Source: https://caselaw.4ipcouncil.com/search/tag/sep%20owner%E2%80%99s%20offer
Timestamp: 2019-09-20 10:24:02
Document Index: 241722832

Matched Legal Cases: ['§ 30', '§ 242', 'In casu', 'In casu', 'In casu', 'In casu', 'In casu', 'Art. 101', 'Art. 102', 'CJEU ']

4iP Council :: Case Law Search :: Case law search :: sep owner’s offer
The court tentatively confirms that, in transitory cases, it is sufficient if the SEP proprietor fulfills its Huawei duties by way of the statement of claims or even after the lawsuit was initiated. [74] As to the reasons for this finding, the court is not convinced by the considerations of the lower court (cf. above LG Mannheim, 8 January 2016 - 7 O 96/14), in particular because the ECJ has not stated that actions for infringement brought prior to the Huawei decision had to comply only with the Orange Book rules of conduct and not the Huawei rules. [75] However, according to the Court, the Huawei decision deals only with the abusive bringing of an action for SEP infringement, not with the question whether such action remains abusive even after the SEP proprietor has fulfilled its conduct obligations under Huawei. [76] It appears possible that, at least in transitory cases, the continuation of an infringement action is no longer abusive where the statement of claims provided sufficient notice of the infringement, where the SEP proprietor made a Huawei-compliant licensing offer during the ongoing litigation, and where the standard implementer failed to appropriately react to this offer. Hence, the lower court’s finding on that issue was not considered manifestly erroneous.
The court did, however, find the lower court’s ruling to be manifestly erroneous with regard to the standard of review it had postulated for the SEP proprietor’s licensing offer: [77] As stated clearly by the ECJ, the SEP proprietor has to make a licensing offer that qualifies as FRAND—not, for instance, slightly above FRAND—and it is for the respective court to assess the FRAND quality of the offer. A reduced standard of review, consisting merely in a summary assessment of whether the offer is evidently non-FRAND, has no basis in Huawei. Even if the SEP proprietor were to be granted much leeway in determining the licensing conditions—a question which the court reserves for its decision on the merits of the appeal—the conditions would still have to remain within the FRAND range. Since the lower court’s conclusion that Claimant had complied with the Huawei rules of conduct while Defendant had violated them was reached by applying the reduced standard of review the court decided to partly [78] suspend the enforcement of the first instance-ruling.
[74] Case No. 6 U 55/16, para. 24-28
[75] Case No. 6 U 55/16, para. 26
[76] Case No. 6 U 55/16, para. 27
[77] Case No. 6 U 55/16, para. 29-36
[78] The reasons why the Court limited the suspension to the recall and destruction of infringing products are of no interest here, cf. OLG Karlsruhe, 31 May 2016 – Case No. 6 U 55/16, para. 37 et seq.
Since Claimant only entered into licensing negotiations with and addressed all licensing offers to ZTE Corporation, being the parent company of Defendant I, it did not comply with its Huawei obligations vis-à-vis Defendant I. Claimant neither noticed Defendant I of the alleged infringement prior to initiating litigation nor did it provide the necessary documents indicating the essential character of the patent in question. [72]
While rejecting all other actions , particularly as to the seizure of devices using the patent-in-suit, raised against Defendant II, who neither became involved into the licensing negotiations between Claimant and ZTE Corporation nor possesses mobile devices implementing the UMTS standard anymore, the court upheld the action for prohibitory injunction because the confirmation of cessation of sales does not completely exclude periculum in mora. [73] Furthermore, the court rejected the preliminary measures raised by Claimant against Defendant I.
[72] Case No. 30308/20215 R.G., para. 3
[73] Case No. 30308/20215 R.G., para. 5, a-c
The court left open the question of whether the SEP conferred market power to Claimant since it did, in any case, find no abuse of such potential market power (cf. below). As to the infringement notification, [34] the court did not decide whether the meetings with individual companies of the group to which Defendants belong already satisfied the requirements established by the ECJ. Since, in the present case, Claimant filed its actions before the judgment in Huawei v ZTE was rendered the court considered it sufficient that the infringer was alerted of the infringement through the statement of claims: The rules of conduct established by the German Federal Court (Bundesgerichtshof) in its Orange Book-ruling do not require the patent holder to give notice or submit a licensing offer prior to suing a (purportedly) infringing standard implementer. Although Orange Book addressed a de facto Standard and was heavily criticized by scholars and the EU Commission alike, it was being applied by German lower courts to de jure standards until the ECJ handed down its Huawei decision. In consequence, Claimant could—prior to the Huawei decision—reasonably consider itself to comply with the law by acting in accordance with the Orange Book rules.
