nokia v.

level of substantive/material law : restrictions on the

Daimler” by the Dusseldorf Regional Court.

allowable design of the licensing practice of the SEP(d) Accepted method for calculating FRAND

owner.

rates – the double approach

If the SEP owner is not in compliance withthese restrictions, various adverse consequences may

In the European FRAND royalty rate calculation

kick in, including denial of injunctive relief in patent

practice, two main approaches are commonly used : (1)litigation (see section B.1 above), and prosecution/pun-the comparable licensing agreement approach, and (2)ishment under antitrust law.

the top-down approach.

The comparable licensing

Before we start this analysis, we briefly summarize

agreement approach normally takes the lead in the cal-the fundamental legal basis of the restrictions on theculation, while the top-down approach typically serves

allowable design of the licensing practice of the SEP

as a checkpoint for the results derived from the appli-

owner.

Over time, three main approaches havecation of the comparable licensing agreement approach.

evolved.

The first approach is to see the standardiza-

Both approaches are briefly explained hereinafter.

tion of patents and the dominant position of the SEP(i)holder that is associated with it as a cartel formation

The reliance on evidence and data in comparable li-

within the meaning of Art. 101 of the Treaty on thecense agreements for the purpose of FRAND royalty

Functioning of the European Union (TFEU).

determination is common ground in Europe.25

Never-

Comparable licensing agreement approachHow-theless, this cartel formation can be justified by a com-ever, the exact methodology of making such compari-mitment of the SEP owner to grant licenses to third

son is still under discussion, and approaches vary with-parties on FRAND conditions.

23

Furthermore, Art.

102 TFEU prohibits the abuse of a market-dominantposition.

An SEP owner who refuses to grant fair,in the European jurisdiction.
The UK courts start by identifying a comparable license agreement entered into by the patent proprietor

reasonable and non-discriminatory licenses to thirdor third parties. 26

parties will infringe this per-se prohibition of Art. 102

portfolio (R) is put in relation to the license fee of the

TFEU.

settlement agreement (E). The value R is the ratio of

20

The third approach rather understands aThen the value of the disputed

The Power Balance Between SEP Owners and Implementers in SEP/FRAND Litigation in Europe

the disputed SEPs to the SEPs in the Settlement

tant for the use of the standard and in this regard none

Agreement. The admissible license fee is then equal

is more significant than the other.33

to E times R.

also argued that the significance of the SEPs can never

While also German courts regard existing license

However, it is

be the same due to the differences between their con-agreements as extremely relevant for figuring out thistributions to the standard. 34

acceptable range and then determining the fairness

would be against the aim of benefit- and market value-

and reasonableness of the rate offered to the imple-

oriented patent protection.

menter,27 they take a less mathematical approach, re-ing all SEPs as equally important may increase the risk

flecting the general view that a FRAND licensing rateof over declaration.

is not a fixed, mathematically calculated rate but rather(e)an acceptable range.

28

Such an assumption

In addition to that, regard-

SSPPU v. EMVR

The main idea of the German

The second main sub-issue in the context of fair andapproach is that it is the burden of the SEP owner toreasonable licensing practices is the question whether

explain his license offer and show that it is not discrim-

the FRAND royalty rate applies on the Smallest Sal-

inating or exploiting, especially with regard to existing

able Patent Practicing Unit (“SSPPU”), or whether

licensing agreements.29 The court generally does notrather an Entire Market Value Rule (“EMVR”) needs

re-calculate the offered royalty rate, but rather assess-to be applied.

es the validity of the explanations given by the SEP
owner.

