Injunctions in relation to standard essential patents continue to be a hot topic and prove to be challenging for courts and parties alike. After a series of lower court decisions, the Federal Court of Justice has now rendered its first decision on this issue after the European Court of Justice having rendered its decision Huawei ./. ZTE, which sets new standards for the assessment of whether a patent owner is entitled to an injunction.
Federal Court of Justice Redefines the Requirements for an Injunction in SEP Litigation in its Decision Sisvel ./. Haier (KZR 36/17)
The question under which conditions the owner of a standard essential patent (SEP) that has made a FRAND declaration is entitled to an injunction is an ongoing issue that is still occupying the courts. In the decision C 170/13 (Huawei vs. ZTE) of July 16, 2015 the European Court of Justice defined conditions under which an owner of a standard essential patent does not abuse its dominant position in the meaning of Art. 102 TFEU, requesting a clear notification of the infringement issue by the patent owner, the declaration of willingness to conclude a licensing agreement by the alleged infringer and, consequently, a FRAND offer by the patent owner to which the infringer has to make a diligent response. In the decision 15 U 66/15 (Sisvel vs. Haier) of March 30, 2017, the Court of Appeal Düsseldorf had raised the requirement that in order to be entitled to an injunction the owner has to establish that its offer was indeed FRAND. In consequence, the patentee needed to disclose its licensing policy at least to an extent that enabled the court to assess this issue. In appeal, the Federal Court of Justice (Bundesgerichtshof) has now reversed this decision and held, judging from remarks of the presiding judge in oral proceedings, that the owner of an SEP is entitled to an injunction if the alleged infringer does not seriously and unconditionally show its willingness to take a FRAND license. The reasons of this decision are not yet available, but already at this point in time it can be foretold that it will make a significant change in Germany’s court practice regarding FRAND cases.
It needs to be recollected that the Federal Court of Justice traditionally took fairly restrictive stance on issues related to standard essential patents, in particular in the so-called Orange Book decision KZR 39/06 of 2009, basically putting the burden of proof on the defendant that it is a willing licensee and seriously sought to obtain a FRAND license and that it is therefore entitled to a license for reasons of competition law, as an exception to the general provision of German law that the patentee is entitled to an injunction as of right. In the practice of the lower courts this basically meant that an injunction was granted, unless it could be established that the offer of the patentee was obviously not FRAND. Remaining doubts in this regard were to the detriment of the defendant. This strict position was mitigated by the decision C 170/15 (Huawei vs. ZTE) by the European Court of Justice in 2015, which called for a balanced approach and established obligations both for the patent owner and the alleged infringer. As the decision by the Court of Appeal Düsseldorf focused on the obligation of the patentee to establish that its offer is indeed FRAND, the decision by the Federal Court of Justice is not exactly surprising. The interesting issue is which points of the reasoning of the Court of Appeal were overturned and which requirements regarding the behavior of the defendant were established. Depending, the new decision by the Federal Court of Justice could mean a return to the earlier practice of the German courts in the wake of the Orange Book decision, which, according to personal statements of judges of the Federal Court of Justice, is in line with the ECJ decision Huawei vs. ZTE, or just a correction where the Court of Appeal may have gone too far. This will become more clear when the reasoning of the new decision by the Federal Court of Justice has been handed down, which will be duly reported in this Bulletin.