As regards the Huawei requirement to present the alleged infringer with a specific, written offer for a license on FRAND terms, three statements of the district court deserve attention: Firstly, the SEP holder is in compliance with the ECJ conditions if the licensing offer is submitted not to all individual companies within a group but to the group parent only. Secondly, the court did not decide on whether an offer providing for a worldwide portfolio license and encompassing also non-SEPs could be considered as FRAND because, thirdly, the alleged infringers did not comply with their duties of conduct under Huawei (cf. below). [35]
According to the court, even if the patent proprietor’s licensing offer is not FRAND-compliant, a standard implementer would still have to respond to that offer. The question of whether the alleged infringer may respond to a non-FRAND offer in a different manner than by submitting a specific counter-offer, in particular by merely demonstrating that the SEP owner’s offer was not FRAND, was left undecided. [36] Since Defendants decided to submit a counter-offer, the court stated that they were obliged to render account in respect of acts of use and to provide security for potential royalties, both based on their counter-offer and starting with the refusal of the first counter-offer, regardless of whether subsequent offers and counter-offers were formulated. These obligations also apply to “transitional” cases in which the (first) counter-offer has been rejected before the Huawei ruling because the—previously applicable—Orange Book-rules of conduct were even more demanding for the standard implementer. In the present case, Defendants did not comply with this prerequisite because they rejected, on 1 September 2014, the offers presented by Claimant on 17 February and 29 August 2014 without formulating any counter-offer, submitting such a counter-offer only belatedly, on 12 August 2015. [37] Furthermore, Defendants did not comply with their duties to render account and to provide security because they did so only on 29 September 2015, i.e. more than one month after their first counter-offer had been rejected by the claimant on 24 August 2015. [38]
In addition to its considerations regarding Huawei, the court deliberated on two other important issues: As regards the transfer of a SEP from the original patent proprietor to a non-practicing entity, registration in the patent register in accordance with § 30 (3) PatG establishes presumption of ownership, allowing the proprietor to enforce all rights derived from the SEP as long as the presumption has not been successfully rebutted by Defendants. [39] Furthermore, no patent ambush-defense based on § 242 BGB could successfully be raised because, firstly, Defendants could not substantiate the alleged patent ambush by “A” (being the original SEP proprietor); secondly, the alleged patent ambush would, arguably, have resulted only in a FRAND licensing obligation while, thirdly, Claimant had declared its willingness to grant a license on FRAND terms anyway. [40]
[34] Case No. 4a O 93/14, para. 90-94
[35] Case No. 4a O 93/14, para. 96-98, 125
[36] Case No. 4a O 93/14, para. 98-101
[37] Case No. 4a O 93/14, para. 14, 103-109
[38] Case No. 4a O 93/14, para. 103-111
[39] Case No. 4a O 93/14, para. 37-40
[40] Case No. 4a O 93/14, para. 118-123
Prior to discussing specific conduct requirements established by the Huawei ruling, the court sketches its approach in a general manner. [83] According to the court the Huawei decision establishes a set of rules of due conduct in SEP licensing negotiations. Based on whether the parties comply with these rules the respective court can determine whether an SEP owner’s seeking of an injunction and a recall of products constitutes an abuse of a position of market dominance or a justified reaction to a standard implementer’s delaying tactics. In consequence, the respective court does not—unless it has to decide a claim for the payment of licensing fees and not claims for injunction and recall of products—have to rule on the substance of the offered licensing conditions or their being FRAND. [84] This is in line with recognized commercial practice according to which reasonable parties will not usually want courts to determine their licensing conditions. Furthermore, the ECJ has—from the perspective of the Mannheim District court—stressed that the exercise of the exclusive rights conveyed by a patent will be barred only in very exceptional circumstances. As a result, it is up to the standard implementer to show that such exceptional circumstances are present. [85]
The court does not elaborate on the market power issue. As part of the notice of infringement [86] the court deems it necessary for the proprietor to identify the (allegedly) violated patent, including the patent number, and to inform that the patent has been declared standard-essential. Furthermore, the proprietor has not only to name the standard but to specify the pertinent part of the standard and the infringing element of the implementer’s products in a way that enables the standard implementer to assess whether its use of the standard infringes on the patent-in-suit. The level of detail required must be determined on a case-by-case basis, depending mainly on the expertise of – or available to – the implementer. Presenting claim charts corresponding to recognized commercial practice for licensing negotiations is, in principle, an acceptable way to give notice of the alleged infringement. In casu the court considered the proprietor’s notice as sufficient. [87] In particular, notice was given before the bringing of an action for infringement and the proprietor had submitted claim charts not only with regard to the patent-in-suit but also with regard to six other patents from the portfolio offered for license, a sample which the court deemed in accordance with recognized commercial practice. Sufficient notice having taken place, the court left open the question whether, (1) the Huawei rules applied at all in spite of the action being brought before the ECJ’s decision, and whether (2) the proprietor was obliged to submit claim charts for other patents than the patent-in-suit.
