For the first time since the ECJ’s Huawei judgment, a German court has ruled on the infringement of standard essential patents (SEPs) and Fair Reasonable and Non-Discriminatory (FRAND) licensing terms.
The court in Düsseldorf, Germany, held that under the given circumstances – where injunction proceedings were brought before the Huawei judgment – the SEP holder’s obligation to inform the alleged infringer about the infringement was met when the infringer received the statement of claim. As the alleged infringer did not fulfil the ECJ’s minimum requirement to render accounts and provide security while continuing to make use of the patents in question, the court decided to grant injunctive relief. The court made no substantive assessment on whether the claimant’s original offer or the defendant’s counteroffer were FRAND or whether the claimant held a dominant position within the meaning of article 102 TFEU.
The ruling shows that it is important for an alleged infringer to make sure that it complies with its obligations formulated in the Huawei judgment, although it remains to be seen whether other national courts will adopt the stringent approach of the Düsseldorf court.
Huawei v. ZTE
In its Huawei judgment, the ECJ provided some guidance on interpreting article 102 TFEU from the vantage point of an SEP holder enforcing a patent. More specifically, the ECJ provided a framework for the negotiation dynamics between the prospective licensor and licensee in cases where they are competitors and the licensor holds a dominant market position. First, it is up to the SEP holder to alert the alleged infringer by specifying the patent and the way it has been or is being infringed. Second, if the alleged infringer has expressed a willingness to conclude a licence agreement on FRAND terms, the SEP holder must present a specific, written offer for a licence on FRAND terms to the alleged infringer. This offer should specify, in particular, the royalty and the way in which it is calculated. Third, the alleged infringer must diligently respond in good faith to the offer made by the SEP holder, and observe recognised commercial practices in the sector. Good faith must be established on the basis of objective factors and implies that there should be no delaying tactics. If the alleged infringer does not accept the initial offer, it must promptly submit a written counteroffer on FRAND terms to the SEP holder. If the SEP holder rejects the counteroffer, the alleged infringer should provide appropriate security for the payment of royalties and render accounts of its past and current use of the SEP in question.
The ruling of the Düsseldorf court
In Sisvel v. Haier, the Düsseldorf court first summarised the steps as formulated by the ECJ in the Huawei judgment and then considered whether the parties complied with these steps. According to the court, Sisvel’s obligation, as the SEP holder, to inform the alleged infringer Haier about its infringement was met when Haier gained knowledge about the infringement through the statement of claim in the action brought by Sisvel. A relevant factor in this was that the action had been brought before the Huawei judgment. The court then confirmed that Sisvel had made a suitable licence offer to Haier. In that respect, the court noted that it was sufficient that this offer was made to Haier’s parent company as opposed to all individual affiliates. After Sisvel rejected Haier’s counteroffer, Haier did not respond in a timely manner. Whether this was by itself detrimental to Haier’s FRAND defence was not decided. According to the court, Haier should have provided, at a minimum, security for the payment of royalties and rendered accounts for past and current use of the SEP within a month of Sisvel’s rejection of the counteroffer. Because Haier did not do so, the court held that Haier could not rely on a FRAND defence. Therefore, Sisvel was granted injunctive relief. Because Haier was barred from relying on a FRAND defence, the court did not decide on whether Sisvel held a dominant position or whether Sisvel’s offer and Haier’s counteroffer were indeed FRAND.
Implications of the ruling
The ruling shows that it is important for an alleged infringer to ensure that it complies with obligations as formulated in the Huawei judgment. By neglecting to do so, the alleged infringer could be prevented from raising a FRAND defence. The ruling does not provide any guidance in cases where the alleged infringer does fulfil its obligations, nor does the ruling provide any guidance on what constitutes a FRAND offer (for example, whether a portfolio licensing offer is FRAND) or on when a dominant position of the SEP holder is to be assumed. These questions remain unanswered. The ruling does show that a national court could apply the framework provided in the Huawei judgment quite strictly, although it remains to be seen if other national courts will adopt the stringent approach of the Düsseldorf court.