Germany: Düsseldorf Regional Court Addresses Requirements For FRAND Defence And Grants Injunction Based On A SEP In Sisvel V Haier

Last Updated: 21 June 2016
Article by Taylor Wessing

The case Sisvel v Haier (case 4a 144/14) dated 3 November 2015 before the Düsseldorf regional court (parallel case 4a 93/14) was the first reported German case in which an injunction for the infringement of a SEP was granted after the CJEU's ruling in Huawei v ZTE.

It left virtually no room for defendants to slow down negotiations without risking the loss of the FRAND defence. Secondly, the case highlighted 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 obtain the actual third party licence agreements because they are in possession of the current or past patentee, the Düsseldorf regional court appeared reluctant to order their production by patentee, or to shift the burden of proof.

This case started before the CJEU ruling in Huawei v ZTE. In September 2014, Sisvel had filed an 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 judgment, Sisvel had made different licence 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 licence 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 licence 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 licence offers were actually FRAND. It was the failure to provide security and reporting for accrued royalties as required by the CJEU which proved fatal to Haier's defence.

According to the CJEU (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 a 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 CJEU 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 CJEU decision 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 provided 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

This case is also interesting due to another aspect. Haier tried (unsuccessfully) to defend itself by pointing to a licence 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-licence, 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 licence between Nokia and Qualcomm which is binding also for Sisvel. Therefore, Sisvel argued (unsuccessfully) that even if exhaustion of rights does not apply to Haier's sales in the EU, Sisvel nevertheless could not ask for additional royalties with regard to mobile phones with already licensed chipsets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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