A standard-essential patent (SEP) is a patent whose subject matter is essential for compliance with an industry standard. SEP holders may enter agreements with Standard Setting Organizations to license their SEPs on fair, reasonable, and non-discriminatory (FRAND) terms. When SEP holders and potential licensees fail to come to an agreement on licensing terms, the SEP holder may pursue litigation against the potential licensee for patent infringement. We previously wrote on obtaining injunctive relief for SEPs in the United States.1 We now write on international implications for SEP portfolios.
International Implications of SEP Portfolios
SEP holders often have portfolios of SEPs that cover many countries and frequently negotiate worldwide licenses for their SEP portfolios to streamline the licensing process. When licensing negotiations fail, an SEP holder may choose to litigate. Because of the territorial nature of patents, an SEP holder must generally file patent infringement suits on a country-by-country basis with the responsible national courts. In such cases, the laws of the jurisdiction or forum in which the case is brought govern, among other things, whether injunctions or damages may be granted, how FRAND rates are determined, and whether the parties were willing participants in the licensing negotiations. Therefore, it is important to understand the varying legal approaches to issuing injunctions and calculating FRAND rates in SEP cases in international jurisdictions.
SEPs at the Court of Justice of the European Union (CJEU)
In Huawei Technologies Co. Ltd. v. ZTE Corp.,2 the CJEU issued a judgment on an SEP case from the Düsseldorf District Court. In this case, Huawei, the holder of an SEP related to 4G Long Term Evolution, filed a patent infringement suit in the Düsseldorf District Court after failing to reach a license agreement with ZTE.3 In its ruling on the case, the CJEU established conditions in which an SEP holder can seek injunctive relief against an unwilling licensee.4 To seek injunctive relief, the SEP holder must first "alert the alleged infringer of the infringement by designating that SEP and specifying the way in which it has been infringed."5 Following a first notice of infringement, the implementer must express "its willingness to conclude a licensing agreement on FRAND terms" after which it is up to the SEP owner to "present to that alleged infringer a specific, written offer for a license on FRAND terms."6 To avoid being deemed an unwilling licensee and the issuance of an injunction, the alleged infringer must "submit [] to the proprietor of the SEP in question, promptly and in writing, a specific counter-offer that corresponds to FRAND terms." If the SEP holder rejects that counter-offer then the implementer must "provide appropriate security."7
SEPs in Germany
The German courts have issued several decisions interpreting Huawei v. ZTE,8 and many of these cases further define when an injunction against an "unwilling licensee" is proper in view of an SEP holder's FRAND obligations.9
In the landmark decision Sisvel International SA v. Haier Deutschland GmbH,10 the German Federal Court of Justice overruled the Düsseldorf Higher Regional Court's judgment that Sisvel failed to meet its FRAND obligations when it refused to license its SEP to Haier on the same terms as another licensee. The Federal Court of Justice found that an injunction against Haier was proper because Haier was not a willing licensee. The court noted that Haier took over a year to respond to Sisvel's original licensing offer, and its response to the offer did not demonstrate a willingness to enter into a license.11 The court emphasized that an implementer must declare its willingness in a serious, unequivocal, and unconditional manner to take a FRAND license on whatever terms are in fact FRAND.12 The implementer must also participate in licensing negotiations in a target-oriented way to avoid an injunction for patent infringement.13 Further, the court determined that FRAND obligations do not require an SEP holder to treat all licensees equally. An SEP holder may still meet its FRAND obligations and be entitled to an injunction against potential licensees despite offering varying licensing terms to different licensees as long as the SEP holder can justify the unequal terms.14
Shortly after the first judgment, the German Federal Court of Justice handed down another decision in the Sisvel v. Haier dispute.15 There the court clarified further aspects on the framework for conducting a FRAND license negotiation. The court stressed that the SEP holder is not obliged to provide a first offer that is already FRAND in every aspect.16 Otherwise, there would be no need for a counteroffer and further negotiations. Also, the implementer is required to provide an "offer with diligence, in accordance with accepted commercial practices in the field and in good faith," and without delaying the negotiations even if the first offer by the SEP holder is not FRAND.17 The court limited the obligation for the implementer to react, however, only for exceptional cases: if the first offer by the SEP holder deviates to such an extent from a FRAND compliant rate that it appears as a refusal to conclude a licensing agreement, it may be sufficient for the implementer who seriously seeks a license to explain the shortcomings of that offer.18
In Nokia v. Oppo, 19 the District Court Munich I expanded on the requirements of being a willing licensee and how being a willing licensee affects whether or not an injunction may be issued for patent infringement. Nokia, the holder of several SEPs related to wireless communication standards, filed a lawsuit for patent infringement against Oppo after Nokia and Oppo failed to renew an expiring SEP license.20 Oppo raised a FRAND defense, arguing that Nokia failed to offer a license on FRAND terms.21 The court, ruling against Oppo, found that Oppo failed to act as willing licensee during negotiations.22 The court noted that to demonstrate willingness to enter into a license, a party must act in a way that will advance negotiations at each stage of the negotiation process.23 The fact that Nokia did not explain in detail the calculation of the offered rate was not considered a refusal to conclude a licensing agreement. The court found that Oppo's delays in negotiations and failure to conduct the negotiations in a target-oriented manner demonstrated that Oppo was not a willing licensee.24 Accordingly, the court decided that Oppo infringed Nokia's SEPs and granted an injunction against Oppo.