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: [88] 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 accepted the Huawei compliance of the licensing offer, [89] in particular because the proprietor had explained its calculation of the licensing fee based on the percentage of patents in the WCMA/SIPRO and the VIA patent pools held by the proprietor. The proprietor was not required to prove its share in the patent pools. The parties disagreed over whether the smallest saleable unit forms an appropriate basis for royalty calculation and whether it is acceptable to look only at the size, not the quality of a proprietor’s share in a relevant patent pool. The court, however, considered these issues as not decisive for the Huawei-conformity of the licensing offer.
As a further consequence of the court’s general approach, the standard implementer’s duty to diligently react to the proprietor’s licensing offer is not removed only because the offer does not fully comply with FRAND. [90] . An exception applies only where it can be established by a mere summary assessment that the offer evidently violates FRAND. If a reaction of the alleged infringer is due, the “diligence”, i.e. timeliness, of this offer has to be determined cases-by-case, based on the principles of good faith and recognized commercial practice. In casu the standard implementer’s reaction was insufficient (1) because a counter-offer was made only 1.5 years after receiving the licensing offer and 0.5 years after the bringing of the proprietor’s action, (2) because security was merely promised, not provided, and (3) because the amount of security offered fell short of the court’s suggestions.
[83] Case No. 7 O 66/15, para. 53 et seq.
[84] Case No. 7 O 66/15, para. 56
[85] Case No. 7 O 66/15, para. 53
[86] Case No. 7 O 66/15, para. 57
[87] Case No. 7 O 66/15, para. 65-69
[88] Case No. 7 O 66/15, para. 58
[89] Case No. 7 O 66/15, para. 70-72
[90] Case No. 7 O 66/15, para. 59 et seq
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. [1] 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. [2] 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.
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. [3] 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. [4]
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: [5] 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, [6] 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.
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. [7] 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. [8] As the court explains in some detail, [9] 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.
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. [10]
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. [11]
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. [12] 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.
[1] Case No. 7 O 96/14, para. 84-107
[2] Case No. 7 O 96/14, para. 81-83
[3] Case No. 7 O 96/14, para. 109 et seq.
[4] Case No. 7 O 96/14, para. 114-117
[5] LG Mannheim, 29 January 2016 – Case No. 7 O 66/15, para. 58
[6] Case No. 7 O 96/14, para. 118-129
[7] Case No. 7 O 96/14, para. 131-133
[8] Case No. 7 O 96/14, para. 134 et seq.
[9] Case No. 7 O 96/14, para. 136-141
[10] Case No. 7 O 96/14, para. 142
[11] Case No. 7 O 96/14, para. 144 et seq.
[12] Case No. 7 O 96/14, para. 146
As regards the Huawei condition to submit a written offer on FRAND terms prior to the initiation of proceedings, the court requires a contractual offer that is ready to be adopted and comprises the essentialia negotii. However, in the opinion of the judges, Huawei does not oblige the infringement court to determine pursuant to objective criteria whether the licensing offer complies with FRAND terms, if the latter fact is disputed by the alleged infringer. [139] The SEP proprietor’s offer is only considered not FRAND and in violation of antitrust law, if it constitutes an expression of exploitative abuse, taking into account the specific negotiation situation and, in particular, the market conditions.
Taking into account the summary examination of the Higher Regional court in Karlsruhe granting the SEP proprietor much leeway in determining FRAND terms [140] , the Mannheim court left in the present case undecided whether it has to reassess its own standards of review, because Claimant did not sufficiently explain why royalties of USD 1.00 per unit should be FRAND in accordance with Huawei. The mere indication of the multipliers underlying the calculation of the royalties were deemed inadequate, since on the basis of this incomplete (market) information the alleged infringer is neither able to assess whether Claimant’s offer is FRAND nor to submit a FRAND counter-offer.
The subsequent explanations as well as the expert opinion, seeking to prove the non-discriminatory character of the royalties, forming part of Claimant’s reply, did not fulfill the Huawei requirements, because prior to the initiation of proceedings Claimant has to substantiate both the manner of patent infringement and the way of calculating the royalties. Without completely dissenting from the decision previously rendered by the OLG Düsseldorf [141] , the Mannheim court, by reference to the subsequent rectification order issued by the ECJ on 15 December 2015, denied the SEP proprietor’s unlimited possibility to perform its Huawei obligations within the ongoing trial without incurring sanctions, because otherwise the central idea underlying the ECJ decision of being able to negotiate without the burden of pending proceedings while having all necessary information to evaluate the FRAND conformity of the licensing offer would be diminished.
The standard implementer is obliged to react to a licensing offer, even if it deems the later not as FRAND in accordance with Huawei [142] , unless it is established by means of summary examination that the licensing offer is evidently not FRAND and therefore constitutes an abuse of dominance.
Besides, the Court denied the exhaustion of the patents in-suit. [143]
[139] The judges stated in an even more general manner that the infringement court shall not be required under Huawei to determine the FRAND terms, if the proceedings do not involve the payment of royalties, but only relate to actions for a prohibitory injunction or for the recall of products.
