- Düsseldorf Regional Court granted an injunction based on a Standards-Essential Patent (SEP) in the case of Sisvel vs Haier (Case 4A/144/14)
- Defendants in future SEP cases should ensure that security and an account are prepared simultaneously with any licence counter-offer to the patentee
- If any ECJ requirements for the FRAND defence are not complied with, then the FRAND defence cannot be used to avoid an injunction.
There has been much litigation in Europe in recent years relating to Standards-Essential Patents (SEPs). During such cases, defendants typically raise the so called FRAND defence (i.e. that they will take a licence under the patent on fair, reasonable and non-discriminatory terms) to avoid the imposition of an injunction.
In July 2015, The European Court of Justice (ECJ) set out in Huawei vs ZTE (Case C 170/13) a number of principles according to which an infringer would be able to use the FRAND defence to avoid an injunction.
Since then, Europe has been awaiting the first national court decision based on these principles. The Düsseldorf Regional Court has now issued a decision in the case of Sisvel vs Haier (Case 4A 144/14).
The ECJ set out in Huawei vs ZTE that, in order to be entitled to the FRAND defence to an injunction, the alleged infringer - after having received the patentee’s first licence offer - must attempt to negotiate the licence terms in good faith and without delay. If the parties cannot agree the licence terms, the alleged infringer must provide an account and security for the payment of royalties (e.g. in the form of a bank guarantee) for past and future use of the patent in a timely manner.
The Düsseldorf Court held that as Haier only submitted an account and security for the payment of royalties at the oral hearing stage of the trial, they had not done so in a timely manner and so were therefore unable to rely on the FRAND defence. The Court observed that in order to be considered as a willing licensee (and thereby meet the ECJ’s requirements for the FRAND defence to an injunction), the defendant should at least provide an account and security for the payment of royalties in relation to any counter-offer the defendant may make in a timely manner. The Court considered this to be within one month after the rejection of the defendant’s counter-offer by the patentee.
Defendants in future SEP cases should therefore ensure that security and an account are prepared simultaneously with any licence counter-offer to the patentee.
As the Düsseldorf Court had determined that Haier had not complied with the ECJ’s time requirements for the FRAND defence to an injunction, it did not further consider whether any of the licence offers by Sisvel or Haier complied with FRAND requirements. As a result, no decision was made in relation to what the FRAND requirements might be.
Haier also filed invalidity actions with the German Federal Patent Court against Sisvel’s patents. The Düsseldorf Court did not grant a stay of the proceedings as it did not find that those invalidity actions were sufficiently likely to be successful.
The decision of the Düsseldorf Court remains open to Appeal by either party.