SEPs in the United Kingdom
Like the German courts, U.K. courts have also issued decisions interpreting and expanding on the ruling in Huawei v. ZTE. In Unwired Planet International Ltd. v. Huawei Technologies (UK) Co. Ltd.,25 the U.K. Supreme Court ruled on the power of U.K. courts to issue injunctions and set FRAND rates in SEP cases. (This is in contrast to the German courts which have not determined a global FRAND rate so far). In this case, the U.K. Supreme Court found that U.K. courts have the power to grant an injunction against infringement of a U.K. SEP unless the infringer enters into a global FRAND license.26 The court noted that U.K. courts may "determine a FRAND license which, if accepted by the implementer, may prevent a SEP owner from obtaining a prohibitory injunction. The implementer has the choice whether to exclude the risk of injunction by accepting a FRAND license."27 The court further noted that U.K. courts have the power to determine and set the FRAND terms and rates for a global license.28
In InterDigital Technology Corp. & Ors v. Lenovo
Group Ltd.,29 a U.K. court denied an injunction against
an implementer because of abuses by the SEP holder during licensing
negotiations. InterDigital, the holder of several SEPs, brought
this patent infringement suit against Lenovo after the parties
failed to reach a license agreement.30 In determining
whether to issue an injunction against Lenovo, the court determined
that, "for the most part, Lenovo did conduct themselves as a
willing licensee."31 On the other hand, the court
found that InterDigital did not act as a willing licensor because
the license rates offered by InterDigital were "supraFRAND
rates."32 The court refused to grant
InterDigital
an injunction against Lenovo and, following the decision in
Unwired Planet v. Huawei, calculated a FRAND rate for a
license between the parties.
Conclusion
As the above-outlined SEP cases demonstrate, there are a variety of approaches to issuing an injunction and calculating FRAND terms across international jurisdictions. Courts in varying jurisdictions may be more or less likely to grant an injunction against an unwilling licensee or to calculate FRAND rates for the parties. Therefore, parties may want to take these various approaches into consideration when litigating FRAND issues either as a patent owner or a defendant.
Footnotes
1. Daniel Cooley, Injunctive Relief for Standard
Essential Patents, IP Litigator,
May/June 2023.
2. Case C-170/13, ECJ (2015).
3. Id. at ¶¶ 21–27.
4. Id. at ¶ 59.
5. Id. at ¶¶ 61.
6. Id. at ¶¶ 63.
7. Id. at ¶¶ 66–67.
8. See e.g., Sisvel v. Haier, Regional Court of
Dusseldorf, 4a O 93/14, 4a O114/14 (2015), St. Lawrence
Communications v. Deutsche Telekom, Regional
Court of Manheim, 2 O 106/14 (2015), SLC v. Vodafone, LG
Dusseldorf, 4aO 73/14 (2016).
9. Ashish Bharadwaj and Dipinn Verma, Failure is not Falling Down but Refusing to Get Up: Implication of Huawei/ZTE Framework (CJEU 2015) in Europe, 7 J. Marshall Rev. Intell. Prop. L. 326, 328 (2018).
10. Case No. KZR 36/17, Federal Court of Justice (2020) "FRAND Defence I", of May 5, 2020.
11. Id. at ¶ 92.
12. Id. at ¶ 83.
13. Id. at ¶ 81.
14. Id. at ¶ 76.
15. Case No. KZR 35/17, Federal Court of Justice (2020), "FRAND Defence II" of November 24, 2020.
16. Id. at ¶ 54.
17. Id. at ¶ 87.
18. Id. at ¶¶ 124–25.
19. District Court of Munich I, judgment dated Aug. 5, 2022, Case No. 21 O11522/21.
20. Id. at ¶¶ 15–80.
21. Id.
22. Id. at ¶ 110.
23. Id. at ¶ 114.
24. Id. at ¶ 158.
25. [2020] UKSC 37, 26 August 2020, on appeals from [2018] EWCA Civ 2344 and [2019] EWCA Civ 38.
26. Id. at ¶ 61.
27. Id. at ¶ 88.
28. Id. at ¶¶ 66–84.
29. [2023] EWHC 1578 (Pat).
30. Id. at ¶ 4.
31. Id. at ¶ 932.
32. Id. at ¶ 928.
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