The first ruling on FRAND rules for SEPs since 2015 has now been decided at the beginning of May at the German Federal Supreme Court (BGH) in the case of Sisvel vs Haier. The BGH sets strict standards for the willingness to license and the requirements for ‘willing’ licensees. The ruling strengthens SEP patent holders.
At the beginning of May 2020, the German Federal Supreme Court (BGH) issued the first ruling on FRAND rules for standard-essential patents (SEPs) since the landmark Huawei vs. ZTE ruling of the European Court of Justice (ECJ) of 2015, which is known for the “ping-pong” procedure outlined therein, according to which an SEP holder can only sue for injunctive relief if he has previously offered the alleged patent infringer a license on FRAND terms. The latter must in turn indicate that he is willing to enter into a license agreement.
In practice, this is often a game for the buck. For the ECJ has not set a framework as to how high the concrete license fee may be for an offer. It has also not yet been clarified who has to bear the burden of proof for the FRAND conformity of the licence offer (and thus possibly also the disclosure of the content of all third-party licences concluded).
Requirements for ‘willing’ licensees
And when is an alleged patent infringer ‘willing’ to enter into a license agreement? In the case of Sisvel vs. Haier, which was decided on 05.05.2020 before the German Federal Supreme Court (KZR 36/17), the court mainly dealt with this last question, which requirements have to be met by a ‘willing’ potential licensee. In its ruling, the BGH sets strict standards for the willingness to license and strengthens the patent holders of SEPs.
Background of the case Sisvel vs. Haier
Sisvel International S.A. (Luxembourg) as patent holder of the SEP (SEP EP 08 52 885) sued Haier (China) before the Düsseldorf Regional Court with the accusation of patent infringement. The LG granted the claim, but the appellate instance overturned it.
The OLG Düsseldorf also agreed with Haier and ruled that Haier was not offered a FRAND-compliant agreement, as it is mandatory for patent holders of an SEP. The OLG explicitly referred to a third party license agreement that Sisvel had concluded with a Chinese state enterprise, which offered much better conditions than Sisvel’s license offer to Haier.
Sisvel appealed against the decision of the OLG Düsseldorf, but in the meantime the patent had been restricted by the BPatG and also in the next instance by the BGH. Haier therefore filed a subsequent appeal, arguing that there was no longer any patent infringement against the patent of action in its restricted form.
A hearing on this case was held before the Cartel Senate of the BGH on May 5, 2020, after which the BGH issued its decision (KZR 36/17): the First German BGH ruling on FRAND rules since 2015 .
Abuse within the meaning of Article 102 TFEU
In principle, the BGH considered the patent infringement by Haier against Sisvel as proven. Haier also invoked antitrust law in vain. The court ruled that Sisvel had a dominant position in the market, but would not abuse it.
An abuse within the meaning of Art. 102 TFEU is given if the user seeking a license makes a FRAND-compliant offer, but the patent holder does not accept it. But the FRAND conditions are almost always the point of contention, as was also the case in the groundbreaking Huawei vs. ZTE judgment of the ECJ.
However, the BGH emphasized that potential SEP infringers such as Haier have a duty to make an offer themselves in good time and as concretely as possible, as the ECJ has stipulated in Huawai vs. However, Haier did not do this and must therefore be seen as an unwilling licensee.
This is also in line with the ECJ ruling, according to which both parties should show a recognizable will to conclude a FRAND-compliant license. However, the ECJ did not formally specify the requirements for FRAND terms, so an agreement is basically only possible if both parties are willing to cooperate with each other.
View over the edge: Huawei vs. Unwired
The recent ruling by the OLG Düsseldorf (Akz. I-2 U 31/16) in the case Huawei vs. Unwired Planet is therefore also interesting. In its ruling, the court demanded clear FRAND rules to ensure that the transfer of SEPs does not discriminate against potential licensees.
In the meantime, however, Unwired and Huawei have reached a settlement at the end of April 2020 which ends their legal dispute both in the US and in Germany. The German Federal Supreme Court confirmed that the parties have withdrawn the pending FRAND case (case number: 10 ZR 33/19), so the Federal Supreme Court can no longer pass judgement on Huawei vs. Unwired Planet – a great pity in terms of FRAND legal certainty in Germany.
BGH set aside the judgment of OLG Düsseldorf
In the present case Sisvel vs. Haier, the Federal Court of Justice ruled that according to the infringement notice of the patent owner of an SEP, the user of an SEP patent had to express his will to conclude a license on FRAND terms. Haier, however, at no time expressed this willingness under all conditions as long as they are FRAND-compliant.
The BGH set aside the judgment of the OLG Düsseldorf in the case Sisvel v. Haier, as Haier had not acted as a willing licensee, the BGH ruled.
Sisvel vs. Haier: State pressure from China
Unfortunately, the reasons for the judgement are not yet available, we have to wait for this. in particular, the argumentation of the BGH regarding the third license agreement of Sisvel with a Chinese state enterprise, which the OLG Düsseldorf had considered, will be interesting. Sisvel had argued that the said license agreement had been concluded under the influence of the Chinese state. But can state pressure – especially state pressure by China – on a company justify unequal treatment within the meaning of the FRAND conditions?
By the way, the disputed patent has expired in the meantime. Nevertheless, another lawsuit between the two parties Sisvel and Haier is taking place in Germany concerning another SEP and a possible patent infringement or the FRAND-compliant license agreement.
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