Thanks to standards, suppliers can develop and offer products and services meeting particular specifications that have wide acceptance in their sectors. Standards enable compatibility of technology and therefore offer consumers a broad choice between services and products. The USB, 3G, 4G and USTM standards in the telecommunications sector are just four examples. If a standard cannot be adhered to without using a patent, the patent is considered “standard-essential”.
If a standard-essential patent is enforced, this may conflict with the need for market participants or entrants to have access to standards. This is particularly crucial in areas where the standards have obtained market- or industry-wide recognition, meaning products which are not “standardcompliant” may be unsalable. The patent may consequent ly ref lect a marketdominant position, a situation that could be abused.
In May 2009, the Germany Federal Supreme Court (in Orange Book Standard, KZR 39/06) ruled that a defendant may offer to take a license under fair, reasonable and non-discriminatory (FRAND) terms as a defence against an accusation of infringement where a market-dominant position results from the assertion of a patent. A successful FRAND defence avoids an injunction being granted, if the accused infringer
- Has made an unconditional offer to license under FRAND terms
- Behaves like a licensee and adequately reports on past sales
- Has compensated the patentee for any previous use of the patent, under usual licensing agreement terms
Several recent decisions of the District Courts of Düsseldorf and Mannheim—in particular handed down in the ongoing smartphone and tablet wars—have provided further clarif ication of the requirements of the FRAND defence.
FRAND is not a typical defence. It implies the accused infringer waives fully all objections that can be raised against the injunction and the foundation of the damage claim. Accordingly, the accused infringer needs to decide at a point in time during the proceedings whether to raise the FRAND defence or just follow the usual route by denying the patent infringement.
This requires a well-balanced analysis of the risks involved. On one hand, there is the risk that an injunction is granted and the accused infringer is excluded from continuing to sell the accused products on the market; on the other hand, the accused infringer might be tied to a FRAND agreement, despite there being a possibility of invalidating the patent or a finding of it not having been infringed.
Owing to the short time frames given by German courts between the filing of the complaint and the hearing, the assessment of the chances of invalidating the patent and the quality of the non-infringement arguments, amongst other defences, needs to be carried out as soon as possible after the complaint is filed. Ideally it should take place even earlier than this, i.e., as soon as there appears to be a risk of a patent infringement action in Germany. This ground work will assist in making a good decision at the right time.