Source: http://www.fosspatents.com/2013/03/german-court-refers-huawei-zte-standard.html
Timestamp: 2014-07-22 19:35:23
Document Index: 566345413

Matched Legal Cases: ['CJEU ', 'CJEU ', 'CJEU ', 'CJEU ', 'CJEU ', 'Art. 102', 'Art. 102', 'Art. 102', 'CJEU ']

FOSS Patents: German court refers Huawei-ZTE standard-essential patent case to Europe's highest court
Today the Düsseldorf Regional Court ("Landgericht Düsseldorf") issued an order in a Huawei v. ZTE case that may, indirectly, have unprecedented impact on all standard-essential patent (SEP) enforcement in the European Union. The court, which hears more patent infringement cases than any other court in Europe (though most of the German patent cases this blog reports on were brought in Mannheim and Munich), decided to refer to the Court of Justice of the European Union (CJEU) five fundamental questions concerning the availability of remedies (primarily but not only injunctive relief) to holders of FRAND-pledged SEPs prevailing in patent infringement actions. An opinion issued by Europe's highest court will be binding on on the European Commission's Directorate-General for Competition as well as the courts and competition authorities of the 27 EU member states. This would affect patent infringement actions as well as SEP-related antitrust cases such as the European Commission's presently-ongoing investigations of Samsung and Google (Motorola Mobility).
This referral would not have been ordered if Huawei v. ZTE -- a dispute between China's two largest telecommunications hardware makers -- had been adjudged a few months earlier. It just happens to be the first SEP case to have gone to trial in Düsseldorf after the European Commission issued a Statement of Objections (SO) to Samsung over its pursuit of SEP-based injunctions against Apple and to have resulted in an infringement finding. In my report on the late-January trial I wrote that the court interpreted the European Commission's public statements on the SO in the Samsung case as an indication that Brussels appears to be more skeptical of SEP-based injunctions than German courts have been in recent years. The Düsseldorf court sees a need for clarification in order to ensure the consistency between its own decisions (under the German Orange-Book-Standard framework) and evolving EU-level case law.
The patent-in-suit in the matter that gave rise to this referral is a EP2090050 on a "method and apparatus of establishing a synchronization signal in a communication system". The court found ZTE to infringe this patent, which Huawei had declared essential to the 4G/LTE cellular telecommunications standard, and was unconvinced that ZTE would achieve its invalidation (ZTE opposed the recent grant of this patent, but in February the European Patent Office rejected ZTE's opposition in a first, appealable, decision). A parallel Huawei v. ZTE case over another 4G/LTE declared-essential patent (EP2033335 on a "method for reducing feedback information overhead in precoded MIMO-OFDM systems") was dismissed because the court did not identify a proven infringement.
If not for the uncertainty surrounding the application of EU competition law to SEP injunction matters, Huawei would have prevailed immediately. ZTE's offer to take a license would have failed under the court's own application of the Orange-Book-Standard criteria for licensing offers a patent holder cannot reject without violating antitrust rules. Under those circumstances, Huawei's lead counsel in this action, Christian Harmsen of Bird & Bird, would have won the third patent injunction in six calendar days after winning an injunction against ZTE over another Huawei (also 4G/LTE declared-essential) patent last Friday and one for Nokia against HTC over a power-saving patent (also in Mannheim, but not standard-essential). Now he's scored a hat-trick with respect to liability, but the question of remedies in the Düsseldorf case can only be adjudged after the CJEU has spoken.
The 4b civil chamber (a panel of three judges), over which Judge Ulrike Voss ("Voß" in German, and not to be confused with the most frequently-mentioned judge on this blog, Judge Andreas Voß of the Mannheim Regional Court) presides, did not have a formal obligation to refer certain aspects of this case to the CJEU but exercised its discretion under Article 267 of the Treaty on the Functioning of the European Union (the EU's de-facto constitution) to do so, and accordingly stayed its proceedings until it receives an answer from Luxembourg. I applaud the court's decision because greater clarity is needed, and while the order generally defends the way in which German courts have applied the Orange-Book-Standard criteria thus far, I actually think that the case law in Germany has recently been drifting in an exceedingly patentee-friendly direction -- not in all cases and respects, but in some important ones. And it was inevitable for some dispute or antitrust case to be referred to the CJEU. For example, if the European Commission fines Samsung over its conduct against Apple (which I think may very well happen in the near term), Samsung would appeal such a decision anyway. Today's Düsseldorf decision was triggered by the Samsung SO, but it may ultimately also affect the Apple-Samsung dispute.
