Sunday, 19 July 2015

Remedies for infringements of Standards-Essential Patents

In a nicely-balanced judgment in Case C‑170/13, Huawei Technologies Co. Ltd v ZTE Corp. and ZTE Deutschland GmbH (judgment here) (16 July) the Court of Justice held that the holder of a Standards-Essential Patent (or SEP, a term of art that is gaining currency very rapidly in this SEP-reliant age) can only have an injunction against an infringer if it has previously offered a licence on FRAND (a better-established term of art) terms. If the patentee has given an irrevocable undertaking to grant such a licence, it is not an abuse of a dominant position to seek an injunction and that would be prohibited by Article 102 TFEU, but the patentee has to get over a few hurdles before it is in the clear, to make sure that the right balance is struck between the interests of the patent owner and the would-be user.

First, the patentee has to alert the alleged infringer to the alleged infringement, and then it has to present a FRAND licensing proposal. If the alleged infringer carries on regardless, it will not be regarded (in the court's phrase) as having responded diligently to the proposal. It can only claim that there is an abuse of the patentee's dominant position if it has responded with a counter-proposal, offering FRAND terms (or, you might say, terms which are more FRAND, or FRANDER - there's a nice neoligism) of its own - because, of course, the only matter that can be in dispute is whether the purported FRAND terms qualify as such. Although that makes it sound far easier than it is: FRAND is not a binary, yes-or-no, matter - a wide range of terms might fall within the scope of what is fair, reasonable and non-discriminatory.

The court's approach, within its limits, nevertheless makes perfect sense: if your patent becomes the basis for a standard that everyone has to use, you have to accept that it is no longer a right to stop others from using it, merely a right to remuneration (which may be substantial). Everywhere in the IP field you can observe this shift from exclusive rights to a right to be paid for use: it happened in copyright even before the 1988 Act, when collective licensing suddenly took off with the creation of the CLA, and it was built into design right under Part III of the 1988 Act right from the start.

However, like all references to the Court of Justice, it leaves questions unanswered (usually because the questions weren't posed in the first place, which in turn is usually because they didn't arise in the case concerned so the referring national court had no reason to ask them). Can (as Laëtitia Bénard of Allen and Overy in Paris said to WIPR, that astonishingly inaccurate publication mis-spelling her surname) an injunction be blocked merely because the alleged infringer challenges the FRAND-ness (my word, not Ms Bénard's) of the offer? Will holding an SEP always place the patentee in a dominant position (a point made to WIPR by Axel Walz of King and Wood Mallesons, Munich)? How detailed does that "irrevocable undertaking" have to be (my own thought)? Given the growing frequency with which patents are already becoming standard-essential, which is likely to accelerate rapidly in the future, these are probably questions that we will see coming up before very long.
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