Standard Essential Patents- Huawei Technologies Co. Ltd v ZTE Corp.,

European Court delivered its judgement in this case. Highlights:

Huawei Technologies, which is a multinational company active in the telecommunications sector, is the proprietor of a European patent, which Huawei notified to the European Telecommunications Standards Institute (ETSI) as a patent essential to the ‘Long Term Evolution’ standard. At the time of that notification, Huawei undertook to grant licences to third parties on FRAND terms.

Huawei brought an action for infringement before the Landgericht Düsseldorf (Regional Court, Düsseldorf, Germany) against two companies belonging to the multinational group ZTE. That group markets products in Germany that operate on the basis of the ‘Long Term Evolution’ standard and thus use Huawei’s patent without, however, paying Huawei a royalty. By its action, Huawei is seeking an injunction prohibiting that infringement, the recall of products, the rendering of accounts and an award of damages.

The Court holds that the proprietor of a patent essential to a standard established by a standardisation body, which has given an irrevocable undertaking to that body to grant a licence to third parties on FRAND terms, does not abuse its dominant position by bringing an action for infringement seeking an injunction prohibiting the infringement of its patent or seeking the recall of products for the manufacture of which that patent has been used, as long as:

‒ prior to bringing that action, the proprietor has, first, alerted the alleged infringer of the infringement complained about by designating the patent in question and specifying the way in which it has been infringed, and, secondly, presented to that infringer, after the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, a specific, written offer for a licence on such terms, specifying, in particular, the royalty and the way in which it is to be calculated, and

‒ where the alleged infringer continues to use the patent in question, the alleged infringer has not diligently responded to that offer, in accordance with recognised commercial practices in the field and in good faith, this being a matter which must be established on the basis of objective factors and which implies, in particular, that there are no delaying tactics.

The Court has held, inter alia, that the alleged infringer which has not accepted the offer made by the proprietor of the SEP may invoke the abusive nature of an action for a prohibitory injunction or for the recall of products only if it has submitted to the proprietor of the SEP, promptly and in writing, a specific counter-offer that corresponds to FRAND terms.