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Huawei R&D headquarters in Shenzhen
28 March 2013Patents

Huawei v ZTE patent case referred to the CJEU

A patent infringement case between Chinese telecoms companies Huawei and ZTE has been referred to the Court of Justice of the European Union (CJEU).

On March 21, the Düsseldorf Landgericht (Düsseldorf Regional Court) referred five questions concerning FRAND (fair, reasonable and non-discriminatory terms) to the CJEU.

In 2011, Huawei filed four patent infringement cases against ZTE relating to patents covering 4G technologies. Two of the cases were found to be invalid in a decision Huawei later appealed against, and another case was dismissed.

The fourth of the cases, which concerns a standard essential patent (SEP), will be the first ever seen by the CJEU where the patentee is willing to grant a licence while the parties are in disagreement over FRAND licence terms.

The court will need to decide whether the case constitutes abuse of a dominant position if the SEP patentee requests injunctive relief, even if the infringer is willing to negotiate a licence on FRAND terms, or whether it is further required that the infringer already complies with the contractual obligations that would exist under a FRAND license.

A Statement of Objections (SO) issued to Samsung by the European Commission earlier this year about its SEP-based injunctions against Apple suggested inconsistencies between the European and German courts.

In his report of the trial, patent consultant Florian Mueller said the court interpreted the Commission’s public statements on the SO as an indication that Brussels appears more “sceptical” of these injunctions than the German courts.

Martin Fähndrich, a partner at Hogan Lovells, the firm representing ZTE in the case, said: “ZTE is delighted that the Dusseldorf court has entertained its view that German law as it currently stands may not be in line with EU law. In the interest of fair competition the different approaches to FRAND licensing in the EU require clarification and consolidation.”

Hosea Haag, a lawyer at Ampersand in Munich, said that a principle established by the Federal Court of Justice Standard Spundfass decision and later elaborated by the Orange Book Standard means that in Germany an infringer of a standard essential patent (SEP) may raise the defence that it was entitled to a licence.

“Not granting a licence would constitute an abuse of a dominant position by the patentee,” he said.

“In order to be successful with this so-called antitrust defence, the infringer has to behave like a licensee under FRAND conditions, which implies that he has to determine the reasonable licence fee objectively, regularly render accounts and pay, or at least deposit, hypothetical licence fees.”

He said that in past cases the CJEU has decided that denying a patent grant for a technology, if it is essential to entry of a secondary market, may violate antitrust rules stated in Article 102 Treaty on the Functioning of the European Union.

The German courts, although more “patent owner-friendly”, are “stricter” than the CJEU in terms of competition law, he said.

“It is now hoped that the CJEU will decide whether it is sufficient to offer negotiations. If it is not, the court will hopefully express an opinion on what the minimum requirements for a FRAND license proposal are.”

He said if the CJEU ruled in ZTE’s favour, it will not substantially affect the dispute between Huawei and ZTE as the patents concerned are ‘small’. However, he said, “for the general practice and the standard relevant patents and in the antitrust sense I think it will have tremendous impact.”

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