I’ve had some time now to review Friday’s decision by the UPC’s Mannheim Local Division in Panasonic v. OPPO—the UPC’s very first FRAND decision—and some of the initial commentary discussing it, on ip fray (here and here), JUVE Patent and by Peter Picht on linkedin. As these commentators note, the decision is significant for, among other reasons, the following: (1) it confirms, as most observers pretty much expected, that the UPC has jurisdiction over FRAND counterclaims (paras. 237-41); (2) it intimates, as some previous German case law and commentary had done, that the past damages owed for the infringement of a FRAND-committed SEP can be assessed under any of the methods used for calculating damages (lost profits, reasonable royalties, or an award of the infringer’s profits) (para. 178); and (3) it rejects the European Commission’s view, as expressed in its amicus brief in HMD v. VoiceAge, that the CJEU’s decision in Huawei v. ZTE requires that the sequence of steps as set forth out in that decision (notice, expression of willingness to license, offer, counteroffer) must be strictly adhered to, and that the first two are merely formal in nature. Rather, the UPC Mannheim court is of the view, consistent with the BGH’s 2020 decisions in Sisvel v. Haier (a/k/a FRAND-Einwand I and II), that the infringer’s entire course of conduct is relevant to determining whether it is, in substance, a willing licensee (although its counteroffer should not be considered as part of this inquiry before consideration has been given to the owner’s offer, see para. 198). On the other hand, in the Panasonic decision the court engages in some detail with the content of the patentee’s offer, which perhaps goes some way toward alleviating one matter that appeared to trouble the Commission—the perception that, in other cases, the German courts have not given sufficient scrutiny to the offer. Still, as Florian Mueller points out, the UPC Mannheim decision also seems to require considerable input from the infringer to assist the plaintiff in making a FRAND offer, and doesn’t require the initial notice to include the sort of detail the Commission reads Huawei v. ZTE as requiring. Finally, applying its analysis to the facts, the court rejects the defendants’ FRAND defense and grants the injunction.
One thing that strikes me in particular, however—particularly after the webinar I moderated last week on German FRAND cases and other developments—is how much the German (and now, UPC) approach differs from that in the U.K. The UPC Mannheim decision is explicit on this point in a couple of places in the decision. See para. 172 (stating that, contrary to para. 79 of Panasonic v. Xiaomi, [2024] EWCA Civ 1143, within the EU legal regime SEPs are not to understood as being nothing more than a means for allocating monetary assets (allein eine monetäre Zuweisungsgehalt); rather, according to the case law of the CJEU, which to be sure is no longer decisive for the UK courts, the SEP owner also can exercise the prohibitory rights afforded him on the basis of the patent (“kann . . . der Inhaber eines SEP die ihm auf der Grundlage des Patents zustehenden Untersagungsrechte ausüben,” citing Huawei v. ZTE para. 46); id. para. 192 (stating that it is important to recall, especially against the backdrop of the UK Court of Appeal decision, that the CJEU has explained that the necessary safeguarding of the rights of intellectual property is to be respected, to which inter alia the IP Rights Enforcement Directive is directed). The court also states, in para. 174, that the declaratory judgment entered by the Court of Appeal in Panasonic v. Xiaomi expressly did not affect OPPO, even though OPPO was a defendant in a parallel suit before the Patents Court for England and Wales (citing the EWCA decision para. 2), and that it therefore can remain open in the present dispute whether the decision in that case effectively granted, in in its own words (citing the EWCA decision para. 67) a de facto “anti-suit injunction by the backdoor”—something that, in the public law context of TRIPS, is not to be accepted, citing TRIPS articles 1.1., 28.1, 28.2, 41.1, and 44.1). (Note that these rather generally worded provisions of TRIPS are the same ones the EU cites in its pending WTO challenge to China’s use of antisuit injunctions. Note also that para. 67 of the EWCA decision denies that its declaration granted Xiaomi an antisuit injunction by the backdoor.) Contrast the forgoing with some of what Lord Justice Arnold spoke about last week during our webinar (starting at 46:20). Lord Justice Arnold contrasted the CJEU and German perspective on FRAND with the U.K.’s approach, which is to view the FRAND defense not as competition-law based, but rather as a contractual defense based on clause 6.1 of the ETSI IPR Policy creating a stipulation pour autrui (contract for the benefit of third parties) under French law. His key insight is that
[t]he reality, as everybody surely knows, is that any SEP holder is a willing licensor if the price is high, and any implementer is a willing licensee if the price is low. So, we take the view that all of this discussion of whether people are willing licensors or willing licensees is actually a distraction from what matters. There is only one thing that matters, and that is, what is the right price? In other words, what terms are actually FRAND? That is why the increasing tendency of the UK courts, since Unwired Planet, has been to try and focus upon that question. And therefore, we determine what terms are FRAND, and as soon as you determine what terms are FRAND, then you can get to the crunch, because once you know what terms are FRAND, the issue is, are those terms accepted by the respective parties? Because if the SEP holder is truly willing to license, then they will accept the court’s determination of what is FRAND. Likewise, if the implementer is a willing licensee, it will accept the court’s determination of FRAND.
I too think that the U.K. approach makes more sense than devoting intense scrutiny to willingness and unwillingness—though I recognize that it also means that courts then must be willing to devote very substantial time and resources to determining FRAND rates. Moreover, any time you entrust a court to determine the terms of a contract or to award damages you run the risk of the court erring, because all other things being equal you would expect the parties themselves to have better information than any third-party decisionmaker. (That’s pretty much the standard law-and-economics rationale for injunctive relief.) But the counterargument is that, in these cases in particular, SEP owners often have substantially greater bargaining power to extract a license reflecting not just the ex ante value of their technology in comparison with alternatives but also some holdup value—albeit with implementers also sometimes having an incentive to delay matters for strategic advantage. The fundamental point is that both sides are going to act in their perceived self-interest, and that courts should be available, where necessary, to ensure that the resulting deal is FRAND. And this necessary, in my view and contrary to the view expressed in the UPC decision, because FRAND-committed SEPs really are different, in that the patent owner has made a commitment to accept money in return for access, and this commitment is necessary to ensure that the market power that necessarily flows from owning a technology that reads on a standard is not unfairly exploited.
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