The case Sisvel vs Haier before the Düsseldorf regional court (parallel cases 4a 93/14 and 4a 144/14) is apparently the first reported German case in which an injunction for the infringement of an SEP was granted after the ECJ’s ruling on the FRAND defence in Huawei vs.ZTE (case C-170/13).

The Düsseldorf regional court’s first instance decision, which was rendered on 3 November 2015, contains two key messages for defendants in SEP cases. Firstly, the court discusses and applies the requirements for the FRAND defence as defined by the ECJ and leaves virtually no room for defendants to slow down negotiations without risking the loss of theFRAND defence. Secondly, the decision highlights the difficulties for defendants who need to point to other licences to the same SEP granted to third parties in order to raise the defence of exhaustion of rights or discrimination. If the defendant cannot get hold of the actual third party license agreements because they are in possession of the current or past patentee, the Dusseldorf regional court appears reluctant to order the production of those documents by the plaintiff, or to shift the burden of proof.

Time limits for providing accounting and security by the defendant

The present case is one of many SEP cases in German courts which started before the ECJruling and now have to be decided on the basis of the new guidance provided by the ECJ. In September 2014, Sisvel had filed action against Haier asserting infringement of EP 1 264 504 which is declared essential to one of ETSI’s UMTS standards. The patent was part of a portfolio which was originally held by Nokia and assigned to Sisvel in 2012. Prior to the judgement, Sisvel had made different license offers to Haier with royalties ranging from 0.50 down to 0.15 USD per unit. Haier did not accept any of these offers but made several counter offers, the first in October 2014 just after the action was filed, and the last one week before the oral hearing in September 2015. In the oral hearing, Haier for the first time submitted sales data for the accused devices and a bond over 5.000 EUR to cover accrued royalties. Sisvel rejected all counter offers and asked the court to issue the injunction against Haier, which was subsequently granted.

The Düsseldorf regional court dismissed the FRAND defence raised by Haier because Haier in its view had applied delaying tactics. Sisvel had offered a license agreement before filing the action and put Haier on notice about the infringement. Regarding sufficient notice of the alleged infringement, at least the explanations in the statement of claim were held to be sufficient for the court, so the court did not have to look at the correspondence exchanged before the trial. Therefore, Haier was under a duty to react to Sisvel’s offer without delay after it had refused Sisvel’s original license offer. The specific requirements at this level were more or less left open by the court and the court did not discuss whether Sisvel’s or Haier’s license offers were actually FRAND. It was the failure to provide security and reporting for accrued royalties as required by the ECJ which proved fatal to Haier’s defence case.

According to the ECJ (para. 67), a defendant making a counter offer has to be prepared to provide accounts for past use of the invention and as soon as the counter offer is rejected has to provide a security for accrued royalties during the negotiations or court proceedings. The Düsseldorf regional court now held that in order to be considered as willing licensee, the defendant must at least comply with the terms of his own counter offer. Therefore, the bond must be provided timely by the defendant, which was defined as within one month after the rejection of the counter offer in the present case. Accordingly, Haier’s submission of sales data and security bond in the oral hearing in September 2015 was considered late.

Because the present case started before the ECJ decision when there was still legal uncertainty about the requirements for the FRAND defence, the court considered whether there might have been a second chance for providing accounting and security after the ECJdecision was published. In this case, this could go unanswered by the court because Haier’s accounting and security provided only in the oral hearing was late on all accounts: As Sisvel had no chance to review and comment on the sales data in the oral hearing it was regarded as too late. Defendants in future SEP cases will have to take this as a reminder that security and accounting should not be neglected and have to be prepared simultaneously with the counter offer.

No disclosure of prior license agreements by the patentee

The present case is also interesting due to another aspect. Haier tried to defend itself by pointing to a license granted by Nokia to Haier’s chipset supplier Qualcomm. Before Nokia sold the patent to Sisvel it had concluded a cross license agreement with Qualcomm in 2008. Under this cross license, Nokia had agreed not to assert the patent against Qualcomm. In return Nokia obtained a licence under certain Qualcomm patents. Since at least part of Haier’s mobile phones use Qualcomm chipsets and the patented invention is essentially embodied in these chipsets, Haier argued that phones with Qualcomm chipsets should be covered by the license between Nokia and Qualcomm which is binding also for Sisvel. Therefore, even if exhaustion of rights does not apply to Haier’s sales in the EU, Sisvel nevertheless cannot ask for additional royalties with regard to mobile phones with already licensed chipsets.

Haier’s problem was that it could not produce the agreements between Nokia and Qualcomm and Nokia and Sisvel in court, but had to rely on press releases which Nokia had issued on the cross license with Qualcomm and sale of its 3G patent portfolio to Sisvel. Sisvel simply disputed that the cross license agreement between Nokia and Qualcomm as claimed by Haier exists. In the absence of better proof, the court ruled that Haier’s defence based on the Nokia press releases was merely speculative and therefore irrelevant. The court did not consider ordering the disclosure of the license agreement between Nokia and Qualcomm and did not shift the burden of proof to Sisvel as Nokia’s successor in title to the patent.

This outcome appears not entirely satisfactory. Even though Haier had proven that there is a licence agreement between the previous patentee Nokia and Haier’s chipset supplier Qualcomm which could have been highly relevant for the case, the court decided without taking this license into account, simply because it was not available. Future defendants should be aware of this information gap in German court proceedings and will have to find ways to get hold of prior license agreements relevant to the asserted patents. These prior licenses may be highly relevant not only in the context of exhaustion of rights, but also for proof of discrimination between different licensees for the same patents.