On 20 November 2014, an EU advocate general (AG) provided important guidance on the application of competition law in the EU to the enforcement of standard essential patents through injunctions. The principles outlined in the opinion, in which the AG advised the EU’s highest court, the European Court of Justice (ECJ), are relevant to any industry in which standards are used.
The case arose out of an action for infringement of a standard essential patent (SEP) in the telecoms sector, brought by Huawei against ZTE before the Düsseldorf Regional Court, Germany. Huawei sought an injunction stopping the alleged infringement, but ZTE in reply argued that this was an abuse of a dominant position, since ZTE was willing to negotiate a licence. The German court referred the issue to the ECJ for its view, which would be binding on the court.
The AG answered the question by saying firstly that the fact that a company owns an SEP does not necessarily mean that it holds a dominant position. This must be determined on a case-by-case basis. Subject to this, in the AG’s view, where the proprietor of an SEP has made a commitment to a standards body to grant third parties a licence on fair, reasonable and non-discriminatory (FRAND) terms, it constitutes an abuse of a dominant position for that proprietor to seek an injunction against a company that has infringed the SEP. This assumes that the third party has shown itself to be objectively ready, willing and able to enter into such a licensing agreement.
The AG went on to set out the actual steps that in his view an SEP holder must take before seeking an injunction and the corresponding obligations of the third party. This is a very important case for patent litigation and negotiations concerning SEPs, and the eventual judgment of the ECJ itself will be closely watched.