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.
