In a recent decision, the Mannheim Regional Court made a further important judgement on standard essential patent (SEP-)litigation in Germany.
IP Bridge sued HTC in Germany for infringement of the European Patent EP 2 294 737. The EP’737 was originally applied for by Panasonic and subsequently assigned to IP Bridge. EP’737 belongs to a portfolio of patents declared essential to the LTE-standard (in the following: SEP-portfolio).
Facts and Circumstances of the Case
After a first contact in the end of 2014, IP Bridge and HTC negotiated the terms of a licensing agreement for the SEP-portfolio. After almost two years of eventually unsuccessful negotiation, IP Bridge started a patent infringement suit in September 2016 claiming information and accounting as well as a determination of liability for damages. Initially, IP Bridge did not file a motion for an injunction. Prior to filing the action, IP Brigde provided two licensing offers and HTC subsequently made two counter-offers that IP Bridge rejected as too low.
After having filed the patent action, IP Brigde provided another two licensing offers in April 2017 and February 2018, respectively, and informed the Mannheim Regional Court about the latest offer five days after its provision. Subsequently on 11 April 2018 and after the conclusion of a non-disclosure agreement, IP Bridge further provided HTC with third-party licensing agreements concerning the SEP-portfolio and set a one-week deadline for HTC until 18 April 2018 to accept the latest licensing offer. HTC, in turn, informed IP Bridge that an external expert was entrusted with the analysis of the third party licensing agreements and that more time would be required for a reaction/counter-offer.
On 24 April 2018 IP Bridge again requested HTC to react on the latest licensing offer (this time) until 7 May 2018. HTC in turn replied on 2 May 2018 and brought forward that HTC plans to provide an answer as soon as the external expert opinion is finalized.
On 15 May 2018, 22 business days after the provision of IP Bridge’s (complete) offer, IP Bridge filed an additional motion and asked the Court to grant an injunction. The oral hearing of the case took place on 13 July 2018. After the oral hearing IP Bridge provided another licensing offer on 27 July 2018 and suggested a stay of proceedings if the Court refuses to consider this latest offer. HTC, however, did not file a respective motion for a stay of proceedings with the Court.
The Mannheim Regional Court’s Decision
The Mannheim Regional Court held EP’737 to be infringed and refused to stay the proceedings with a view to a parallel nullity action brought forward against EP’737 in Germany. The Court ordered that HTC has to give information, render accounts and determined that HTC is liable for damages. The Court, however, refused to grant an injunction because of HTC’s successful FRAND-defense. It dismissed IP Bridge’s patent suit in this regard.
The Court opined that EP’737 provides for a dominant position in the market. The LTE-technology is not substitutable with technology of prior standards since the LTE-technology offers substantially faster data transmission.
IP Bridge, however, did not fulfill its duties under the ECJ-decision Huawei vs. ZTE (docket number C-170/13). IP Bridge conduct was, therefore, not FRAND.
IP Bridge submitted its last (complete) licensing offer on 11 April 2018. The Court considered the timeframe of 22 business days from the provision of this licensing offer until IP Bridge’s filing of the additional motion for an injunction (15 May 2018) to be too short for HTC to prepare an adequate reply/counter-offer.
The Mannheim Regional Court considered IP Bridge’s behavior in this regard to be abusive. If the SEP-holder files a motion for an injunction without fulfilling its FRAND-related obligations beforehand, the filing of the patent action remains abusive if and as long as the SEP-holder does not make sufficient efforts to create a “negotiation situation without any pressure”. The German Civil Procedure Rules offer such a possibility, e.g. in the context of the suspension of a legal dispute pursuant to Section 251 German Civil Procedure Rules. IP Bridge, however, did not file a respective motion in this regard. The mere suggestion of such a stay was in the eyes of the Court not sufficient under the German Civil Procedure Rules.
The Decision’s overall Context
It is currently debated in Germany whether and if in which timeframe the SEP-proprietor is entitled to still make licensing offers in ongoing litigation after he has filed the motion for an injunction.
The 7th Chamber of the Mannheim Regional Court pursues a (comparably) restrictive line. Its primary concern is the "pressure situation" caused by the late submission of a FRAND licensing offer in the ongoing litigation. The Courts in Düsseldorf appear to be more forthcoming in this regard since they basically allow the SEP-proprietor to provide licensing offers and/or necessary information in the ongoing litigation (see Düsseldorf Court of Appeal, indicative Court order dated 17 November 2016, docket number I-15 U 66/15). It remains to be seen whether the German Courts will develop a common approach in this regard in the (near) future.
In any case, the SEP-owner is well advised to at least ensure that the SEP-user is granted an adequate “review and reaction”-time if licensing offers are provided, in particular in already on-going SEP-litigation. As a rule of thumb, a period of three months may be considered to be adequate since the Mannheim Court’s 7th Chamber in the case at hand considers the period between the complete FRAND licensing offer (11 April 2018) and the oral hearing (13 July 2018) as such to be sufficient for a careful examination.