[140] See above OLG Karlsruhe, 31 May 2015 – Case No. 6 U 55/16
[141] See above OLG Düsseldorf, 9 May 2016 – Case No. 15 U 36/16
[142] See also LG Mannheim, 27 November 2015 – Case No. 2 O 106/14 and LG Düsseldorf, 3 November 2015 – Case No. 4a O 144/14
[143] Para. V, p. 34 et seq.
TThe court did not comment on the existence of a dominant market position. It focused on the notice of infringement and the license offer. The court held that the notice of infringement should enable the alleged infringer to examine and assess the patent situation. [150] It is insufficient to indicate that the alleged infringer is marketing products covered by a standard and is therefore infringing a patent. Rather, the SEP proprietor needs to specify the patent number and the standard for which it has been declared essential. The SEP proprietor also needs to describe the technical functionality of the standard which is at issue. The level of detail of these descriptions depends on the particular situation. [150] The SEP proprietor needs to take into consideration the level of the alleged infringer’s technological knowledge, or its ability to gain the required knowledge through professional advice. 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. However, the description does not need to be as thorough as a statement of claim in patent litigation.
The court stated that the SEP proprietor’s written license offer needs to contain all relevant aspects of the contract, to enable the alleged infringer to accept the offer. [151] If the alleged infringer argues that the conditions of this 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. The Court acknowledged that the Higher Regional Court of Karlsruhe had rejected this view in the decision 6 U 55/16 of 31 May 2016. [152] The Mannheim District Court, however, reiterated its view that a reduced standard of review of the offered conditions is sufficient, referring to the final opinion given by the Advocate General in the ZTE/Huawei ruling. [151] It was, the court argued, the CJEU’s intention to keep the infringement proceedings free of the determination as to what precise conditions would exactly be FRAND in each particular situation. [151] Only an offer that is clearly abusive, i.e. evidently non-FRAND, would not meet the CJEU criteria at this point. [151]
Of course, the SEP proprietor’s mere assertion that the offer is FRAND would be insufficient. [151] Instead, the Court requires the SEP proprietor to be transparent about the calculation. That means that it needs to specify how the terms of the license offer are calculated. [153] It needs to make clear the basis of the SEP proprietor’s conclusion that the offer is FRAND. Merely stating the royalties owed per unit (in this case: USD 1,- per unit without further explanation) [154] is also insufficient. Rather, the SEP proprietor needs to find a proper way of substantiating its view as to what royalties are owed. This could be a standard license agreement entered into with third parties, or other references such as fees for a pool license that contains SEPs of the respective standard.
The SEP proprietor needs to make these explanations before it commences infringement proceedings. [155] Only then, the alleged infringer is able to assess the situation unburdened by the treat of an ongoing court case. The Court was aware that the Higher Regional Court of Düsseldorf had recently (Case No. I – 15 U 36/16, 9 May 2016) expressed its view that this understanding might be overly formal. However, the Mannheim District Court upheld its opinion that only a thorough explanation by the SEP proprietor enabled the alleged infringer an informed decision as to whether the license offer is FRAND. [155]
The Court held that, in theory, the claimant could be exempt from this transparency obligation if the defendant had been unwilling to enter into a license agreement. [156] However, in the case at issue the defendant had demonstrated its willingness to enter into a license agreement. The Court took into account four factors:
the defendant’s had repeatedly requested the claimant to explain the basis of the license offer calculation, [156]
the defendant had offered to transfer some of its own patents in exchange, [156]
the defendant had made an offer and had commissioned an expert opinion that elaborated why the respective conditions were FRAND, [156]
the defendant had deposited a substantial amount. [157]
The Court repeated its view expressed in the decision 2 O 106/14 of 27 November 2015. [158] Accordingly, the alleged infringer needs to respond to the SEP proprietor’s offer, even if the infringer considers that the offer does not meet the FRAND criteria. The only possible exception is an offer that, by means of summary examination, is clearly not FRAND and therefore constitutes an abuse of market power. A potential counter offer needs to be made in due course, which means as soon as possible, taking into account the recognized commercial practices in the field and good faith.
[150] Case No. 7 O 19/16, para 77
[151] Case No. 7 O 19/16, para 78
[152] Case No. 7 O 19/16, para 76
[153] Case No. 7 O 19/16, para 79
[154] Case No. 7 O 19/16, para 84
[155] Case No. 7 O 19/16, para 86
[156] Case No. 7 O 19/16, para 87
[157] Case No. 7 O 19/16, para 88
[158] Case No. 7 O 19/16, para 80
The Claimant, IP Bridge, is a non-practising entity holding a European patent (German part) which was declared essential to the wireless telecommunications standard LTE (Standard Essential Patent or SEP) developed by the European Telecommunications Standards Institute (ETSI) [135] . The previous holder of the SEP in question had made an undertaking towards ETSI according to Article 6.1 of ETSI IPR Policy to make the patent accessible to users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions [136] .
