Antitrust Law Daily Wrap Up, TOP STORY: Standard-essential patent holders’ injunctive relief actions could be unlawful, EC court, (Jul 16, 2015)

By Greg Hammond, J.D.

Holders of standard-essential patents may abuse their dominant position, in certain circumstances, when seeking a prohibitory injunction against alleged infringers, the Court of Justice of the European Union in Luxembourg has clarified. The court made its determination after the Landgericht Düsseldorf (Regional Court, Düsseldorf, Germany), in Huawei Technologies Co. Ltd v. ZTE Corp., requested clarification on the circumstances in which an undertaking in a dominant position, such as Huawei, abuses that position by bringing an action for infringement (Huawei Technologies Co. Ltd v. ZTE Corp., July 16, 2015, Šváby, D.).

Huawei is a multinational telecommunications company that owns a European patent bearing the title “Method and apparatus of establishing a synchronization signal in a communication system,” a patent that is essential to the “Long Term Evolution” standard. In obtaining the standard-essential patent, Huawei was obligated to grant licenses to third parties on fair, reasonable and non-discriminatory terms (FRAND terms). Huawei filed an infringement suit against two companies—ZTE Corp. and ZTE Deutschland GmbH—for using Huawei’s patent without paying a royalty. Huawei seeks injunctive relief, the recall of products, the rendering of accounts, and an award of damages. The companies previously negotiated licensing on FRAND terms, but an agreement was never reached.

In response to the Landgericht Düsseldorf’s request for clarification, the Court of Justice concluded that Article 102 TFEU must be interpreted as meaning: the owner of a standard-essential patent, which was procured on the condition the owner grants licenses to third parties on FRAND terms, does not abuse its dominant position by seeking an injunction prohibiting infringement of its patent or seeking to recall patent-infringing products, as long as: (1) prior to bringing suit, the owner has, first, alerted the alleged infringer of the infringement by identifying the patent and specifying how it has been infringed and, second, after the alleged infringer has expressed willingness to execute a licensing agreement on FRAND terms, the owner presented the alleged infringer with a specific, written offer for a license on such terms, detailing the royalty and way in which it is to be calculated; and (2) the alleged infringer continues to use the patent at issue and has not diligently responded to that offer, which is to be determined on the basis of objective factors that, in part, imply there were no delaying tactics.

The Court of Justice further clarified, that Article 102 TFEU must be interpreted as not prohibiting, in circumstances such as those in this case, the owner of a standard-essential patent who obtained the patent on FRAND terms, from bringing an action for infringement against an alleged infringer of its patent and seeking the rendering of accounts in relation to past acts of use or an award of damages in respect of those acts of use. In the instant case, the action for infringement does not have a direct impact on products complying with the clarified standard manufactured by competitors appearing or remaining on the market.

Companies: Huawei Technologies Co. Ltd; ZTE Corp.

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