Based on this approach, the SEP owner does

When applying the EMVR, the value of the entire
product creates the base for the calculation of the re-not even need to explain the royalty rate if such rate is

muneration.

already accepted by a significant number of existing li-

plies a smaller royalty base with a larger one in ordercensees.
(ii)

30

Then again, the SSPU approach multi-

to reach a royalty rate.
On the mobile phone market, the EMVR has assert-

The top-down approach

As a checkpoint for the results derived from the ap-

ed itself as predominant.35

One of the main reasonsplication of the comparable licensing agreement ap-

for this is that the approach supports “industries withproach, the top-down approach is commonly used instrong externalities and complementary effects” byEurope. The first step is the estimation of the aggre-

summarizing their contributions in a very realistic

gate royalty rate of all SEPs concerning a given stan-way.36 Especially in the telecom industry, the technol-

dard.31

ogy represents a core element in the product.

Afterwards, the court will have to evaluate

the exact portion of a particular SEP holder’s portfolio
to this aggregate rate.

On the other side, SSPPU is frequently used in thefield of the Internet of Things (“IoT”).

It should be noted that the determination of the up-

In addition tothat, it plays an important role for smart home patents

per limit for the royalty rate to avoid overcompensa-

and on the connected cars market.

tion is sometimes a difficult endeavor.

There is often

this royalty base of relevance argue that a fair rate will

no reliable and broadly accepted data concerning theusually somehow be related to the price of a unit which

aggregate rate.

32

The supporters of

can be sold separately.37

In addition, it is an open question whether all SEPs

In conclusion, the European answer to the questionneed to be considered as having an identical vale (nu-which one is the “correct” FRAND royalty base de-merical approach), or whether the value of the individ-

pends on the concrete product and technology market.

ual SEPs needs to be weighted (weighting approach).

Especially the actual licensing practice in the respec-

European FRAND negotiation practice tends to favor

tive market is decisive.

the numerical approach as every SEP is equally impor-“one-size-fits-all” response.

There is no existence of a21

〈日本知財学会誌〉 Vol.17 No.3― 2021

(f)

The Nokia v. Daimler issue

mended to the Mannheim Court to refer these ques-

The third main sub-issue in the context of fair andtions to the CJEU.

reasonable licensing practices is the question whether

However, in a parallel case pending before the Dus-

the SEP owner is under the obligation to offer licenses

seldorf Regional Court, the court took a different viewto all entities involved in a supply chain, or can rather

and issued an order for a reference to the CJEU.43

restrict availability of licenses to the OEM level.

Consequently, this highly controversial question is

In the ongoing litigation between Nokia (as SEP

likely to be resolved by CJEU in due time.

owner) and Daimler (as implementer), Nokia argues
that they are allowed to restrict availability of FRAND
licenses to the OEM level (i.e. Daimler), while Daim-

2.3 Material definition of a“non-discriminatory”
licensing practiceler argues that its suppliers are willing to take a

Next to the requirement of a “fair and reasonable”

FRAND license and Nokia’s refusal to grant licenses

licensing practice (section C above), the third key char-on the supplier level makes their licensing model in-acteristic heavily impacting the power balance between

herently un-FRAND.

the SEP owners and implementers is the requirement

This “Nokia v. Daimler” dispute is representativeof a “non-discriminatory” licensing practice.

Again, if

for quite a fundamental issue in today’s FRAND dis-the SEP owner is not in compliance with these further

cussion.

In modern – connected – cars, up to 10.000

requirements, various adverse consequences may kickcomponents from various suppliers are installed andin, including denial of injunctive relief in patent litiga-

about 100 standards are implemented.38

tion (see section B above), and prosecution/punish-

Under thetraditional so-called horizontal licensing practice in thement under antitrust law.

automotive industry, the car manufacturers (OEMs)

As a starting point, the SEP owner needs to imple-

required their suppliers to provide components which

ment a licensing practice which does not discriminate

enjoy freedom-to-operate regarding third-party pat-

implementers seeking a license.
According to the case law of the German Federal

ents.
Both sides involved in this controversy bring for-Court of Justice, every licensee has the right to get theward various reasons defending their respective posi-best available licensing conditions ; nevertheless, thetion.

