Brussels, 12 November 2019, Foss Patent Blog Conference on component

licensing, Bram Nijhof

Check against delivery

Personal view disclaimer: mention of Asus / Philips and own involvement and that of
Maurits Dolmans

Admittedly, when Florian asked me to summarize the case law developments after
Huawei / ZTE, I became a bit lost. Where to begin and what to include? This
overview is in no way meant to be exhaustive (pun intended).

Obviously we should talk about the Unwired Planet / Huawei cases, because let’s
face it: who doesn’t at conferences like these? However, I will not only discuss the
subject which has been on everyone’s mind and in particular the UK Supreme
Court’s mind and that is the “global license” question. Can a SEP-implementer be
forced to leave a certain national market if he refuses to accept a FRAND license
which is global in scope? I know Florian for one has very strong opinions about this
issue considering his blog posts during the week of the Supreme Court’s hearing.

As for my opinion - and this is going to be the obvious lawyer’s answer - I feel that
this question very much depends upon the specific situation of the licensee. I think
there is merit in the argument that a company which has a focus on a particular
geographic market cannot accept a worldwide license offer as FRAND under the
threat of an injunction. But I can also think of a number of companies who almost
always conclude global licenses. In those cases it seems somewhat counterintuitive
that such companies claim that they want a license for a particular market or
jurisdiction, whereas normally they would gladly take a global license.

The Court of Appeal in the UK recently confirmed once again that a FRAND license
can be global, regional or even national depending on the circumstances. This was
held in the TQ Delta v Zyxel case. In fact the Court explicitly mentions that this
follows directly from its previous Unwired Planet v Huawei ruling. Zyxel faced
numerous patent proceedings from TQ Delta, but when the patent litigation dust
settled, only one of the two invoked patents turned out to be valid and said patent
would last for only another three months. An injunction would therefore also be
limited to three months, but Zyxel was still faced with a RAND trial which could
potentially lead to the setting of a global license rate. In order to avoid said trial
entirely Zyxel came up with a rather creative idea of waiving its rights to a RAND
licensing obligation in the UK for UK designated patents. And said waiver was
successful eventually with the Court of Appeal. Because there was no longer an
English patent for which Zyxel wanted a license, having the Court of Appeal
determine the terms of such a license would be a bridge too far for TQ Delta.

Justice Birss and the Court of Appeal did however accept a take-it-or-leave-it
approach in Unwired Planet v Huawei which boils down to an implementer either
accepting a worldwide license or leaving a particular national market under threat of
an injunction. However, I do not believe the global aspect of the license as such is
the main concern of the potential licensors and licensees involved in these
discussions. The main issue boils down to who is determining the FRAND license
terms and in what manner. The parties involved need to have enough faith that the
calculation made is accurate enough.

The way in which Justice Birss calculated the total number of patents for the 4G
patent portfolio was relatively simple. Both parties had submitted different numbers
of patents that they alleged to be essential to the standard. Justice Birss took those
numbers and simply split the difference between them to end up with a denominator
somewhere in the middle.

I can imagine that some parties are hesitant to enter into a similar calculation
exercise if the outcome seems this uncertain to say the least, if not random. Never
mind the costs of such a calculation exercise. Even in the case of SEP holders with
only a relatively small patent portfolio, the calculation of the share of such a party still
involves a study of the patents that are (allegedly) part of the relevant standard.

The very first judgement by Justice Birss in Unwired Planet (April 2017) hardly deals
with the aspect of injuctive relief. In said judgement no injunction was actually
imposed, because the FRAND license first had to be drawn up based on the
decisions and calculations made by Justice Birss regarding the worldwide license
rates. The injunction would follow in June 2017 in an additional judgement. Perhaps
because the injunction was suspended due to Huawei’s appeal, the substantive
aspects of said injunction are less known or at least less discussed than they in my
view should be. In this injunction judgement Justice Birss imposed upon Huawei
what he calls a "FRAND injunction". According to Justice Birss, Huawei could at any
time decide to accept the FRAND offer, the terms of which were set by Justice Birss,
even though Huawei in the past had not accepted or had even flat out refused
certain aspects of those terms such as the global scope of the license.

Does this mean a party who proved to be an unwilling licensee in the past can
transform into a willing licensee and still invoke the FRAND license obligation vis-a-
vis a SEP-holder once it is faced with an injunction? The ETSI policy licensing
obligation imposed on the SEP-holder does not seem to make a distinction
depending on whether or not the licensee was previously unwilling.

The answer to this question also depends on your interpretation of Huawei v ZTE.
Should the obligations of SEP-holders and implementers mentioned by the CJEU be
interpreted as a strict step-by-step protocol or do they merely serve as a set of
guidelines? If the latter is the case, then that means not fulfilling certain obligations
can be fixed by the relevant party at a later stage, be it SEP-holder or SEP
implementer. But does this redemption feature also extend to injunctions?

