The Hague District Court in the Netherlands rejected a claim
brought by smartphone maker Archos alleging that Philips had abused
its dominant position during negotiations concerning licenses on
fair, reasonable and non-discriminatory (FRAND) terms for standard
essential patents (SEPs). Archos S.A. v. Koninklijke Philips
N.V. (Dist. Ct. of The Hague, Feb. 10, 2017)
In June 2014, Philips discovered that
Archos had used three of Philips's patents covering UMTS and
LTE technology. Because they covered standards used to transmit
data via smartphones, the patents were registered as SEPs with the
European Telecommunications Standards Institute.
After Philips notified Archos that it
was using Philips's SEPs, the two parties entered into
negotiations. In July 2015, Philips made Archos an offer of EUR 0.7
per product sold that used UMTS and/or LTE functionality. In
January 2016, Archos countered with an offer of EUR 0.07 per
These offers were made two weeks after
the European Court of Justice (ECJ) decision in Huawei v.
ZTE. In that case, the ECJ established three core principles
concerning the licensing of SEPs on FRAND terms:
The burden of making an offer lies with the SEP holder.
The determination of what constitutes a FRAND offer is left up
to national courts across European jurisdictions.
An application by an SEP holder for an injunction against an
alleged infringer that is not preceded by an opportunity for the
alleged infringer to license the patent on FRAND terms is an abuse
After unsuccessfully having made an
offer in line with Huawei, Philips sought an injunction
against Archos to prevent it from using Philips's SEPs. Archos
applied to the same court simultaneously, arguing that
Philips's offer had not been on FRAND terms and that, in line
with Huawei, Philips's application for an injunction
was an abuse of dominance. Archos argued that Philips's offer
was too high in light of the fact that Archos produces low-cost
smartphones and generates low profit margins. Archos further
claimed that Philips had shown inflexibility in its
The Hague District Court rejected
Archos's claim, stating that it had failed to prove that
Philips's offer had not been FRAND and that its application for
an injunction had been an abuse of dominance. The Court stated that
Philips had not failed to enter into effective negotiations and
that, in fact, it had been Archos that had prevented a solution
from being reached, evidenced by the fact that during the
negotiations preceding the Huawei judgment—which
shifted the burden of making an offer from the SEP user to the
rights holder—Archos had failed to make an offer.
Furthermore, Archos had told Philips that it would have to take
legal action if it wanted higher royalty fees, thereby
demonstrating an unwillingness to enter negotiations.
The Court also noted that Archos's
low margins did not necessarily mean that the offer made by Philips
had not been FRAND.
Archos therefore failed to establish
that Philips's conduct had been in breach of the ECJ's
decision in Huawei. The claim was dismissed, and Archos
was ordered to pay the legal costs.
The focus on the product being obvious or anticipated as at a certain date provides powerful protection and commercial certainty without conflicting with a patentee's ability to obtain patent protection.
Following the UK Government's announcement that it will ratify the Unified Patent Court Agreement, the Unitary Patent and Unified Patent Court (UPC) are expected to go live in December 2017.
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