In particular, the tier-one suppliers and OEMs

patent proprietor may enjoy a margin of discretion

defend their position arguing that a fair and reasonable

while suggesting licensing terms.44 Such a differenti-

licensing practice inherently requires that licenses

ation between potential licensees can be seen as a le-must be available for every party requesting such li-

gitimate market behavior, provided that it is based oncense.

39

In contrast, third party SEP owners defend

legitimate grounds.

The justification of an unequal

their refusal to offer licenses to entities other than thetreatment is assessed on the basis of all the circum-

OEM, arguing that this practice reduces transactional

stances and interests of the individual case, taking into

costs and ensures more effective technology dissemi-

account the purpose of Article 102 TFEU to ensure ef-

nation.

fective and undistorted competition.45

40

The decisive

In one of the various pending cases, the Mannheim

factor is whether the disadvantageous treatment of a

Regional Court came to the conclusion that Nokia’s li-

company compared with others “appears to be a com-censing practice is in compliance with Nokia’s FRAND

petitive balancing of interests, or is rather based on ar-obligations.

41

Furthermore, the Court rejected therequest to order a referral to the CJEU,42 even though
the Federal Cartel Office (Bundeskartellamt) recom22

bitrariness or considerations and intentions that arealien to economic or entrepreneurial activity”.46
Under this so-called “general” rule, it might be for

The Power Balance Between SEP Owners and Implementers in SEP/FRAND Litigation in Europe

example considered as a reasonable behavior of the

FRAND licensing landscape, as opposed to an approach

SEP owner to offer unusually low royalty rates in amerely evaluating the FRAND licensing offers sub-single case in order to avoid personal or economic

mitted by the parties.

sanctions by foreign authorities putting the SEP ownermind that a detailed and scientifically reasoned, in-under pressure.47

A licensing agreement that is con-depth assessment of FRAND royalty terms may comecluded under such special circumstances does not enti-

with a very heavy price tag in terms of litigation costs,

tle other licensees to enjoy the same unusually low

so that the effective availability of judicial guidance

royalty rates.

may be locked away for many implementers due to

However, the “general” understanding of non-discrimination is not completely undisputed.

The Dus-

However, it should be kept insoaring litigation cost, potentially resulting in de-facto
unavailability of justice.

seldorf Court of Appeal rather takes the view that non-In the following, we will briefly describe the two

discrimination means that the first license ever granted

main approaches presently used in Europe, and also

involving the patent in question sets the benchmark

present a most recent trend in German patent litiga-

for non-discrimination, unless any of the subsequenttion.

licenses provides an even more favorable rate (so-(g)

called “hard-edged” approach).

48

UK

It shall be the duty

The English courts are prepared to provide a full andof the current patent owner to produce all prior licens-

in-depth calculation of a global FRAND rate for a given

es to enable the potential licenses to assess the non-

SEP portfolio, based on a very thorough evaluation of

discrimination of the licensing offer.49 If the patentee

the usually extensive evidence presented to the court.

is unable or unwilling to produce these prior licenses,

The English courts therefore accept the de-facto roleno injunctive relief will be available.

of a universal court, deciding a FRAND dispute not

Within the port-

folio of all existing relevant licenses, the lowest ever

only for the territory of the UK, but rather for all coun-

granted rate sets the standard for non-discrimination,

tries worldwide.

even if that rate is the result of unprofessional negotiations.

50

Consequently, if the SEP owner decides to use theEnglish jurisdiction for SEP litigation, such litigation
will have a massive impact on the legal feasibility of

2.4

The role of the court

SEP owner’s global licensing system and monetization

As the last of the four key characteristics defining

campaign (and the SEP owner also puts its patent-in-

the power balance between the SEP owner and the im-suit under the well-known English scrutiny of a validi-

plementer, we will now analyze whether courts arety assessment).

prepared to determine what a FRAND licensing rate in“deluxe” evaluation of evidence and extensive hear-a particular case is, or whether the courts restrict theirings come with a very heavy price tag regarding costs

jurisdiction to an evaluation of the FRAND licensingof litigation.

offers sub-mitted by the parties.

