On July 16, 2015 the Court of Justice rendered a decision in case C-170/2013 concerning a patent essential to a standard established by a standardisation body. Although the request for interpretation focused on Article 102 TFEU, the judgment clarifies the burdens imposed on the owner of such patents in order to be able to pursue an infringement action without incurring in an abuse of dominant market position.
The original case between two multinational corporations of the telecommunication sector – the Huawei Technologies Co. Ltd and the ZTE Corp., with its subsidiary ZTE Deutschland GmbH – concerned the alleged violation on the part of the latter of a patent which had been declared essential to a standard by the European Telecommunication Standards Institute (ETSI). Upon invitation by ETSI, and according to its procedures, the Huawei Technologies had irrevocably committed to grant third parties licenses on fair, reasonable and non-discriminatory terms (so-called FRAND terms) for the use of the European Patent n. EP 2 090 050 B 1. However, negotiations for such license in favour of ZTE had been unsuccessful, and the latter had nonetheless engaged in the non-authorised use of the patent. Faced with the infringement action brought by the Huawei Technologies, the referring judge had posed to the Court the question whether such behaviour constituted an abuse of dominant market position according to Article 102 TFEU.
In answer to the preliminary reference by the German judge, and since the existence of a dominant market position was undisputed, the Court sought to balance the need to ensure fair competition and the prerogatives of the owners of intellectual property rights, and concluded that, although the commitment to grant a license imposes certain obligations on the owner of a patent, an infringement action does not always amount to abusive conduct. In particular the owner, before commencing such proceedings, must alert the alleged infringer and indicate with sufficient accuracy the patent and the way in which it has been violated; if the alleged infringer expresses its willingness to conclude a license agreement, the patent owner must submit an offer in compliance with FRAND terms and specify the amount and mode of calculation of royalties. If, however, the owner has complied with the above-mentioned conditions and the alleged infringer does not accept the offer, adopts delaying tactics or behaves itself in a manner contrary to good faith, the owner of the patent may legitimately bring an infringement action without incurring in an abuse of its dominant market position.
Although several questions on the matter of patents essential to a standard remain unsolved, this judgment ensures a certain clarity in this regard, and guarantees a balance between respect for intellectual property rights and the rules against unfair competition which result in the imposition of licenses. With this goal in mind, the Court underlines the need to behave according to good faith in the course of negotiations for FRAND licenses, and requires the owner of the patent to act for the conclusion of the agreement only insofar as the counterpart does not prove unwilling or engages into obstructive practices.