It's possible that Huawei and ZTE settle their dispute before the CJEU issues an opinion. In that case, clarification would merely be delayed. Presumably the Düsseldorf court will also refer other SEP injunction matters to the CJEU (provided that in each case an infringement of a valid SEP is identified and the defendant would normally fail to prevail on an Orange-Book-Standard defense).
These are the questions the Düsseldorf Regional Court would like the CJEU to answer (in my own, obviously unofficial, translation):
Does an SEP owner who declared himself willing, vis-à-vis a standard-setting organization, to grant a license to all comers on FRAND terms, abuse his dominant market position if he seeks injunctive relief from a court of law against a patent infringer despite the infringer having declared himself willing to negotiate such a licenseoris it a requirement for the presumption of abusive conduct that the infringer has made a binding offer to the SEP owner on terms that the SEP owner cannot refuse without treating the infringer unfairly or discriminatorily and [furthermore require that] the infringer, in anticipation of the license he is seeking already complies with his contractual obligations with respect to past acts of infringement?In the event that a presumption of abuse of a dominant market position may already result from the infringer's willingness to negotiate:Does Art. 102 TFEU involve specific requirements for said willingness to negotiate in substantive and/or chronological terms? Can such a presumption be based merely on the infringer's (oral) declaration in broad and general terms of his willingness to enter into negotiations or does such a presumption require that the infringer has indeed entered into negotiations, such as by, for example, communicating terms and conditions under which he is prepared to conclude a license agreement?In the event that the [infringer's] submission of a binding offer to conclude a license agreement is a requirement for an abuse of a dominant market position:Does Art. 102 TFEU involve specific substantive and/or chronological requirements with respect to such an offer? Does the offer have to set forth all of the commercial terms that in accordance with relevant industry practice are usually set forth in such license agreements? Can the offer be conditioned upon actual use and/or validity of the SEP-in-suit?In the event that the infringer's [precontractual] fulfillment of obligations arising from the requested license is a requirement for an abuse of a dominant market position:Does Art. 102 TFEU involve particular requirements with respect to such acts of fulfillment? Is the infringer required, in particular, to make disclosures relating to past acts of infringement and/or to pay [precontractual] royalties? Can an obligation to pay [precontractual] royalties also be fulfilled by giving security?Do the requirements for the presumption of abuse of a dominant market position by an SEP holder also apply to other remedies for patent infringement (disclosures relating to past infringement, recall [of infringing products from distribution channels], damages)?
These are important questions. Interestingly, the Düsseldorf Regional Court makes reference to a previous FRAND pledge. In the German Orange-Book-Standard case there was no promise to license the patent-in-suit on FRAND terms, and it's possible that developments in EU law will ultimately require German courts to distinguish between FRAND standards and other cases in which a patent infringer raises a compulsory-licensing defense. It's also possible that the rules will be the same in all cases involving essential patents (regardless of whether a FRAND promise was made or an entitlement to a compulsory license is enforced), but in any event EU competition rules, which trump national competition rules, may turn out to be significantly more implementer-friendly than the recent application of Orange-Book-Standard by certain German courts. The European Commission issued an SO against Samsung even though Apple did not raise an Orange-Book-Standard defense (i.e., make a binding offer to take a license on particular terms and start to comply with the proposed agreement even before the other party accepts it) at any of the five Apple v. Samsung SEP trials (plus one retrial) I attended in Germany. (Apple did, however, make an Orange-Book-Standard offer to Motorola Mobility, which the latter ultimately, after various amendments, felt forced to accept.)
One important issue that is absolutely key to the Samsung and Google (Motorola) antitrust cases that the Düsseldorf court does not raise in its questions to the CJEU is whether a blatantly unreasonable royalty demand by a patent holder also constitutes abusive conduct and precludes injunctive relief. This one will also have to be clarified at some point, even if it may not be outcome-determinative in Huawei v. ZTE.