(h)This fourth key

characteristic is on the structural level of the judicial

In addition, as mentioned before, theGermany

In contrast to the English courts, German courts dosystem, defining the level of judicial involvement in

not take a de-facto role of a universal court calculating

the determination and development of FRAND licens-a FRAND royalty rate. The courts rather review theing rates and systems, and therefore the level of guid-

FRAND offers submitted by the parties ; consequent-ance the SEP owner and the implementer may expect

ly, the court will only assess whether the licensing of-from the courts. It seems clear that strong guidance

fer submitted by plaintiff and the counter offer submit-

from the courts tends to result in a more balanced

ted by defendant are FRAND, but will remain silent on
23

〈日本知財学会誌〉 Vol.17 No.3― 2021

the question what the “correct” royalty rate is, in caseistic, the procedural restrictions regarding the judicial

both licensing offers are non-FRAND.

Consequently,

enforcement of SEPs, the SEP owner is currently in a

German courts merely approve or disapprove submit-

quite powerful position in Germany and the UK.

ted royalty rates, but will not determine a fixed rate.

However, at least for Germany (as the UK has left the

However, the Mannheim court very recently started
a modified approach of the above procedure.

The

court seems to be prepared to present its calculation of
a FRAND licensing as a settlement proposal to bothparties.

EU), the pendulum might be swinging back to a morebalanced situation, if the request for a preliminary ruling of the CJEU in Nokia v. Daimler proceeds.
As for the second key characteristic, the material

While such proposal is of course legally non-definition of a “fair and reasonable” licensing practice,binding, it nevertheless gives very strong guidance to

the SEP owner should expect that a very comprehen-

the parties as to FRAND, without causing soaring

sive disclosure of existing licensing agreements is re-costs of litigation.

quired in litigation, and that the court will focus on as-

Compared to the English proceedings, the amount ofsessing whether the current licensing offer follows theformal evidence processed by the court in context ofrational of these existing agreements.

the FRAND assessment is marginal.

The courts al-

if in line with a consistent licensing approach, it seems

most never appoint experts, and cross-examination of

to be a high risk strategy to restrict availability of li-

experts presented by the parties is foreign to Germancenses to the OEM level (“Nokia v. Daimler issue”) :civil procedure law.

However, even

While German courts normally

While German lower instance courts have taken an ap-

carefully read and evaluate all expert reports and otherproach favoring the SEP owner so far, against the

documents submitted by the parties in support of theirstrong opposition of the German Cartel Office, therespective position, the final assessment of the licens-pending referral to the CJEU in Daimler v. Nokia may

ing offers submitted by parties does not follow a math-lead to important changes of the case law soon.

ematical approach, but rather a discretionary approach.

This approach results in reasonable costs oflitigation, compared to the English approach.

3.

Conclusions

As for the third key characteristic, the material definition of a “non-discriminatory” licensing practice, theSEP owner can expect that European courts generally
avoid unworldly strict rules which would otherwise
stifle active licensing business and dissemination oftechnology.

However, there seems to be some re-In this article, we have analyzed four key character-maining resistance in Europe to agree on the “general”

istics of the European judicial landscape which heavily

approach that a non-discriminatory licensing rate may

impact the power balance between the SEP owners,

vary (or develop) over the time in both directions, as

and the implementers, respectively.

opposed to the approach that the lowest ever granted

From the perspective of the SEP owner, the analysis

royalty rate sets the standard for the assessment of allof these four key characteristics provides a multi-di-

subsequent licensing rates until the expiration of themensional fingerprint of a SEP/FRAND landscape, al-licensed patent (“hard-edged”). It remains to be seen

lowing an informed decision whether or not to use Eu-

whether this remaining resistance will eventually faderopean jurisdictions for an SEP enforcement campaign,

away, or whether this issue needs to be clarified by aand if so, which country (and court) provides for the

future referral to the CJEU.

most suitable “ecosystem” given the specific characteristics of the case.
As for the first (and most important) key character24

As for the fourth key characteristic, the question
whether courts are prepared to determine what a
FRAND licensing rate in a particular case is, the Euro-The Power Balance Between SEP Owners and Implementers in SEP/FRAND Litigation in Europe

pean judicial landscape offers two very diverse ap-

nition of a “non-discriminatory” licensing practice, Eu-

proaches.

