Standard-essential Patent Dispute: Final Submissions of Advocate General might Challenge “Orange-Book-Judgment”
Since 2013, the Chinese telecommunications companies Huawei and ZTE are in dispute before the Regional Court of Düsseldorf (LG Düsseldorf) about a breach of a standard essential patent (SEP).
According to the principles defined by the Federal Court of Justice in 2009 in the “Orange Book” judgment, the party seeking the license (or the potential infringer) is, in principle, obliged to make an unconditional offer to the SEP holder for the conclusion of a license agreement and at the same time to behave in advance as if this agreement had already been entered into. ZTE in the present case had only indicated its readiness to participate in license negotiations; but had not made any concrete license offer.
Because of the Commission decisions in the Samsung and Motorola cases, which present a clear departure from the principles developed by the Federal Court of Justice, because they deem that readiness in principle of the infringer to accept a license is adequate, the LG Düsseldorf considered it was obliged to refer the matter to the ECJ. The ECJ has in particular to decide whether and if so under what conditions the patent infringement claim of the holder of an SEP against a manufacturer of products using that standard, constitutes an abuse of a market dominant position if, on the one hand, the holder committed himself to issuing licenses under FRAND terms and, on the other hand, the potential infringer has declared its readiness for license negotiations.
The Advocate General in his final submissions was of the opinion that an SEP holder can be obliged prior to commencing an injunction claim, to make a license offer to a potential infringer. Possession of an SEP alone, however, does not necessarily imply a market dominant position.
If the ECJ follows the submissions of the Advocate General and sees an obligation of the patent holder to make a license offer to potential infringers as a condition that an injunction claim is not regarded as an abuse of a market dominant position, this reverses not only the established case law in Germany but can also have wide-ranging financial consequences. The possibilities of SEP holders to obtain an injunction would be significantly reduced. Against the risk of long and expensive litigation, a prospect of settlement on unfavourable license terms with low license fees determined by third parties would exist. Since the SEP holder would ultimately be prevented from efficiently enforcing its exclusive rights, a strong reduction in participation in SSOs had to be expected.