A FRAND torpedo? An update on Vodafone v Intellectual Ventures

Patentees commonly litigate in Germany. The validity of a patent is considered separately from (generally after) any infringement claims. Infringement proceedings, including injunctive relief, are not typically stayed pending a validity challenge. The availability of a relatively quick infringement decision and potential injunction against a licensee who has not complied with the Huawei v ZTE framework seem to make it an attractive option. 

To avoid the risks of an injunction in Germany, implementers actually or potentially subject to infringement proceedings there might think about asking a court in another jurisdiction to consider any FRAND dispute. This could enable them to argue that issues relevant to an injunction, such as whether the implementer is a ‘willing licensee’, are already subject to the jurisdiction of another Court, making it more difficult for the patentee to get an injunction. 

This is exactly what happened in Vodafone v Intellectual Ventures. As this blog reported here, when faced with infringement proceedings in Germany, Vodafone launched a FRAND countersuit in Ireland (with an ex parte application for permission to serve out of the jurisdiction). Earlier this year (unreported judgment [2017] IEHC 160), Intellectual Ventures responded by making an application to the Irish Court on the basis of Articles 29 and 30 of the Recast Brussels Regulation. It claimed that the German Court had been ‘first seised’ and so the Irish Court was required (or alternatively that it should exercise its discretion) to decline jurisdiction, or at least stay the proceedings. 

Despite identifying a number of overlaps relating to FRAND between the Irish and German proceedings, the Irish Court did not agree that Article 29 applied. The Irish proceedings did not involve the same cause of action or even the same parties (because of the involvement of an Intellectual Ventures subsidiary in the Irish case). However, given the degree of overlap between the two sets of proceedings, the Court considered that some form of discretionary relief under Article 30 was appropriate. It decided not to decline jurisdiction under Article 30, but agreed to stay the proceedings pending the final judgment of the Düsseldorf Court, expected in September, at which point, the various issues discussed might become clearer, e.g. the extent to which the German Court would cover FRAND.

The success of Vodafone’s tactic is therefore yet to be fully determined. It will be very interesting to see to what extent the German Court takes into account the Irish proceedings when issuing its infringement decision, and in deciding whether to grant an injunction. In the meantime, it seems that implementers wishing to secure a favourable FRAND jurisdiction would ideally act pre-emptively, before patent infringement proceedings are issued.

A final point worth noting arises from Unwired Planet v Huawei (see this blog’s posts here and here).  In that case the English High Court decided that it could settle the terms of a FRAND licence (dealing with incidental FRAND disputes along the way) and that a FRAND licence between companies operating on a world-wide basis would be global in scope. 

There are many issues relevant to determining jurisdiction and the operation of the Recast Brussels Regulation. However, with the English Court clearly prepared to determine FRAND licence terms and having held that a FRAND licence will be global, there is perhaps more potential now to argue successfully that if FRAND proceedings have been issued in one jurisdiction, a Court in another should be cautious about granting an injunction or coming to any other conclusion that might conflict with any FRAND findings of the first Court. Indeed, if the implementer has made it clear that it will accept the terms settled by a Court, it may be difficult to argue convincingly that it should be regarded as “unwilling” or dilatory.

Unwired Planet v Huawei: a new FRAND injunction

Mr Justice Birss has once again broken new legal ground by granting what he has termed a ‘FRAND injunction in Unwired Planet v Huawei.

As a reminder, in April Mr Justice Birss handed down the first UK court decision determining a FRAND royalty rate (see here). A post-judgment hearing took place in May to establish whether or not Huawei should be subject to an injunction in the UK and the issue of permission to appeal.

The FRAND injunction

At the post-judgment hearing, Huawei had argued that the judge should not grant an injunction. As Huawei intended to appeal the decision, it said that it could not enter into the FRAND licence agreement at this stage, in case the Court of Appeal determined that different FRAND terms were appropriate. Huawei claimed that to grant an injunction now would effectively be punishing it for exercising its right to appeal. It also noted that if an injunction was granted, it would last until 2028 (when the patent found valid and infringed in the first patent trial expired), despite the FRAND licence agreement expiring in 2020. Therefore, Huawei would be forced to negotiate a new licence from an extremely weak position – it would automatically be injuncted if terms could not be agreed. 

