On 20 November 2014, Advocate General Wathelet issued an opinion in Case C-170/13 Huawei Technologies v ZTE. At issue is whether Huawei, as a holder of standard-essential patents ("SEPs") subject to a fair, reasonable and non-discriminatory ("FRAND") commitment, may seek an injunction in an action for infringement. The case is currently pending before the Court of Justice of the European Union ("ECJ"). In his opinion, the Advocate General concluded that, assuming that the SEP-holder has a dominant position, it constitutes an abuse under Article 102 TFEU to make a request for corrective measures or to seek an injunction against a company that allegedly infringed the SEPs (the allegedly "offending company") if the SEP-holder has not honoured its FRAND commitment and the offending company has shown itself to be objectively ready, willing, and able to enter into a licensing agreement.
The underlying national proceedings pitted two Chinese telecommunications firms against each other, namely Huawei and ZTE. Huawei is the owner of patents considered as essential to the Long Term Evolution (LTE) standard, which was developed under the aegis of the European Telecommunications Standards Institute ("ETSI"). Huawei notified the patents to ETSI and then committed to grant licences to third parties on FRAND terms. Following a breakdown of the negotiations for the conclusion of a licensing agreement on FRAND terms, Huawei brought an action for patent infringement before the German District Court of Düsseldorf (the "referring court").
In the view of the referring court, there is a potential divergence between the respective requirements set out by the European Commission in the Motorola and Samsung decisions (see VBB on Competition Law, Volume 2014, No. 4, available at www.vbb.com) and those set out by the German Bundesgerichtshof in its Orange-Book-Standard judgment. The Commission appears to be more sceptical of SEP-based injunctions than the German court. Indeed, while the Commission considers that an injunction against a willing licensee to enter into a licensing agreement can constitute an abuse of dominant position, the German court considers that seeking injunctive relief in relation to SEPs is an abuse of dominant position in very limited circumstances only such as where the prospective licensee had previously offered to conclude an unconditional and binding licensing agreement with the SEP-patent holder. In that context, the ECJ has been called upon to analyse whether, and in what circumstances, an action for infringement brought by a SEP-holder against an undertaking which manufactures products in accordance with that standard constitutes an abuse of dominant position.
The Advocate General considered that a pure and simple application of either approach would not be appropriate on account of, on the one hand, the factual differences of the present case with that of the German case (i.e., the German case dealt with a de facto standard, whereas the standard in the present case is subject to FRAND terms) and, on the other hand, the belief that, pursuant to the Commission's approach, the mere willingness of the prospective licensee to negotiate in a highly vague and non-binding fashion is not sufficient to limit the SEP-holders' right to bring an action for injunction.
According to the Advocate General, the SEP-holder must present the allegedly offending company with a written offer of a licence on FRAND terms, and that offer must contain all the terms normally included in a licence in the sector in question, including the precise amount of the royalty and the way in which that amount is calculated. If the offending company does not provide a considered and serious response to that offer, such as by making a reasonable counter-offer in writing on any terms with which it disagrees, or otherwise engages in conduct that is purely tactical, dilatory, and/or not serious, an application for corrective measures or for an injunction does not constitute an infringement of Article 102 TFEU. For these purposes, the conduct of the offending company cannot be regarded as dilatory or not serious if it requests that FRAND terms are determined either by a court or arbitration tribunal, or if it reserves the right after entering into a licence agreement to challenge the validity, the use or the essential nature of the patent.
The Advocate General also noted that in order to avoid an infringement, the SEP holder must, before making a request for corrective measures or seeking an injunction, alert the offending company to the infringement at issue in writing, giving reasons and specifying the SEP concerned and the way in which it has been infringed by that company. However, these precautionary steps are, according to the Advocate General, not necessary if it has been established that the offending company is fully aware of the infringement.
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