The English courts have been obviously rather explicit on this question and have
confirmed that they view Huawei v ZTE as guidelines meaning that a SEP-
implementer can still redeem itself for its past behaviour, even when an injuction has
been imposed already. Justice Birss notes explicitly that Huawei could reverse the
effects of the injuction at any given time, provided it accepted his suggested FRAND
license.

Obviously, in Germany the principle of an automatic injunction applies when a patent

is found to be infringed, unless a FRAND defense in the infringement proceedings
succeeds. Edmund will touch upon the reform of the German system later on in this
panel. In the assessment of the FRAND defenses the German courts previously
were rather strict towards SEP holders: not having fulfilled the obligations contained
in Huawei v ZTE would in most cases mean that the injunction would be refused. In
particular the Landesgericht Mannheim seemed to allow little room for SEP holders
to redeem themselves.

But following a number of recent cases such as Sisvel v Wiko, SEP holders have
been allowed to make amends with a stay of proceedings: negotiations can then be
initiated during the suspension to allow an implementer to negotiate without the
threat of a large impending patent infringement case. One could argue that this
should work both ways: if the SEP holder is allowed to compensate for unFRANDly
behaviour, then the SEP-implementer should have this opportunity as well, even if
an injunction has already been imposed. But the patent law reform does not seem to
bring said change to the automatic injunction principle just yet.

The Dutch courts claim to be on the same page as the English courts with regards to
their interpretation of Unwired Planet v Huawei, that is to say that the framework
provided in the CJEU judgement should be interpreted as a set of guidelines.
However, the Dutch Court of Appeal in The Hague seems to be somewhat less
forgiving for SEP implementers than the English courts are. In the Philips v Asus and
Philips v Wiko cases the fact that the implementers indicated to (still) be willing to
conclude a license after proceedings had started came too late as far as the Appeal
Court in The Hague was concerned. It found that both Asus and Wiko had not
demonstrated their willingness before the initiation of proceedings (despite Asus’ and
Wiko’s claims to the contrary). Showing willingness after those proceedings have
started could at best lead to a resumption of negotiations, but not a suspension of
the trial and in any case not a ruling of abuse of a dominant position with regards to
the initiation of the trial as such. The injunctions were awarded by the Court of
Appeal without having to adjudicate on what was FRAND. It should be noted that
both Asus and Wiko have lodged appeals with the Dutch Supreme Court. There are
also still two out of three patent cases against Wiko and Asus awaiting judgement of
the Court of Appeal in the Hague, which might lead to a different judgement on
FRAND as well. In any case part of the discussion with regards to one of the patents
involved around the question whether there might be a de minnimis infringement,
ecause telecom providers in the Netherlands do not use the invention contained in
the SEP which is invoked by Philips.

The District Court in the Hague recently ruled on another interesting case between
Sivel and Xioami. Sisvel sought injunctions for the infringement of two SEPs in
preliminary relief proceedings. As an alternative claim, Sisvel requested the District
Court to impose those injunctions in so far as Xiaomi refused Sisvel’s proposal for
arbitration of the dispute. The District Court refused said preliminary injunctions, not
only because it felt this issue could be best dealt with in proceedings on the merits,
but also because a FRAND trial was already scheduled in the UK in which a FRAND
license fee would be determined. Imposing an injunction and thereby implicitly
getting ahead of that FRAND determination in the UK would be premature according
to the District Court. The District Court also deemed important that an injunction in
the UK could be avoided by Xiaomi by paying the fee as set by the English courts.
The judge furthermore explicitly ruled that he considered Sisvel’s aim was not really
to prohibit the sale of any 4G phones, but to obtain a license fee for its patent
portfolio. The judge notes that the preliminary relief proceedings seemed to have
been initiated by Sisvel merely to force Xiaomi to negotiate and agree to a license
fee which could possibly be higher than a rate that would be considered FRAND.

I feel that the English and Dutch courts are right to assume that Huawei v ZTE is a
set of guidelines, rather than a step-by-step protocol. If it were different, then I would
find the judgement hard to reconcile with the older case law of the CJEU which it is
at least partially based upon, such as Volvo Veng. It is not the intellectual property
right itself that can constitute an abuse of a dominant position, but the exercise of
said right can be such an abuse in certain circumstances. Because a SEP is different
from any ordinary patent, the circumstances that could give rise to an abuse have
been specified further to make clear to what extent the exercise of such a specific
right is allowed. And that is to me at least the very definition of proportionality which
Maurits will discuss from a different angle, namely the Enforcement Directive.