Huawei requested that the judge accept undertakings in lieu of granting an injunction, offering to: (a) enter into the licence following its appeal, and (b) to comply with the terms of the licence as if it was in effect (including paying royalties) until its appeal was finished.

Mr Justice Birss essentially took the view that the offer of undertakings now was too little, too late. He decided that an injunction should be granted. However, he recognised the risk that this might affect negotiations or disputes about the terms of the licence in later years. To resolve this, he granted a new kind of injunction, which he called a “FRAND injunction”. This would be like a normal injunction, but with the following extra features:

  • A proviso that it would cease to have effect when the defendant enters into a FRAND licence; and
  • Express liberty to return to court to decide whether the injunction should take effect again at the end of the FRAND licence (if it ends before the relevant patents expire, or ceases to have effect for any other reason).
The injunction is to be stayed pending the result of the appeal, on terms that provide for appropriate royalty payments from Huawei to Unwired Planet in the meantime.

Permission to appeal 

Mr Justice Birss granted Huawei permission to appeal on three main issues:

  1. The global licence: including: (i) whether more than one set of terms can be FRAND, (ii) whether a UK only licence was FRAND, (iii) whether the court is able to determine FRAND terms, including rates, for territories other than the UK, and (iv) whether it is appropriate to grant an injunction excluding Huawei from the UK market unless it took a global licence.
  2. Hard-edged non-discrimination: Huawei have permission to appeal the finding that a distortion of competition is required for the non-discrimination aspect of FRAND to apply, but not whether or not there was a distortion of competition in this case.
  3. Huawei v ZTE (Article 102 TFEU): regarding the judge’s findings on abuse of dominance and injunctive relief.
This permits a fairly wide-ranging appeal, especially as regards the competition law elements of the latter two issues. The trial judgment appeared to downplay the importance of competition law in FRAND issues (see here for more information); the appeal may enable a renewed focus on it.

The FRAND licence 

In his main trial judgment, Mr Justice Birss settled the terms of the FRAND licence to be entered into by Unwired Planet and Huawei. This latest judgment annexes a copy of the final form of that licence. Given the shroud of secrecy that usually surrounds such patent licence agreements, this is a unique insight, reflective of the judge’s desire throughout the case to ensure as much transparency as possible.

Transparency is likely to be helpful as the law in this area continues to develop. With the advent of new technologies developed for 5G and the Internet of Things, new companies may need to enter the FRAND licensing field for the first time. Without being able to draw upon any previous experience of negotiating licences in this area, they will be at a disadvantage in negotiations. 

If other judgments follow Mr Justice Birss’ lead and annex copies of any FRAND agreement determined by the court, these would provide useful points of reference for negotiating parties. It might also reduce the requirements for third party disclosure (a costly, time-consuming exercise) in any subsequent litigation. Otherwise, such disclosure will be essential in FRAND cases involving relatively new entrants to the market – they are unlikely to have many licence agreements that can be used by the judge as comparables as part of the process for determining a FRAND rate.

Conclusion

Yet again, Mr Justice Birss provides plenty of food for thought. Assuming that Huawei does go ahead with its appeal, it will be fascinating to see how the Court of Appeal responds to these issues.

Pat Treacy and Matt Hunt



Unwired Planet v Huawei: Is FRAND now a competition law free zone? Not so fast…

It has been two weeks since Mr Justice Birss handed down his latest judgment in Unwired Planet v Huawei (see here for a summary), which is almost long enough to get to grips with the 150 or so pages. There has already been a huge amount of discussion as to what this judgment means in practice and we have even overheard some suggest that, when it comes to FRAND in the future, we can simply ignore competition law altogether. This week we were invited by our friends at the renowned IP law blog, IPKat, to have our say on this. You can check out our thoughts on the IPKat blog here.

Unwired Planet v Huawei: UK High Court determines FRAND licence rate

Mr Justice Birss has just handed down the first decision by a UK court on the ever controversial topic of what constitutes a FRAND royalty rate.  At well over 150 pages, the judgment covers a lot of ground: a lot of ink is likely to be spilled about it over the coming weeks and months.  From what we’ve seen so far, the judge has not been afraid to make findings that will have a considerable impact on licensing negotiations in the TMT sector. 