The Defendant is a German subsidiary of HTC, a company which manufactures and sells electronic devices worldwide, including mobile phones complying with the LTE standard [137] . The Defendant filed an action for invalidity against the Claimant’s SEP in Germany [137] .
In December 2014, the Claimant contacted the Defendant’s parent company (parent company) suggesting that the parties entered into negotiations regarding a licence for Claimant’s patent portfolio which also included the aforementioned SEP [137] . Subsequently, several licensing offers and counter-offers were made by the Claimant and the parent company respectively [137] . On 29 February 2016, the Claimant sent a letter to the parent company explaining how the LTE standard made use of the technology covered by its SEP inter alia under reference to an attached claims chart [138] . In response, the parent company confirmed that it is willing to obtain a licence, among others, by letter dated 7 September 2016 [139] . However, no licensing agreement was concluded.
On 27 September 2016, the Claimant brought an infringement action against the Defendant before the District Court of Mannheim (Court) requesting for a declaratory judgment confirming Defendant’s liability for damages arising from the use of its SEP as well as for information and rendering of accounts [140] .
On 16 February 2018, during the course of the pending proceedings against the Defendant, the Claimant made a further licensing offer to the parent company [141] . On 11 April 2018, after the parent company had signed a Non-Disclosure Agreement, the Claimant presented existing licensing agreements with third parties concerning its relevant patent portfolio (comparable agreements) to the parent company and requested the latter to respond to its last licensing offer of 16 February 2018 within one week (that is until 18 April 2018) [141] . This deadline was extended for almost three weeks until 7 May 2018 [141] .
On 15 May 2018, the Claimant extended its claims in the ongoing proceedings; in addition to its already pending claims, it sought for injunctive relief and also requested the recall and the destruction of products infringing its SEP (claims for injunction) [141] .
With the present judgment the Court ruled that the Defendant is liable for damages arising from the infringement of the SEP in suit [142] . The Court also ordered the Defendant to render accounts and to provide relevant information to the Claimant [142] . On the other hand, the Court dismissed the claim for injunctive relief and the recall and destruction of infringing products as being unenforceable for the time being [143] .
The Court held that the products sold by the Defendant in Germany infringe Claimant’s SEP [144] . Thus, the Defendant is obliged to compensate the damages suffered by the Claimant and the previous holder of the patent in suit [142] . Since the Claimant has no knowledge of the details required for the quantification of the damages suffered, the Defendant is obliged to provide information on relevant uses (starting from the publication of the patent grant) and render accounts for such uses (starting from one month after the publication of the patent grant) [142] .
In the Court’s view, the Defendant cannot raise a defence based on a so-called “patent ambush” against these claims [145] . A “patent ambush” requires that the patent holder deliberately – in terms of a willful fraudulent misconduct – misled the participants in the standardisation process and intentionally prevented the adoption of an alternative technology into the standard [146] . Insofar, it needs to be established (by the defendant) that the disclosure of the patent during the standardisation process would have led to an alternative structure of the standard, which would have avoided making use of the teaching of the patent in suit; the mere theoretical possibility of an alternative technical solution does not suffice for supporting the allegation of a “patent ambush” [146] . The Court held that the Defendant failed to establish such fact [145] . Accordingly, the Court left the question regarding the legal consequences of a “patent ambush” open (obligation to licence royalty-free or just an obligation to offer FRAND licences?) [145] .
Furthermore, the Court stressed out that the FRAND undertaking given by the previous holder of the SEP in suit has no impact on both the scope and the enforceability of the above claims [147] .
In the Court’s eyes, the Claimant is bound to the FRAND undertaking made by the previous holder of the SEP in suit towards ETSI [148] . The wording of Article 6.1. ETSI IPR Policy establishes a respective assumption [148] . In any case, the assignee of a SEP abuses its market power, if it is aware of the FRAND-undertaking of its predecessor, but, nevertheless, refuses to fulfil the obligations arising from it [138] . The assignee of an SEP cannot draw benefits from the inclusion of its patent into a standard, without being bound to the FRAND commitment of its predecessor, since the latter enabled the inclusion of the SEP in the standard in the first place [138] . Indeed, antitrust law and particularly Article 101 of the Treaty for the Functioning of the EU (TFEU) obliges standard development organisations to make the inclusion of patented technology into a standard subject to a FRAND commitment of the patent holder, in order to secure that essential technology will be accessible to users [149] .
Having said that, the Court made clear that SEP holder’s claims for information and rendering of accounts are not limited by the FRAND undertaking [147] . Even if one would assume that such undertaking limits the SEP holder’s claims for damages to the amount of the FRAND royalty (which the Court left undecided), the patent holder would, nevertheless, be entitled, in principle, to information regarding the use of its SEP [147] .
