Monday, December 5, 2016

FRAND News from Germany

As I mentioned late last month (here), Daniel Hoppe recently published an article titled Die Rechtsprechung der deutschen Instanzgerichte zum Patent- und Gebrauchsmusterrecht seit dem Jahr 2015 ("The Patent and Utility Model Case Law of the Lower German Courts Since 2015") in the October 2016 issue of GRUR RR (pp. 385-96).  A good portion of the article discusses the German post-Huawei v. ZTE FRAND cases.  I've blogged about a few of these cases before (see here, here, here, here, here, and here), but this article discusses a few additional cases I hadn't seen, including one appellate decision, the May 9, 2016 judgment of the Oberlandesgericht Düsseldorf, I-15 U 35/16.  (There is an almost identical May 9, 2016 Judgment of the Oberlandesgericht Düsseldorf with the case number I-15 U 36/16, involving a separate defendant.)  So if I've got this right, we now have (essentially) three German appellate decisions, including the January 13, 2016 decision of the Oberlandesgericht Düsseldorf and the the May 31, 2016 judgment of the Oberlandesgericht Karlsruhe, 6 U 55/16,  (If readers are aware of any others in addition to these, please let me know.)  Then last week Florian Mueller published a post on FOSS Patents titled "Mannheim Regional Court denies injunction in standard-essential patents case for antitrust reasons," which includes a translation of key passages of another recent district court judgment, the July 1, 2016 judgment of the Landgericht Mannheim, 7 O 209/15. 

To put the matter in context, the CJEU's July 2015 judgment in Huawei v. ZTE holds that "the proprietor of an SEP which considers that that SEP is the subject of an infringement cannot, without infringing Article 102 TFEU, bring an action for a prohibitory injunction or for the recall of products against the alleged infringer without notice or prior consultation with the alleged infringer, even if the SEP has already been used by the alleged infringer" (para. 60).  In particular:
61      Prior to such proceedings, it is thus for the proprietor of the SEP in question, first, to alert the alleged infringer of the infringement complained about by designating that SEP and specifying the way in which it has been infringed. . . .
63      Secondly, after the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, it is for the proprietor of the SEP to present to that alleged infringer a specific, written offer for a licence on FRAND terms, in accordance with the undertaking given to the standardisation body, specifying, in particular, the amount of the royalty and the way in which that royalty is to be calculated. . . .
65      . . . [I]t is for the alleged infringer diligently to respond to that offer, in accordance with recognised commercial practices in the field and in good faith, a point which must be established on the basis of objective factors and which implies, in particular, that there are no delaying tactics.
66      Should the alleged infringer not accept the offer made to it, it may rely on the abusive nature of an action for a prohibitory injunction or for the recall of products only if it has submitted to the proprietor of the SEP in question, promptly and in writing, a specific counter-offer that corresponds to FRAND terms.
67      Furthermore, where the alleged infringer is using the teachings of the SEP before a licensing agreement has been concluded, it is for that alleged infringer, from the point at which its counter-offer is rejected, to provide appropriate security, in accordance with recognised commercial practices in the field, for example by providing a bank guarantee or by placing the amounts necessary on deposit. The calculation of that security must include, inter alia, the number of the past acts of use of the SEP, and the alleged infringer must be able to render an account in respect of those acts of use.
By itself, this formulation leaves a number of interpretive issues on the table, including whether all SEPs are deemed to confer monopoly power; whether or to what extent this framework applies if the plaintiff and defendants are not competitors; whether it applies when the patent in suit is a de facto SEP and there is no formal FRAND commitment; how detailed the plaintiff's initial offer must be; and whether the defendant's failure to provide a counteroffer and security are relevant if the initial offer was not within the FRAND range, however the court evaluates the latter.  For previous discussion on this blog, see, e.g., here, here, and here.

Anyway, as discussed in the July 1 Judgment of the Landgericht Mannheim (see Florian Mueller's post) and in Mr. Hoppe's article, one of the important principles that may be emerging is that the SEP owner's initial offer must be in the FRAND range.  According to the May 31 Judgment, it isn't sufficient for the court to engage in a very minimal review (Evidenzkontrolle) to determine whether the offer was manifestly non-FRAND.  At the same time, it may not be necessary for the court to determine precisely what a FRAND offer would have been in order to adjudicate the competition-law defense; the SEP owner is entitled to "a generous degree of wiggle room" (ein großzügiger Entscheidigungsspielraum).  However, according to the Mannheim court, there has to be a sufficient degree of  transparency for the alleged infringer to evaluate the offer, such as claim charts and a delineation of the method (a standard licensing program, a patent pool, whatever) by which the owner calculates the FRAND rate.  On the other hand, as discussed in the May 9 Judgment of the Oberlandesgericht Düsseldorf, where the alleged infringer waits to respond until five months after the SEP owner has put it on notice of its alleged infringement, this indicates that the alleged infringer hasn't "expressed its willingness to conclude a licensing agreement on FRAND terms" (Huawei, para. 63), and thus that there is no abuse of dominant position if the SEP owner proceeds to request an injunction.  If I'm understanding correctly, the SEP owner isn't required to convey a FRAND-range offer if, as here, the accused hasn't expressed its willingness to license.

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