We’ve summarised the headline conclusions below, but also keep an eye out for future posts in which we’ll analyse some of the judge’s findings and reasoning in more detail.

Background

In March 2014, Unwired Planet (“UP”) sued Huawei, Samsung and Google for the infringement of 6 of its UK patents.  Five of these were standard essential patents (“SEPs”) that UP had acquired from Ericsson.  They related to various telecommunications standards (2G GSM, 3G UMTS, and 4G LTE) for mobile phone technology. 

Five technical trials, numbered A-E, were listed on the validity and infringement of the patents at issue.  These were to be followed by a non-technical trial on competition law and FRAND issues.  UP’s patents were found valid and infringed in both trial A and trial C, but two were held invalid for obviousness in trial B. Trials D and E were then stayed, and as Google and Samsung had settled with UP during the proceedings, this just left Huawei and UP involved in the 7 week non-technical trial, for which judgment has just been given. 

Judgment

There’s a lot to unpack in this judgment, but here is a short list of what we think are the most important findings:

General principles:
  • There is only one set of FRAND terms in a given set of circumstances.  Note the contrast between this and the comments of the Hague District Court in the Netherlands in Archos v Philips (here, in Dutch) which seem to interpret the CJEU decision in Huawei v ZTE as meaning that there can be a range of FRAND rates.
  • Injunctive relief is available if an implementer refuses to take a FRAND licence determined by the court. Mr Justice Birss indicated that an injunction would be granted against Huawei at a post-judgment hearing in a few weeks’ time (although presumably Huawei can avoid this by now taking a licence on the terms set by the Judge).
  • UP is entitled to damages dating back to 1 January 2013 at the determined major markets FRAND rate applied to UK sales. 
  • What constitutes a FRAND rate does not vary depending on the size of the licensee.
  • For a portfolio like UP’s and for an implementer like Huawei, a FRAND licence is worldwide.
  • It’s still legitimate to make offers higher or lower than FRAND if they do not disrupt or prejudice negotiations.
Abuse of dominance:
  • UP did not abuse its dominant position by issuing proceedings for an injunction prematurely (it began the litigation without complying with the Huawei v ZTE framework).
Calculating the FRAND rate:
  • A FRAND royalty rate can be determined by making appropriate adjustments to a ‘benchmark rate’ primarily based upon the SEP holder’s portfolio. 
  • In the alternative, if a UK-only portfolio licence was appropriate, an uplift of 100% on the benchmark rates would be required.
  • Counting patents is the only practical approach for assessing the value of sizeable patent portfolios, although it may be possible to identify a patent as an exceptional ‘keystone’ invention.
  • Comparable, freely negotiated licences can be used as to determine a FRAND rate.
The FRAND rates as determined:


Other FRAND terms:
  • The Judge goes into some details as to the terms which will be FRAND in the licence between Unwired Planet and Huawei – much of which will be worth reading for licensors and licensees in this field.  Of particular note is the royalty base for infrastructure (excluding services). 
Other remedies:
  • Damages are compensatory and are pegged to the FRAND rate.
Comment

There have been near continual disputes between the major players in the TMT field over the last decade or so.  The meaning of FRAND has been strategically important in a large number of cases.  However, many of these companies are very effective negotiators.  In the vast majority of cases, they are able to agree licences without resorting to litigation.  Where proceedings are initiated, the parties are usually able to settle long before a judgment is reached, particularly given the time and expense required to take a FRAND case all the way to trial.  (Such expense is, however, usually dwarfed by the value of the licence – many licences in this field are valued in $billions.) 

The scarcity of judicial opinion in this area means this is a rare opportunity to see how a respected UK judge has approached a number of the unresolved questions regarding FRAND. 

A number of significant questions remain unanswered however, and we will be exploring these in future blog posts.  There’s also the matter of the upcoming post-judgment hearing in a few weeks’ time, which will establish whether or not Huawei will actually be subject to an injunction in the UK, and of course the chance that either party might wish to appeal.  All in all, there’s plenty of interest to talk about, plenty of advice to be given to clients, and the FRAND debate will undoubtedly continue on.