In addition, the Court explained that a FRAND undertaking has also no influence on the enforceability of the claims for damages (on the merits), information and rendering of accounts asserted by the Claimant [147] . In particular, these claims are not subject to the conduct requirements set forth by the Court of Justice of the European Union (CJEU) in the matter Huawei v ZTEHuawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-130/13. (Huawei requirements or framework) with respect to dominant undertakings in terms of Article 102 TFEU [151] .
The opposite is, on the other hand, the case with respect to the claims for injunction asserted by the Claimant. These claims are not enforceable for the time being, since the Claimant failed to fully comply with the Huawei requirements [152] .
Regarding to the SEP in suit, the Court ruled that the Claimant has a dominant market position in terms of Article 102 TFEU: The patent is essential to the LTE standard, which, in turn, cannot be substituted by an alternative standard (from the users’ point of view) [153] .
Looking at the negotiations between the parties involved, the Court did not see any flaws in the parties’ conduct with respect to the first two steps of the framework; the Claimant had effectively notified the Defendant about the infringing use of its SEP and the Defendant (in fact, its parent company) had effectively declared its willingness to obtain a licence covering also the SEP in suit [138] . In this context, the Court pointed out that the SEP holder’s obligation to notify the user of the infringing use of its SEP is also met, when the respective notification is addressed to the parent company of the (alleged) infringer (as is was the case here, especially with the Claimant’s letter to the parent company dated 29 February 2016) [138] .
However, the Court held that the Claimant failed to fulfil its consequent obligation under the Huawei framework, namely to make a FRAND licensing offer to the Defendant (respectively its parent company) [154] .
The Court considered only two offers made by the Claimant to the Defendant’s parent company prior to the extension of its claims in the pending proceedings on 15 May 2018 (since the other offers made were either indisputably not FRAND or were not produced by the Claimant in trial) [139] .
An offer made in February 2016 was found not to be FRAND in terms of content, since it contained a clause, according to which the licensee was obliged to pay the full amount of the royalties agreed, even if only one patent of the licensed portfolio was valid and used by the Defendant [139] .
The Court reached the same conclusion also with respect to the further offer made by the Claimant on 11 April 2018 (that is short before the Claimant extended its claims in the proceedings, adding the claims for injunction) [155] . The Court held that this offer did not comply with the Huawei requirements, since the Defendant was not given sufficient time to assess the offer and eventually make a counter-offer to the Claimant, before the latter asserted the claims for injunction against him in the proceedings [139] .
In the Court’s eyes, a licensing offer complying with the Huawei requirements is only given, when the SEP holder provides the SEP user with all information required from assessing the FRAND conformity of the offer [156] . Only then, the SEP user’s consequent obligation under the Huawei framework to make a FRAND counter-offer to the SEP holder is triggered [156] . In particular, the SEP holder must make the requested royalty amount transparent with reference to a standard licensing programme implemented in the market or to rates actually paid by third parties to a patent pool, covering also patents relevant to the standard [156] . For the assessment of the non-discriminatory character of the offer, information on comparable agreements is needed [156] .
Based on the above considerations, the Court held that the period of 22 workdays between the presentation of the comparable agreements to the parent company (11 April 2018) and the assertion of the injunction claims in the proceedings by the Defendant (15 May 2018) was too short for a competent assessment of the Claimant’s licensing offer [157] . The fact that the Defendant (and/or its parent company) would have had sufficient time to react to the Claimant’s offer until the end of the oral hearings in mid-July 2018 was considered irrelevant by the Court in this respect [157] . The Huawei framework aims at preventing the situation, in which the SEP user agrees to unfavourable licensing conditions under the pressure of pending infringement proceedings (defined by the Court as “patent hold-up”) [157] . In case that the SEP holder has not fulfilled the Huawei requirements prior to the initiation of proceedings (as it was the case here), it has to make sure that the parties can again negotiated without the pressure of an ongoing trial, for instance by asking the court to stay its proceedings pursuant to Article 251 of the German Court of Civil Procedure [158] . Otherwise, the initiation of the infringement proceedings shall be considered as abusive in terms of antitrust law [158] . In the present case, the Claimant chose to not ask for a stay in the proceedings, ignoring the Court’s respective indication [158] .
The Court explained that the registration in the patent register allows the registered patent holder to assert the patent rights in court [159] . On the other hand, it does not define the ownership of the patent in material legal terms [160] . Nevertheless, the patent registration establishes an assumption of ownership which must be rebutted by the defendant in infringement proceedings based on concrete indications [161] .
Besides that, the Court pointed out that a stay in the infringement proceedings (pursuant to Article 148 of the German Code of Civil Procedure) until the end of parallel invalidation proceedings concerning the patent(s) in suit can be considered only under special circumstances [162] . As a rule, it must be expected with a sufficient degree of probability that the patent(s) in suit will be invalidated [162] . The Defendant failed convince the Court that this was the case with the SEP in suit [162] .
