The Court of Justice of the European Union recently ruled on the question of whether it is a breach of EU competition law rules to seek a injunction restraining an alleged infringer from exploiting a standard-essential patent (SEP). The decision in the long-running Huawei/ZTE litigation provides clear guidance for SEP holders on the level of engagement with alleged infringers which they must show in order to avoid a finding of anti-competitive behaviour.
The Court clarified that it may constitute abuse of a dominant market position for the holder of an SEP, which has undertaken to grant licences on fair, reasonable and non-discriminatory (FRAND) terms, to seek an injunction for infringement without first seeking to engage the alleged infringer on FRAND terms. In order to avoid abusing a dominant position, SEP holders must take the following steps prior to seeking a prohibitory injunction:
- Alert the alleged infringer of the alleged infringement;
- If the alleged infringer then expresses a willingness to enter a licensing agreement on FRAND terms, present a specific, written offer for a licence on FRAND terms, including specific details on royalties;
- Establish that the alleged infringer has continued to use the SEP without properly responding to the licence offer.
The Court also found that infringement actions by SEP holders seeking an account of profits or an award of damages would not constitute an abuse of a dominant position contrary to EU competition law.
The decision highlights the importance of seeking expert competition and licensing law advice, both for market leaders and challengers seeking to exploit SEP holders' patents.