Both approaches have strong advantages,

ropean case law generally favors the position of theand an intelligent use of both systems may strategical-

SEP owner, so that the implementer can rely on thely provide best results from the perspective of the SEP

non-discrimination defense generally only in rare cas-owner : When starting a new SEP licensing/monetiza-

es where a differential treatment compared to other li-tion campaign, the UK might be the preferable forum,censees is no longer justified by any commercial rea-as the court will calculate and set a FRAND rate forsons, except for cases pending before the Dusseldorf

the beginning, leading to a strong precedent for future

courts, as their court of appeal expressed sympathy

cases in other jurisdictions.

with the “hard-edged” approach.

In contrast, the German

jurisdiction might be the more efficient venue to run

As for the fourth key characteristic, the question

bulk litigation in established SEP licensing/monetiza-

whether courts are prepared to determine what ation programs.

FRAND licensing rate in a particular case is, the im-

The implementer is usually forced to accept the case

plementer can benefit from the full re-calculation ofin the jurisdiction picked by the SEP owner, i.e. “forum

the FRAND royalty rate by English courts only if he is

shopping” is the exclusive privilege of the SEP owner.

prepared to make a massive investment into the pro-However, the analysis of the four key characteristics

duction of supporting evidence, in particular expert

enables the implementer to identify the best possible

opinions, so that justice may come with a heavy pricedefensive strategy in SEP litigation for the relevant ju-

tag. In Germany, the implementer should show to therisdiction.

court that he is prepared to re-adjust his initial coun-

As for the first key characteristic, the procedural re-ter-offer during litigation in light of the substantive ar-strictions regarding the judicial enforcement of SEPs,

guments submitted by the SEP owner.

the position of the implementer might improve in theof openness to consider counter-arguments of the SEP

near future if the request for a preliminary ruling of theowner will generally strengthen the position of the im-

CJEU in Nokia v. Daimler proceeds.

plementer that his own licensing offer shall be consid-

Therefore, theA high degree

implementer should, wherever possible, try to obtain aered as FRAND.

stay of the infringement proceedings, pending the out-menter may also ask the court to prepare a settlement

come of the CJEU referral. This approach however is

proposal considering the licensing offers submitted by

not feasible in UK proceedings, as the UK is no longer

the parties ; recent proceedings before the Mannheim

under the jurisdiction of the CJEU.

court showed that this might be a feasible approach

As for the second key characteristic, the material
definition of a “fair and reasonable” licensing practice,In appropriated cases, the imple-

leading to a de-facto FRAND determination by the
court at relatively moderate costs of litigation.

the implementer should aim to maximize SEP owner’s
disclosure of existing licensing agreements, as therates and conditions of existing agreements seem toprovide the highest degree of leverage in SEP/FRAND
litigation.

If confronted with an SEP owner restrict-ing availability of licenses to the OEM level (“Nokia v.
Daimler issue”), the implementer should again try toobtain a stay of the infringement proceedings, pending
the outcome of the CJEU referral.
As for the third key characteristic, the material defi-

Notes
1 German Federal Court of Justice (Bundesgerichtshof),
May 6, 2009, Case KZR 39/06, English translation available at : https://www.ie-forum.nl/backoffice/uploads/file/
IEForum/IEForum%20Uitspraken/Octrooirecht/EN%20
Translation%20BGH%20Orange%20Book%20Stan
dard%20-%20eng.pdf (last visited Dec. 10, 2020).
2 Martin Buntscheck, Die Durchsetzung standardessentieller Patente als Missbrauch einer marktbeherrschenden
Stellung (The enforcement of standard essential patents
as an abuse of a dominant position), NZKart, 521(2015).
3 Court of Justice of the European Union (CJEU), July 16,
2015, Case C-170/13 Huawei Technologies Co. Ltd v.
25

