LG Munich: Foreign ASI and willingness to FRAND license

In the patent dispute between IP Brigdge from Japan and Huawei from China, the LG Munich has made a remarkable ruling: Anyone who applies for a foreign ASI as an SEP user or threatens to do so is generally deemed to be ‘unwilling to license’ in proceedings concerning FRAND licensing conditions.

Foreign ASI – popular remedy in FRAND licensing disputes

Patent holder IP Bridge from Japan and the defendant Huawei have been negotiating since 2015 about a FRAND fair licensing of a portfolio of patents of IP Bridge, which are considered essential for the 2G, 3G and/or 4G standard. Since the 5G standard in turn builds on the 4G standard, one can certainly assume that some of these patents are also relevant for the new 5G standard. And the technological supremacy in the 5G standard is currently being fought over globally – and politically.

This is also evident in this case: IP Bridge has meanwhile filed several patent infringement suits against Huawei in relation to these standard-essential patents (SEP): one suit each before the LG Munich (ref. 7 O 360/21) and one before the LG Mannheim (ref. 7 O 5/21). In addition, IP Bridge has applied to the UK High Court (UK) for a global FRAND licence (currently pending) in relation to the standard essential patents EP 17 88 782 B1, EP 22 94 737 B1, EP 21 24 463 B1, which are also at the centre of IP Bridge’s patent infringement actions against Huawei.

Other popular weapons in this global battle over essential patents for 4G and 5G standards are anti-suit injunctions (ASI) and anti-enforcement injunctions (AEI).

Overall, this shift from SEP disputes about FRAND-compliant licensing to ASI decisions can also be viewed quite critically. Instead of – as actually intended with the FRAND conditions – primarily reaching an agreement between users and owners of essential patents, more and more of these cases are shifting to the courts – especially often in Germany, but above all globally and tactically planned with a foreign ASI.

Chinese FRAND determination and AEI

In this case, a Chinese case had already been pending between the two parties before the court in Nanjing, in the course of which something remarkable happened. This court had set a FRAND royalty rate for the Chinese patents from the disputed patent portfolio (a so-called FRAND determination).
Incidentally, a Chinese court determination of a Chinese FRAND royalty rate on patents in dispute merely determines a royalty rate that is deemed by the Chinese court to be FRAND compliant. This, however, does not establish a licence agreement – the parties still need to reach an agreement through negotiation.

In any case, IP Bridge subsequently brought patent infringement proceedings against Huawei (Ref.: 4b O 30/18) – before the Düsseldorf Regional Court. With success, Huawei was ordered to cease and desist on 27.08.2020. However, on the same day, Huawei applied to the Supreme People’s Court of the People’s Republic of China (Ref.: (2019) Zui Gao Fa Zhi Min Zhong No. 792, 733 and 734) for an injunction prohibiting it from enforcing the anticipated injunction of the LG Düsseldorf in the patent infringement proceedings (a so-called anti-enforcement injunction).

It is important to know: The decision of the Supreme People’s Court was issued ex parte (i.e. on the part of only one party) to secure the Chinese FRAND determination proceedings. And appeals against such decisions (“reconsideration”) have no suspensive effect in Chinese procedural law.

LG Munich – IP Bridge vs. Huawei

In any event, the LG Munich (possibly influenced by this decision of the Supreme People’s Court of China) prohibited Huawei from seeking an injunction, in particular in a court of the People’s Republic of China, against the patent infringement action of 8 January 2021 filed with the LG Munich I (Anti-Suit Injunction, ASIs). Likewise, the preliminary injunction of the LG Munich prohibited the filing of an Anti-Enforcement Injunction (AEI) in the People’s Republic of China in this matter.

Huawei filed an appeal against this decision of the LG Munich of 11.01.2021, which the LG Munich now rejected at the end of June with its final judgment summarised here (7 O 36/21). Accordingly, the Munich Regional Court considers it likely that Huawei will or would file an injunction with a Chinese court to prevent IP Bridge from asserting claims arising from its SEPs in Germany. This is because Huawei or its group companies can, at any time and without warning, obtain an anti-suit injunction before a Chinese court in the context of a parallel pending FRAND determination proceeding. Therefore, the Munich Regional Court (LG Munich) ruled that there was a risk of first infringement.

Shifting the risk of first infringement ahead of time?

The Munich Regional Court admitted that there was currently no concrete infringement relevant to the risk of first infringement (Huawei had not yet applied for a foreign ASI). However, the LG Munich referred to the case law of the Federal Supreme Court (BGH) on the risk of first infringement, according to which the existence of rights (which Huawei has through a Chinese FRAND determination in this case ) is not sufficient to establish a risk of first infringement, but a threat of infringement is. This was present here, the LG Munich ruled, and emphasised that the willingness to act in a legally compliant manner immediately or in the near future must also be inferred due to BGH.

Such willingness does not exist in principle with regard to foreign ASIs, the LG München stated and explained. The applications for the issuance of an ASI that have become known so far were all justified by the need to protect a main action pending in the issuing state with regard to FRAND licence agreements or FRAND licence conditions. The main actions are thus based on the assumption that the patent user is willing to license, because the will to agree is a very important aspect in FRAND jurisprudence.

However, a patent user who applies for an ASI abroad or threatens to do so cannot, as a rule, be regarded as sufficiently willing to license within the meaning of the case law of the Court of Justice of the European Union and the Federal Court of Justice, the Munich judges ruled. Ultimately, this implies a temporal advance of the initial threat and, incidentally, also a quasi preventive ASI – or even an AASI without an ASI.

Foreign ASI = not willing to license: a judgement with radiant effect

This is a judgement with a radiant effect on global patent disputes, which have recently been fought mainly by ASIs and their enhancement. From now on, such foreign injunctions will probably be much less attractive in Germany, especially in Munich.

The Munich court emphasised that, according to case law, filing an ASI before a foreign court in order to prevent the enforcement of injunctive relief for patent infringement in Germany constitutes an impairment of the patent proprietor’s property-like legal position in Germany (OLG München GRUR 2020, 379; LG München I BeckRS 2021, 3995, para. 120).

Finally, the LG Munich closed the circle on the risk of first infringement. There is a claim to access to justice (Basic German Law). And this entitlement to the safeguarding of justice requires the moderate advance shifting of the risk of first instance, as was done in the present case, in order to prevent a de facto exclusion of access to the courts as a result of a foreign ASI from the outset. A patent proprietor was threatened with the issuance of an ASI as a reaction to his infringement notice, the court explained. In fact, he would be prevented from successfully enforcing his right to injunctive relief under patent law against patent users who were indisputably unwilling to license during the term of the patents.

Only the proposed modifications concerning a temporal advance of the assumption of a risk of first infringement could guarantee the required access to the courts, summarised the LG München.

In other respects, the judgement reads that due to the feared unlawful encroachment on the property-like protected legal position of the plaintiff in the injunction, the defendants in the injunction are to be ordered to cease and desist from future encroachments pursuant to § 1004 German BGB. The way is thus clear for the actual patent infringement proceedings between the parties.

Do you need support in patent protection or licensing issues?

Our attorneys and patent attorneys have many years of expertise in patent and licensing law as well as in the entire field of intellectual property and are authorised to represent you before any court – in Germany and also internationally.
Please contact us if you are interested.