Friday, July 10, 2020

A couple of thoughts on Sisvel v. Haier

I don't have very much to add, at this point, to Peter Picht and Erik Habich's excellent analysis of the German Federal Supreme Court's decision in Sisvel v. Haier, which I recommend (see previous post here).  I'll note just two things that I thought were of particular interest.

First, as Picht and Haber point out, the decision puts a great deal of emphasis on whether, at step two of the Huawei v. ZTE framework, the implementer has adequately expressed its willingness to conclude a license on FRAND terms--to the extent of actually disagreeing, at one point, with the lower court's analysis of the evidence (see decision para. 95).  Presumably, then, in future cases much will depend on how well (or how poorly) the implementer can document its efforts to negotiate in good faith.  See, e.g., para. 83 (stating, in the Arnold Ruess translation of the decision, that "the infringer . . . must clearly and unequivocally declare his willingness to conclude a licence agreement with the patent proprietor on reasonable and non-discriminatory terms and must also subsequently participate in the licence agreement negotiations in a target oriented manner"). 

Second, although the court notes the difficulty, in the SEP/FRAND context, faced by implementers in discovering and clearing all relevant patents in advance of launching a product--and cites this as one reason for the competition-law defense to make it more difficult for patent owners to obtain injunctions than in other types of patent cases (see para. 74 of the decision)--the court doesn't see this difficulty as a reason for departing from the traditional German rule that allows courts to award damages based on the assumption that a defendant who launches a product without clearing the relevant patent rights first is, in general, negligent (see para. 109).  The court therefore clears the way for owners of FRAND-committed SEPs to recover damages against infringers under any of the three methods available in Germany (lost profits, reasonable royalty, or defendant's profits), though it notes that if the defendant's competition-law counterclaim succeeds, the damages would be to some extent offset and the plaintiff would only recover the value of a FRAND royalty (paras. 110-12).  I'm not sure this rule is economically sound, particularly in the FRAND context, where the nature of the commitment is such that the plaintiff should expect to recover only a FRAND royalty.  I realize, of course, that if the reason the competition-law defense doesn't apply is that the implementer has been negotiating in bad faith, some remedy above the value of the FRAND royalty may be necessary for deterrence purposes (and enhanced damages, as such, are not an option in Germany); though one would think the injunction itself would have much the same function, as Dan Burk has pointed out (though maybe not in a case like Sisvel v. Haier, where the patent in suit expired before the appeals had all run their course).  I also recall that one of the Supreme Court judges on the Sisvel panel, Dr. Meier-Beck, has previously written that in his view the damages awarded under any of the three methods should, in principle, converge (a point with which I disagree); see previous discussion here

For discussion elsewhere of the damages courts may award in FRAND cases, see this chapter from Patent Remedies for Complex Products.          

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