〈日本知財学会誌〉 Vol.17 No.3― 2021

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5
6
7
8
9

10

11

12
13

14

15

16
17
18
19
20

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22
23

24

25

26

26

ZTE Corp., ZTE Deutschland GmbH.
Huawei v. ZTE, par. 61.
Huawei v. ZTE, par. 63.
Id.
Huawei v. ZTE, par. 65 et seq..
Huawei v. ZTE, par. 67.
Dusseldorf Regional Court (Landgericht Düsseldorf), November 26, 2020, Case 4c O 17/19 Nokia Oyj v. Daimler
AG.
Mannheim Regional Court (Landgericht Mannheim), August 18, 2020, Case 2 O 34/19 Nokia Oyj v. Daimler
AG, GRUR-RS 2020, 20358.
Court of Appeal of the Hague (Gerechtshof‘s-Gravenhage), May 7, 2019, Case 200.221.250/01 Koninlijke
Philips N.V. v. Asustek Computers INC., Asus Europe B.V.,
Asus Holland B.V., English translation available at :  
https://drive.google.com/file/d/0B_U9nV8-MjxrWmJQW
HZNd3B3b3NrSnZ3djJmc0t4M21oMzVB/view (last visited Dec. 10, 2020).
Philips v. Asus, par. 4.180.
Court of Appeal of the Hague (Gerechtshof‘s-Gravenhage), December 24, 2019, Case 200.231.810/01
Koninlijke Philips N.V. v. Asustek Computers INC., Asus
Europe B.V., Asus Holland B.V., available at : https://uitsp
raken.rechtspraak.nl/inziendocument?id=ECLI:NL:GHD
HA:2019:3427 (last visited Dec.10, 2020).
German Federal Court of Justice (Bundesgerichtshof),
May 5, 2020, Case KZR 36/17 SISVEL v. Haier, English
translation available at : http://eplaw.org/wp-content/upl
oads/2020/07/DE-FCJ-Sisvel-v-Haier-English.pdf (lastvisited Dec. 10, 2020).
London High Court, November 30, 2017, Case HP-2014000005 Unwired Planet International Ltd v. Huawei
Technologies Co. Ltd, Huawei Technologies (UK) Co. Ltd,
par. 708.
SISVEL v. Haier, par. 97.
SISVEL v. Haier, par. 95.
SISVEL v. Haier, par. 92.
See SISVEL v. Haier, par. 73.
Supreme Court of the United Kingdom, August 26, 2020,
Case [2020] UKSC 37 Unwired Planet International Ltdv. Huawei Technologies Co. Ltd, Huawei Technologies(UK) Co. Ltd.
Unwired Planet v. Huawei 2020, par. 139.
Dusseldorf Regional Court (Landgericht Düsseldorf), November 26, 2020, Case 4C O 17/19 Nokia v. Daimler.
Communication from the Commission, Applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements, 2011/C
11/01, par. 263-307, available at : https://eur-lex.euro
pa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52011XC
0114(04)&from=EN (last visited Dec. 10, 2020)
See Philipp Maume/Claudia Tapia, Der Zwangslizenzeinwand ein Jahr nach Orange Book Standard – mehr Fragen
als Antworten (The compulsory license objection one year
after Orange Book Standard – more questions than answers), GRUR Int., 923 (927) (2010).
Haris Tsilikas, Emerging Patterns in the Judicial Determination of FRAND Rates : Comparable Agreements andthe Top-Down Approach for FRAND Royalities Determination, GRUR Int., 885 (2020).
See England and Wales Court of Appeal, October 23,
2018, Case EWCA Civ 2344 Unwired Planet International Ltd v. Huawei Technologies Co. Ltd, Huawei Technologies (UK) Co. Ltd, GRUR Int., 357 (2019) ; Maximilian

