LESI: FRAND DISPUTES
The saga continues
The CJEU’s judgment on the AG’s non-binding opinion in Huawei v ZTE is expected in the coming months and will expand on the meaning of FRAND terms, as Patricia Cappuyns of the Licensing Executives Society International (LESI) reports.
Union (CJEU) gave his eagerly awaited opinion in Huawei v ZTE about the proper way to conduct fair, reasonable and non-discriminatory (FRAND) licensing negotiations. Some industries, most notably telecoms, are
O
heavily standardised. Since all the components of a complex technological system must work together, every manufacturer of every component must comply with the same technical requirements. Many of the technologies that fi nd their
way into a technical standard are protected by a patent. A large number of these patents are technically essential to a standard. Put simply (although some qualifi cations do apply), standard-essential patents (SEPs) are those whose use cannot be avoided by a company that wishes to produce a standard-compliant product. T is gives the owner of an SEP a powerful,
even dominant, position, with great potential for abuse within the meaning of article 102 of the Treaty on the Functioning of the European Union (TFEU). Leſt unrestricted,
owner could charge excessive royalties that are not justifi ed by the value of the patented technology, simply because its SEP is indispensable to the standard. In order to limit the potential for abuse, companies that
have
www.worldipreview.com
n November 20, 2014, Advocate General (AG) Melchior Wathelet at the Court of Justice of the European
potentially essential to a technical standard are generally subject to a FRAND commitment: the SEP owner agrees to license its SEP to any standard-implementer on FRAND terms. T e FRAND requirement is largely
understood to limit to some extent the SEP owner’s right to seek injunctive relief against the standard-implementer. Otherwise, the SEP owner could ‘hold up’ the standard-implementer and prevent it from commercialising standard-compliant products on the basis of one single SEP, even though each technical standard is populated
by hundreds of SEPs. While the principle is largely undisputed, disagreement remains about when the quest for injunctive relief is abusive.
German Orange Book judgment On May 6, 2009, the German Supreme Court—the Federal Court of
Justice
(Bundesgerichtshof)—issued a controversial judgment in the Orange Book case. T e Orange Book is a de facto standard created by Philips that contains the format specifi cations for CD-Rs. In this judgment, the German Supreme Court
“THE COMMISSION INSISTED THAT THE STANDARD-
the SEP
IMPLEMENTER SHOULD ALWAYS BE AT LIBERTY TO CHALLENGE THE VALIDITY AND INFRINGEMENT OF THE SEP, EVEN WHILE NEGOTIATING A FRAND LICENCE.”
declared a patent
took a very pro-patentee position. T e court held that the standard-implementer is required to take the initiative by sending the SEP owner an off er to take a licence—an off er that is so favourable to the SEP owner that it would be abusive on its part not to accept it. T e standard-implementer’s off er should not be conditional upon the patent’s being found valid or infringed, but it doesn’t necessarily have to include a specifi c royalty rate. If
the
standard-implementer is already using the SEP, it must render an account of its use and deposit suffi cient funds for the payment of the royalty in escrow. T e court held that if all these conditions are fulfi lled, the SEP owner might abuse its dominant position by seeking injunctive relief against the standard-implementer. In practice, these German requirements put
all the burden of the FRAND negotiation on the standard-implementer. T e German approach
World Intellectual Property Review Annual 2015 31
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140