On 14 October 2011, the president of the District Court of The Hague denied the injunction sought by Samsung in relation to the alleged infringement by Apple of a number of its patents. The Court held that invoking the patents, essential under the UMTS standard, would constitute an abuse of rights. Under the circumstances of the case, which were not fully disclosed, the Court concluded that Samsung effectively refused to conclude a license on FRAND terms and thereby sought to evade its obligations arising from its participation in a Standard Setting Organisation (ETSI/3GPP) and its own FRAND undertakings. 

Background

Samsung invoked four patents concerning 3G (UMTS) technology against Apple in preliminary relief proceedings. It was not in dispute that these patents are essential under the UMTS standard and therefore also practiced in Apple's iPhone and iPad.

Samsung participated in the development of the UMTS standard within the standard setting organisation ETSI. In relation thereto Samsung had issued a general undertaking that it was prepared to grant license to its essential patents on Fair, Reasonable and Non-Discriminatory (FRAND) terms. After the standard was concluded, Samsung declared the patents that it deemed essential for the standard, and gave specific FRAND undertakings for these patents (including the patents in suit). Samsung now tried to invoke against Apple.  Earlier, Apple expressed an interest to conclude a licence with Samsung in April 2011. 

The Dispute

According to Apple, the patents of Samsung would not be enforceable as a result of the FRAND undertakings. Under French law, Apple argued, the FRAND undertakings amount to a license offer which can be accepted by complying with the standard. Apple took the position that it concluded a license agreement by adopting the UMTS standard (and only the terms of the royalty still had to be established). Apple further argued that Samsung would be estopped from enforcing its patents in view of its FRAND undertakings (as Apple argued, after which an essential patent cannot be enforced), its participation in the standard setting process and its ex post facto notifications of the Patents (a "patent ambush"). As a last resort Apple argued that in the circumstances of this case Samsung is abusing its rights and on that ground, Samsung's patents would not be enforceable against Apple. 

Decision

The Judge found that a FRAND undertaking obliges a party to negotiate but rejected the position that (under French law) a FRAND undertaking was an offer which is accepted as soon as the standard is applied.

The Judge further held that there was no estoppel with respect to Samsung's patent rights. The mere issuing of a FRAND undertaking does not deprive the owner of an essential patent of his right to an injunction, even if, as in this case, the specific FRAND undertakings in respect of the Patents were issued after the standard setting process was completed. He then considered that Samsungs' demands in respect of the FRAND License were unreasonable to the point that Samsung was effectively refusing to grant a license. Apple substantiated its position that its own FRAND proposal was reasonable and according to the Judge Samsung did not sufficiently dispute this.

The Judge therefore held that under the circumstances of this case enforcing the patents amounts to an abuse of rights and he denied the injunction. The Judge suggested that Samsung was effectively evading its FRAND obligations and concluded:

"The road to a FRAND License starts with a request for a license by Apple, followed by a FRAND offer from Samsung. If the parties cannot agree, Samsung may apply for an injunction."

Comments

The Judge comes to the conclusion that a patent holder who issued a FRAND-undertaking may only enforce its patent rights after it has made a "reasonable" license offer. Because information on the negotiations and rates were not disclosed in the public version of the judgment, it is difficult to assess what test will be applied in order to determine when an offer is indeed "FRAND". For now it appears that an injunction will only be denied if the infringer has expressed a bona fide intention to conclude a license, but where the patentee's offer is so unreasonable that it constitutes a refusal to license. Any other test or further Court assessment of the reasonableness of an offer is likely to cause significant legal uncertainty.

This is the first time in the Netherlands that an injunction is denied on the basis of FRAND obligations of the patent holder. It will certainly not be the last time that this issue is addressed by the courts in Europe.