[135] District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, page 2 and 23.
[136] Ibid, page 23 et seq.
[137] Ibid, page 5.
[138] Ibid, page 25.
[139] Ibid, page 26.
[140] Ibid, pages 5 et seq.
[141] Ibid, page 6.
[142] Ibid, page 19.
[143] Ibid,page 23.
[144] Ibid, pages 16 et seqq.
[145] Ibid, page 20.
[146] Ibid, page 21.
[147] Ibid, page 22.
[148] Ibid, page 24.
[149] Ibid, pages 24 et seq.
[150] Huawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-130/13.
[151] District Court of Mannheim, judgment dated 28 September 2018, Case-No. 7 O 165/16, pages 22.
[152] Ibid,pages 23 and 25.
[153] Ibid, page 23.
[154] Ibid, pages 23 and 25 et seq.
[155] Ibid, pages 26 et seqq.
[156] Ibid, page 27.
[157] Ibid, page 28.
[158] Ibid, page 29.
[159] Ibid, page 10.
[160] Ibid, pages 10 et seq.
[161] Ibid, page 11.
[162] Ibid, page 30.
By letter dated 13 October 2013, the Claimant, Koninklijke Philips N.V. (“Philips”), informed the Defendant, Wiko SAS (“Wiko”), that it holds patents declared essential to the UMTS and LTE mobile telecommunication standards (Standard Essential Patents or “SEPs”) towards the European Telecommunications Standards Institute (“ETSI”). The letter included a list of some of Wiko’s products and invited Wiko to discuss a FRAND licensing agreement [1] . Wiko did not react to the letter [2] .
On 28 July 2015, Philips sent Wiko claim charts and a licensing agreement [3] . The communication remained unanswered by Wiko [2] .
On 19 October 2015, Philips started the present proceedings against Wiko [4] . On 25 August 2016, Wiko made a counteroffer [5] . Since 2016, it has also provided information about worldwide units sold and blocked an amount of EUR 895.000 into an escrow account [2] .
In an interlocutory decision dated 16 April 2019, the Court of Appeal of The Hague (Court) held that the patent in suit EP1 623 511 (EP 511) is valid and that Wiko is infringing this patent [6] . Wiko claimed that, as this patent is a SEP and Philips has not complied with its contractual duties, Philips is abusing its dominant position by initiating infringement proceedings against Wiko [2] .
With the present judgment, the Court granted Philips’ request for injunctive relief [7] , destruction [8] and the recall of products [9] , but partly invalidated EP 511, insofar it goes beyond the claims of the second auxiliary request [10] .
Since the Court of Manheim in Germany had honoured its FRAND defence, Wiko argued that Articles 29 and 30 of Brussels Regulation 1215/2012 on jurisdiction and enforcement of judgements (Brussels Regulation) are applicable and that the Court is not competent for the present case [11] .
The Court rejected this argument, underlying that each national proceedings are based on a national counterpart of a European patent. For each national counterpart, the concerned national jurisdiction is exclusively competent [12] .
The fact the same FRAND defence has been raised in the German proceedings does not prevent the Court from moving on with its proceedings. The application of Articles 29 and 30 of the Brussels Regulation on cases with same object requires that the filed claims, not the raised defences, are identical [11] .
The Court concluded that recognition of the Mannheim decision would not affect the pending proceedings, as the patents at stake were not the same [13] .
Philips had declared EP 511 as essential to HSUPA (part of UMTS standard) towards ETSI on 26 November 2009 [14] . The fact that EP 511 is essential to HSUPA was not challenged by Wiko [15] .
Moreover, the interlocutory decision of the Court dated 16 April 2019 confirmed that claims 1, 9 and 12 of EP 511 are implemented in the UMTS standard [2] .
The Court considers that the Huawei decision [16] does not set up strict rules, but rather guidelines for FRAND negotiations in good faith between the parties [17] .
Regarding the first step of the Huawei decision, that is the SEP-holder’s obligation to notify the implementer of the patents at stake and the infringement [18] , the Court underlines that this approach is different than what had been previously decided in a Dutch case prior to the Huawei decision, Philips v. SK Kassetten [19] .
Moving on to the next step, the Court found that Wiko had not fulfilled its duty as it did not react to Philips’ notification [20] . The Court, therefore, held that Philips was not obliged to make a licensing offer to Wiko, before starting proceedings against Wiko [2] .
Nevertheless, Philips had made an offer to Wiko on 28 July 2015 [21] . This offer was for a worldwide licence under Philips’ UMTS and LTE SEPs [22] .
Philips’ expert explained that the offered rate amounting to USD 1,0 per product (non-compliant rate) and USD 0,75 per product (compliant rate) was justified in view of all UMTS and LTE SEPs [2] .
However, Wiko argued that Philips’ offer is not FRAND for the following reasons: Philips did not specify that its offer was FRAND compliant and did not explain how the offer was FRAND [23] .