27

28
29
30

31

32
33

34

35

36

37
38

39

40
41
42
43

44

45

46

47
48

49
50

Haedicke, Lehren aus der Huawei v. Unwired Planet-Entscheidung für das deutsche Patentrecht (Lessons fromthe Huawei v. Unwired Planet Decision for the German
patent law), GRUR Int., 661 (666) (2017).
Dusseldorf Regional Court (Landgericht Düsseldorf),
March 31, 2016, Case 4a O 126/14 Saint Lawrence v.
Vodafone, GRUR-RS, 8040 (2016) ; Dusseldorf Regional
Court (Landgericht Düsseldorf), November 9, 2018, Case
4a O 15/17 Fraunhofer-Gesellschaft (MPEGLA) v. ZTE,
BeckRS, 33825 (2018).
See SISVEL v. Haier, par. 81.
See Case 6 U 183/16 (fn. 27), 172.
Dusseldorf Regional Court (Landgericht Düsseldorf), January 8, 2019, 4c O 12/17, BeckRS, 3125 par. 196(2019).
See Tsilikas, 889 ; Peter Picht, Unwired Planet v.
Huawei : A Seminal SEP/FRAND Decision from the UK,
GRUR Int. 569 (572) (2017).
See Unwired Planet v. Huawei 2018.
See for example Constantin Kurtz/Wolfgang Straub, Die
Bestimmung des FRAND-Lizenzsatzes für SEP (The determination of the FRAND license rate for SEP), GRUR,
136 (143) (2018).
See Tim W. Dornis, Das standardessentielle Patent unddie FRAND-Lizenz (Teil 2) (The standard essential patentand the FRAND license (Part 2)), WRP, 688 (694 etseq.) (2020).
See United States Court of Appeals for the Federal Circuit, May 14, 2014, Case 2013-1519 Samsung Electronics Co., Ltd. v. International Trade Commission andApple Inc..
Fredrik Nilsson, Appropriate base to determine a fair return on investment : A legal and economic perspective on
FRAND, GRUR Int., 1017 (1019) (2017).
Nilsson, 1018.
See Torsten Körber, Nokia ante portas – die „Patentkriege”erreichen Autohersteller und Industrie 4.0 (Nokia
ante portas – the“patent wars”reach the car manufacturers and the industry 4.0), NZKart, 493 (494) (2020).
See Thomas Kühnen, FRAND-Lizenz in der Verwertungskette (FRAND license in the supply chain), GRUR, 665(666) (2019).
Dornis, 692 et seq.
Nokia v. Daimler, par. 203.
Nokia v. Daimler, par. 257.
Dusseldorf Regional Court (Landgericht Düsseldorf), November 26, 2020, Case 4c O 17/19 19 Nokia Oyj v.
Daimler AG.
SISVEL v. Haier, par. 81. Likewise : Supreme Court of theUnited Kingdom, August 26, 2020, Case [2020] UKSC
37 Unwired Planet International Ltd v. Huawei Technologies Co. Ltd, Huawei Technologies (UK) Co. Ltd.
Higher Regional Court Dusseldorf (Oberlandesgericht
Düsseldorf), March 30, 2017, Case I-15 U 66/15,
GRUR, 1219 par. 175 (2017).
German Federal Court of Justice (Bundesgerichtshof),
April 12, 2016, Case KZR 30/14, NZKart, 374 (376)(2016).
See SISVEL v. Haier, par. 102.
Higher Regional Court Dusseldorf (Oberlandesgericht
Düsseldorf), March 22, 2019, Case 2 U 31/16 Unwired
Planet v. Huawei, BeckRS, 6087 par. 237 (2019).
See Unwired Planet v. Huawei 2019, par. 242.
Unwired Planet v. Huawei 2019, par. 237.