Advocate General Wathelet has issued an Opinion to the Court of Justice of the EU in Huawei Technologies Co. Ltd v ZTE Corp., ZTE Deutschland GMBH on whether the proprietor of a standard essential patent (“SEP”) who has informed a standardisation body that he is willing to grant any third party a licence on fair, reasonable and non-discriminatory terms (a “FRAND declaration”) abuses his dominant market position if he brings an action for an injunction against a patent infringer who has declared he is willing to negotiate a licence.
Huawei brought a patent infringement claim against ZTE before the Düsseldorf Patent Court. The patent in suit was a SEP for which Huawei had filed a FRAND declaration with ETSI, the European telecommunications standards setting organisation. The court found that ZTE had infringed the patent.
Huawei sought an injunction, and the German court found that, in principle, it was entitled to one. However, this would not be the case if seeking the injunction would be an abuse of Huawei’s dominant market position (Article 102 TFEU). The German Court then referred a number of questions to the CJEU for a preliminary ruling, including whether bringing an action for an injunction in the circumstances of this case amounted to an abuse of a dominant position.
The Advocate General’s opinion was that where the proprietor of a SEP had made a commitment to licence its SEP on FRAND terms, it constituted an abuse of a dominant position to seek an injunction, or make a request for corrective measures (this would include customs seizures of allegedly infringing products at national borders) where it was shown that the SEP holder had not honoured its FRAND commitment, even though the offending company had shown itself to be a willing licensee.
The following steps had to be taken by the SEP holder before making a request for corrective measures or an injunction:
- the SEP holder had to alert the offending company to the infringement in writing, giving reasons and specifying the SEP concerned and the way in which it had been infringed, unless it could be shown the offending company was fully aware of the infringement; and
- the SEP holder had to put forward a written licence offer on FRAND terms, and that offer had to contain all terms normally included in a licence including the precise amount of royalty, and the way in which that amount was calculated.
An application for corrective measures or an injunction did not, however, constitute an abuse of a dominant position if the conduct of the offending company was purely tactical and/or dilatory and/or not serious.
The Advocate General also set out the steps the offending company had to take in order to be considered a “willing licensee”:
- it had to provide a considered and serious response to the licence offer and if it did not accept the offer, promptly present a reasonable counter-offer;
- it could request that FRAND terms be fixed either by a court or by an arbitration tribunal. In this event it was legitimate for the SEP holder to ask the offending company either to provide a bank guarantee for the payment of royalties or to deposit a provisional sum at the court or arbitration tribunal in respect of its past and future use of the patent; and
- it could reserve the right, after entering into an agreement for a licence, to challenge before a court or arbitration tribunal the validity, use and essential nature of that patent.
For more details, please see the article here.
Opinion of Advocate General Wathelet in Huawei Technologies Co. Ltd v ZTE Corp, ZTE Deutschland GmbH (Case C-170/1)