Last week, the Court of Justice of the European Union (“CJEU”) handed down its decision in Huawei Technologies Co. Ltd v ZTE Corp., ZTE Deutschland GmbH. The judgment concerns the availability of injunctive relief for owners of standard essential patents (in this case, telecoms patents) bringing infringement proceedings. The decision is in line with the opinion of the Advocate General Wathalet (discussed in our post here).
The decision proceeds on the footing that the standard essential patent (“SEP”) holder is in a dominant position, as per the instructions of the referring court (the existence of a dominant position was uncontested).
In giving its judgment the CJEU distinguishes between two different scenarios:
- Infringement proceedings where an injunction or the recall of products is sought; and
- Infringement proceedings where the rendering of accounts and an award of damages is sought.
Infringement proceedings where an injunction or the recall of products is sought
The CJEU has confirmed the Advocate General’s guidance that for a SEP holder to bring infringement proceedings and seek an injunction without abusing its dominant position, the following steps need to be taken before proceedings are issued:
- The SEP holder should alert the alleged infringer of the infringement complained of by designating the infringing SEP in question, and specifying the way in which it has been infringed; and
- After the alleged infringer has expressed its willingness to conclude a licence on on fair, reasonable and non-discriminatory (“FRAND”) terms, it is for the proprietor of the SEP to put forward a “specific, written offer for a licence on FRAND terms”, specifying (i) the amount of the royalty and (ii) the way in which that royalty is calculated.
The CJEU does not expressly say that the FRAND offer has to be for a per-patent licence. However, the entire CJEU judgment is expressed by reference to one SEP only. See, for example, paragraphs 60 and 61 of the judgment, which state that the proprietor of an SEP has to notify the infringer of that SEP by “designating that SEP and specifying the way in which it has been infringed” (emphasis added), and paragraph 67, which refers to only one SEP in calculating the amount of security. It therefore seems to be a fair reading of the judgment that it would follow that the licence offer should be for the specified SEP that has been notified to the alleged infringer, and in respect of which infringement proceedings are threatened.
If the SEP holder carries out the steps identified above, the alleged infringer has to respond diligently to the FRAND offer, in accordance with recognised commercial practices in the field and in good faith. The alleged infringer cannot be seen to be applying “delaying tactics”.
If the alleged infringer does not accept the offer, the alleged infringer can only avoid an injunction if it carries out the following steps:
- It promptly puts forward a written counter-offer on FRAND terms; and
- It provides appropriate security (for example, a bank guarantee). The calculation of that security must include the number of past acts of use of the SEP, and the alleged infringer must be able to render an account in respect of those acts of use.
The CJEU has also confirmed that the alleged infringer is entitled to challenge the validity and/or essentiality of the patent; and the parties may, by agreement, request the amount of the royalty be determined by an independent third party.
Infringement proceedings where the rendering of accounts and an award of damages is sought
In respect of infringement proceedings where an account of profits, or damages, is sought in lieu of an injunction, the CJEU has unsurprisingly held that such proceedings do not constitute an abuse of a dominant position.
Huawei Technologies Co. Ltd v ZTE Corp., ZTE Deutschland GmbH (Case C-170/13)