The Düsseldorf Court of Appeal’s first oral hearing in the proceedings “Sisvel vs. Haier” (docket numbers I-15 U 65/15; I-15 U 66/15) took place on 17 November 2016. Sisvel sued Haier on the ground of the Standard Essential Patents (“SEPs”) EP 1 264 504 and EP 0 852 885 which are part of Sisvel’s “Wireless Portfolio”. The Düsseldorf Regional Court inter alia rejected Haier’s FRAND-defence in first instance and granted injunctions on the grounds of both patents (docket numbers 4a O 93/14; 4a O 144/14). The enforcement of the injunctions was later on stayed by the Court of Appeal on a preliminary basis (orders dated 13 January 2016, docket numbers I-15 U 65/15; I-15 U 66/15) arguing that the adjudication of the FRAND-defence in first instance was obviously flawed. In the first oral hearing the Düsseldorf Court of Appeal’s 15th Senate now gave several indications on the adjudication of the FRAND-defence’s prerequisites in the wake of the ECJ’s Huawei vs. ZTE-decision (C-170/13).

I. Dominant Position in the market due to ownership of the SEP

The Court of Appeal indicated that a dominant position in the market cannot of itself be inferred from the fact that the proprietor (or its predecessor) issued an ETSI-declaration regarding the SEP. The user has to demonstrate that the SEP provides for a dominant position in the market by applying the relevant market concept (“Bedarfsmarktkonzept”). The Court of Appeal also mentioned that in the absence of a dominant position, it may be considered that an issued ETSI-declaration regarding a certain SEP potentially leads to a protection of legitimate expectation on the SEP-user’s side. The Court of Appeal in this regard referred to the possibility that a “grace period” during which the SEP-user still has the possibility to change its products before he is enjoined from selling e.g. mobile phones may be ordered in the injunction.

II. Notice of Infringement of the SEP-Proprietor prior to bringing the Patent Action

Under para 61 in Huawei vs. ZTE the SEP-proprietor has to alert the infringer by designating the SEP and the way it has been infringed. The Düsseldorf Court of Appeal tends to be forthcoming in favour of the SEP-proprietor as regards the particulars of the notice of infringement. The Court indicated that it considers sufficient to mention the SEP’s publication number as well as the infringing acts of use of the SEP.

III. Willingness of the SEP-user to take a licence

The Düsseldorf Court of Appeal brought forward that it intends to be forthcoming in favour of the SEP-user as regards the required declaration of willingness to take a license. The SEP-user’s general declaration setting out to be willing to take a license will likely be sufficient. The Court of Appeal indicated that it wants to apply “high hurdles” for the SEP-proprietor to successfully demonstrate that the SEP-user’s declaration of willingness is in fact not serious. If the declaration of the SEP-user is delayed, it can basically be made good for in the Court proceedings.

IV. SEP-Proprietor’s Licensing Offer on FRAND-terms

The Court of Appeal indicated that the SEP-proprietor has to present a fully worked out written licensing offer which is in fact on FRAND-terms. The Court further indicated that the offering of a worldwide portfolio licence does not of itself raise concerns in terms of FRAND compliance. It brought forward moreover that a Court has to determine positively whether the concrete licensing offer is in fact FRAND-conform or not. It has to be excluded that a licensing offer is exploitative or discriminatory. The Court of Appeal acknowledged that the SEP-proprietor has a certain amount of discretion; in particular in terms of the determination of the FRAND-licence fee. A FRAND-conform licensing offer can, however, likely be presented also after the patent infringement action has been lodged. The Court indicated in this regard that it wants to give the SEP-proprietor the chance to adapt its licensing offer also in the on-going proceedings in order to meet FRAND requirements.

Referring to Huawei vs. ZTE, para. 63, the Court indicated that the SEP-proprietor in particular has to specify “the way in which the royalty is to be calculated”. It is not sufficient in this regard to merely refer to the claimed royalty rate and the respective reference base. Rather, the SEP-proprietor has to disclose all factors that as such contribute to the concrete amount of the offered licence fee and which can be used as a reference base to determine that a concrete offer is not exploitative. The specification of the way of calculation of the royalty rate can be made in a side letter. An inclusion in the licensing agreement is not necessary.

According to the Court of Appeal the determination of a non-discriminatory FRAND-offer requires proof that the licensing offer is in line with an established licensing practice. The SEP-proprietor has to demonstrate such a licensing practice by production of already existing licensing agreements with third parties to the Court. The third parties will likely have to be explicitly named and the stipulated conditions will likely have to be disclosed to the Court. If predecessors in ownership of the patents of the respective SEP-portfolio have stipulated licensing agreements concerning the portfolio, these agreements have to be produced to the Court, too. If a comparison of the claimed royalty with the royalty rates of other portfolios is made, the SEP-proprietor has to show that the respective SEP-portfolios are comparable. The Court indicated further that non-disclosure obligations as such do not justify a deviation from the SEP-proprietor’s burden of demonstration in the proceedings in this regard.

The Court of Appeal further indicated that the FRAND-licensing of a SEP-portfolio requires substantial demonstration by the SEP-proprietor in terms of the actual use of the SEP-portfolio. Therefore, at least a substantial amount of claim charts has to be provided by the SEP-proprietor that map the specific features of the respective patents to the specific passages of the respective standards. The Court indicated that at least a „proud list“ (of 10-15 portfolio patents with corresponding claim charts) has to be provided. Moreover, the SEP-proprietor has to explain in this regard why the respective SEPs of the “proud list” have been selected from the SEP-portfolio.

The Court also brought forward that a FRAND-compliant offer would require an “adaption clause” in terms of the royalty rate taking into account clearly perceivable changes in the SEP-portfolio (such as e.g. expiry of SEPs). It is also questionable according to the Court of Appeal whether an uniform royalty rate for every country is admissible, while the number of SEPs in the various countries in which the eventual sale of the device takes place varies considerably. The Court of Appeal also mentioned in this regard that it may be appropriate to introduce a specific clause in the SEP-proprietor’s licensing offer that ensures that the SEP-user will not be burdened with excessive overall royalty rates if other SEP-proprietors additionally approach the SEP-user with justified royalty demands. The Court indicated that the SEP-proprietor will likely have to explain the reason if he has not introduced such a clause in the FRAND-licensing offer.

V. SEP-user’s Counter-Offer

The Court of Appeal granted Sisvel the opportunity to provide another licensing offer potentially meeting the Düsseldorf Court of Appeal’s requirements. The Court emphasized in this regard that Haier has to react swiftly and diligently on this offer by either accepting or providing a FRAND-compliant counter-offer, provided that Sisvel’s licensing offer is actually in line with FRAND-requirements.

VI. Damages

The Court of Appeal also indicated that to its provisional estimation the SEP-proprietor’s claim to damages may be restricted to the FRAND-compliant royalty as long as the SEP-proprietor is not FRAND compliant. The Court also indicated in this regard that for periods of time in which the SEP-user is not FRAND-compliant, the SEP-proprietor’s damage claim may not be restricted.