Case Law Developments in German Infringement Proceedings Based on Standard Essential Patents
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1 Case Law Developments in German Infringement Proceedings Based on Standard Essential Patents Dr. Roland Kehrwald Wildanger Kehrwald Graf v. Schwerin & Partner
2 Overview of contents Specific economic background and areas of legal developments The two German landmark decisions: Standard Tight-Head Drum (Standard-Spundfass) and Orange-Book-Standard Decisions of 2004 and 2009 Recent case law regarding specific aspects of the FRAND defense according to the Orange-Book-Standard decision 2
3 I. Specific economic background and areas of legal developments 1. Economic background Prior to the definition of a standard competing technologies often coexist after the definition of a standard: - standardized technologies gain specific economic importance, - owners of a SEP (Standard Essential Patent) are in a very strong position, - economic pressure on competitors or even necessity to use SEPs. 3
4 2. Areas of legal develompents IP-Policies by SSOs (Standard Setting Organizations), tendency to develop more and more detailed IP- Policies - see for example JEDEC, ETSI. Amendments of patent applications - use of legal possibilities to amend patent applications in an attempt to cover standardized technologies - personal experience: in most of granting procedures regarding SEPs, undue broadening plays a role. 4
5 Legal disputes before antitrust agencies (e.g. the European Commission) - a number of important proceedings/reviews have been started (for example against Rambus, Samsung and Motorola). Development of specific case law in patent infringement proceedings - two landmark decisions of the Federal Supreme Court ( FSC ), - further case law, especially of the Higher District Courts in Duesseldorf and Karlsruhe and District Courts in Duesseldorf and Mannheim- HDCs and DCs. 5
6 II. The two German landmark decisions of the Federal Supreme Court: Standard Tight-Head Drum (Standard-Spundfass) and Orange-Book-Standard Decisions of 2004 and Decision of 2004 (regarding a case in which the patent owner generally refuses to grant a license) According to the FCS the plea under antitrust law as admissible with respect to claims for damages. Headnote 2: - given an industry standard or standard - like general conditions - that forces potential entrants to a down-stream market to adhere to the technical specifications of a patent, - a market-dominating patent proprietor is in breach of the anti-discrimination provision - if he exploits this situation to restrict access to that market by applying criteria for granting licenses that contradict the purpose of antitrust law (Act Against Restraints of Competition) to guarantee freedom of competition. 6
7 2. Orange-Book-Standard of 2009 Confirmation of a defense of misuse of a market-dominating position also against claim for injunction, if the patent owner is not prepared to grant a license under - non-discriminatory and - non-obstructive conditions. Headnote a): A defendant may. raise the defense that the patent holder is abusing a market-dominant position by refusing to conclude a patent license contract with the defendant on non-discriminatory and non-obstructive conditions. 7
8 Headnote b): A patent holder, however, only acts abusively, if the defendant - has made him an unconditional offer to conclude a license agreement - to which he remains bound - and that the patent holder cannot refuse without infringing the prohibition of discriminative or obstructive behavior and 8
9 - if the defendant - if and as long as he is already using the subject matter of the patent - complies with those obligations that the license agreement to be concluded imposes on the use of the licensed object. Example: - giving account of the extent of his respective use and - paying the license fees. According to headnote c) (simplified): In case of specific problems to quantify the license fee, the requirement of an unconditional offer is satisfied by an offer to conclude a license contract under which the licensor shall specify the amount of the license fee at his fair discretion. 9
10 III. Case Law regarding specific aspects of the FRAND defense according to the Orange-Book-Standard decision 1. Legal basis and classification of the FRAND defense a) Usual factual constellation Patent owner principally prepared to grant a license, frequently ongoing license negotiations with disputes concerning infringement, legal validity and standard essentiality, patent owner has frequently made a FRAND declaration (for example according to the ETSI IPR Policy). 10
11 b) Dolo-petit plea based on antitrust law Defense against patent infringement claims: a party cannot demand something which is to be returned immediately, in connection with Article 102 Treaty of the Functioning of the European Union (TFEU), main requirements: - market dominant position and - abuse of this position, usual forms of abuse in legal disputes: - discrimination and exploitation abuse. 11
12 c) Defense in connection with a FRAND declaration according to ETSI IPR Policy Law of the state of the patent in suit applicable (DC Mannheim, decision of 18 February UMTS-fähiges Mobiltelefon II, cited in Kuehnen, Handbuch der Patentverletzung, 5. ed., page 413; against opinion in literature according to which French law is applicable - Mr Kuehnen is the Presiding Judge of the HDC Duesseldorf), not derivable from this declaration that patent owner has waived a claim for injunctive relief (see the cited decision), the defendant has to make an offer, not the plaintiff and patent owner (HDC Karlsruhe, decision of 26 May U 100/08, InstGE 12, MP3-Standard), 12
13 consequently: no direct claim to obtain a license derivable from FRAND declaration, in decision of 24 April 2012 (4b O 274/10) DC Duesseldorf takes the same position, legal effect (according to Kuehnen, page 413): a kind of admission that the patent owner has a market dominant position. 2. Amount of license fee a) No existing licensing scheme of the patent owner Patent owner principally free to determine the kind of license (see for example DC Duesseldorf, Video-Signal- Coding I decision of 30 November 2006, recital 109 ff.), differentiation allowed as long as justified (see Standard Tight-Head Drum-decision, BGHZ 160, 67, recital 45). 13
14 b) Patent owner has a (standardized) licensing scheme in operation Such as in the Orange-Book-Standard decision, in it the defendant argued that the agreements are applied by the licensor in a discriminating way (by insufficient control of the obligations thereunder, not asserting claims and accepting underreporting ). HDC Karlsruhe (in the second instance) rejected this argument because of lacking substantiation; the final decision of the Federal Civil Court is based on other aspects. 14
15 c) Offer allowing the patent owner to specify amount of license fee at his fair discretion and according deposit The FSC addresses the potential problem of an abusively excessive fee demand of patent holder (Orange-Book-Standard, Recital 39). The defendant is allowed to offer a license fee to be determined by the patent holder at his fair discretion and subject to examination by a court pursuant to Sec. 315 German Civil Code. Deposit of an in any event sufficient amount (Orange-Book-Standard, Recital 41). 15
16 d) License fees for past use and claims for damages An effective license offer by the defendant requires payment of license fees for the past or deposit. For infringing acts prior to such an offer, also damages can be claimed (Kuehnen, page 411, this is however disputed in the literature). An effective license offer requires that the general obligation to pay damages for infringing acts in the past is accepted (Anerkennung dem Grunde nach) (DC Mannheim in first instance decision (of 1 December O 122/11 Motorola/Apple) of the HDC Karlsruhe decision of 23 January 2012). As the defendant had amended its license offer accordingly after this first instance decision this was no more discussed in the second instance decision just mentioned. 16
17 3. Obligation to license other patents Regarding patents, which are no SEPs: left open by HDC Karlsruhe in Nokia/Bosch decision of 23 March U 66/09, InstGE 13, 138, regarding parallel patents in other countries: Kuehnen denies that a patent owner can request such an offer (page 411, however disputed in literature). 4. Case law regarding patent ambush Argument rejected that patent ambush (non- or late disclosure of patent within SSOs) entitles defendant to license free use of the teaching of the patent (DC Duesseldorf decision of 7 June 2011, 4b O 31/10). 17
18 THANK YOU Dr. Roland Kehrwald Wildanger Kehrwald Graf v. Schwerin & Partner Rechtsanwälte Couvenstraße 8 D Düsseldorf Tel.: +49 (0) Fax: +49 (0) kehrwald@wildanger.eu
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