Contrary to German courts, the Court held that the Huawei steps do not imply a substantiation duty [24] , but solely the duty to specify the amount of the rate and the way it is calculated [25] . It bases this reasoning on the fact that the Huawei decision has to be read in light of a previous German decision, the Orange Book Standard decision, where the German Supreme Court decided it was up to the implementer to make a first FRAND offer [2] . The Court interprets the Huawei decision as requiring the SEP-holder, as it is in a better position to do so, to make a first FRAND offer after the implementer has demonstrated itself to be a “willing licensee” [2] . But it does not require the SEP-holder to substantiate its FRAND offer and give insights on why he believes the offer is FRAND. The Court also considers there is no duty for the SEP-holder to justify its rate in view of what other licensees are paying [26] .
Wiko also challenged specific terms of the license, i.e. the suggested duration (until expiry of the last patent), the coupling of UMTS and LTE SEPs, as well as the requested fixed licence fees [27] . The Court held, however, that Wiko did not provide any evidence to support its position that Philips’ offer is not FRAND [2] . Additionally, the Court attached importance to the fact that Philips had expressed its willingness to discuss the offer and specific circumstances with Wiko [28] . Philips had even asked Wiko to make a counteroffer, which the latter did not [29] .
The Court further pointed out that the fact that there are different terms and conditions with other parties does not necessarily imply that the offer made to Wiko is discriminatory [30] . It stressed that “non-discriminatory” does not mean that every licensee must be offered the same structure and rate; the “non-discriminatory” nature of an offer depends on the facts and circumstances of the specific case [2] .
Wiko GmbH, an entity legally independent from other Wiko entities, had made a counteroffer to Philips [31] . However, the Court did not consider this counteroffer as a counteroffer made by the Defendant of the present proceedings to Philips [2] .
Besides that, the Defendant had also made a counteroffer to Philips after the start of the present proceedings [32] . This offer was based on the following estimates: the total number of UMTS and LTE SEPs was 12.000, out of which Wiko estimated that Philips holds 97 families, and the aggregated royalty rate for all SEPs amounted to 12% [33] . Wiko derived a rate of 0.001% per SEP family and made the following counteroffer to Philips [2] :
Subsequently, Wiko made a further offer to Philips of 0.084 (which, in Philips‘ eyes, referred to a percentage) [2] .
The Court held that Wiko’s counteroffers were not FRAND. It found that the counteroffer included too many patents into the total SEPs pool, because it included base station and infrastructure patents, while Philips portfolio was focused on cellphone patents [34] . Consequently, the Court concluded that Philips held a higher percent of SEPs than estimated by Wiko [2] . It also highlighted that Wiko did not provide any explanation with respect to a proposed discount of the initially estimated rate of 0.097% and the aggregated royalty rate [34] . The Court also noticed that, while Wiko stated Philips’ rate should account for the technical and economic value of Philips’ SEPs, this analysis was missing from Wiko’s counteroffer [35] . It added that Wiko’s counteroffer did not account for the value of Philips’ SEPs in view of other SEPs for the same standard [36] .
The Court held that the Huawei case requires that the facts and circumstances of a case have to be assessed to determine if there is an abuse of a dominant position [17] . Furthermore, the Court also referred to the decision of the UK High Court of Justice in Unwired Planet v. Huawei to note that the fact that the circumstances of a case diverge from the Huawei scheme does not automatically lead to the conclusion of an abuse of a dominant position, if the SEP-holder, nonetheless, files an action against an implementer [2] .
The Court expressly pointed out that if starting proceedings is considered as an abuse of a dominant position, then implementers have no incentives to comply with the Huawei steps and can just delay the negotiations [37] .
With respect to the asserted claims for injunction and recall of products, the Court found that the facts and circumstances of this case were different from the German proceedings, where the Mannheim Court viewed Wiko as a “willing licensee” [38] .
[1] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.1
[3] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.2
[4] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.3
[5] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.4
[6] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 3.1
[7] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.1
[8] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.4
[9] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.3
[10] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 5.8
[11] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.1
[12] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.2
[13] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.3
[14] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraphs 4.5 and 4.6
[15] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.5
[16] Huawei v ZTE, Court of Justice of the EU, judgement dated 16 July 2015, Case No. C-170/13.
[17] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.14
[18] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.10
[19] Case reference: Court of The Hague, Philips v. SK Kassetten, 17 March 2019, referred to in Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.10.
[20] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.15
[21] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.16
[22] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.27
[23] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.17
[24] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.18 and 4.19
[25] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.18
[26] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.19
[27] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.31
[28] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraphs 4.26, 4.31, 4.32, 4.36
[29] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.36
[30] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.34
[31] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.20
[32] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 2.4
[33] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.38
[34] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.40
[35] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.39
[36] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.41
[37] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.21
[38] Court of Appeal of The Hague, judgement dated 2 July 2019, paragraph 4.22