UPDATE: International spring cleaning time to review those IPR Guidelines

For those of you who read my blog post from earlier this month on the recent flurry of international IPR guidelines announcements (see here), we thought some of you might be interested in a more in depth look at the Canadian IPR Enforcement Guidelines written by Canadian law firm McCarthy Tétrault (for a link to their interesting article see here).  

The article summarises the most notable new guidance in the Canadian guidelines – namely in relation to pharma patent litigation settlements, product switching, standard setting and SEPs and patent assertion entities.  It also contains links to previous articles discussing the evolution of the guidelines.  There are many parallels to ongoing IPR policy developments in Europe but a few differences also stand out (e.g. express discussion of the potential for criminal liability for pharma patent litigation settlements (not something that has reared its head in Europe… (yet?)) and a helpful distinction between so called ‘hard’ and ‘soft’ product switching).

International spring cleaning: time to review those IPR guidelines…

A number of national competition agencies have recently been reviewing their IPR guidelines giving rise to some interesting trends and developments…  

On 31 March 2016 the Canadian Competition Bureau released updated IPR Enforcement Guidelines (the “Canadian IPR Guidelines”) (see here for a press release and here for the Enforcement Guidelines themselves). The main revisions to the Canadian IPR Guidelines focus on the Bureau’s position on patent settlements and product switching in the pharma sector as well as the conduct of patent assertion entities and conduct involving SEP owners.
  
This followed hot on the heels of an announcement by the Korea Trade Commission (“KFTC”) on 30 March 2016 that the Guidelines regarding the Unfair Exercise of Intellectual Property Rights (“the Korean IPR Guidelines”), which have recently been amended, became effective on 23 March 2016 (the revised Guidelines do not yet appear to be publically available in English at least).  The primary purpose of the Korean IPR Guidelines is to provide a framework for the KFTC to regulate abuse of IPRs by holders of SEPs (including in particular NPEs).   The Korean IPR Guidelines were previously amended in December 2014.  The most interesting changes at that time included de facto SEPs being included within the definition of SEPs, and the introduction of examples of abusive or unreasonable acts, including the filing for injunctive relief against willing licensees by an SEP holder that has committed to grant a license on fair reasonable and non-discriminatory (FRAND) terms.  

The most notable changes to the Korean IPR Guidelines this time around are:

  1. carving out de facto SEPs from the IPR Guidelines (stakeholders argued that the previous change to include them led to over-regulation of the exercise of IPRs); 
  2. removing the reference to the choice of governing law and dispute resolution mechanism which is unilaterally unfavourable to one party as a factor in determining whether an exercise of patent rights in unfair; and 
  3. including a standard for determining unfair refusals to license which focuses on the intent of the SEP holder, the surrounding economic circumstances and the effects of the refusal to license.
Similar developments have taken place not that far from South Korea, with China also drafting IPR Guidelines.  China’s top antitrust authority, the Anti-monopoly Commission (“AMC”) of the State Council has instructed four Chinese antitrust enforcement agencies: the National Development and Reform Commission (“NDRC”); the State Administration of Industry and Commerce (“SAIC”); the Ministry of Commerce (“MOFCOM”); and the State Intellectual Property Office (“SIPO”) to draft antitrust guidelines on IPRs.  It has reported that these agencies are finalizing their respective drafts and that they were due to submit them to the AMC by the end of March 2016.  The AMC coordinates antitrust policies in China, so it will be responsible for consolidating the drafts and issuing an integrated policy.  

The purpose of the Chinese Guidelines will be to provide guidance on when the enforcement of IPRs, and in particular patents, would contravene China’s Antimonopoly law.  China’s IPR Policy is still very much under development. However, these latest developments correlate with a growing international view that the Chinese antitrust authorities are increasingly treating IPR as an enforcement priority (although I think it is still agreed that China has some way to go before it becomes a major jurisdiction for the enforcement of IPR).  One recent example from 2014 was the Chinese Authorities’ investigation into Qualcomm for anticompetitive conduct involving its licensing of 4G SEPs (see our previous blog post here).

It is unsurprising that telecoms and pharma both come under the spotlight in all these new IPR Guidelines given the competition law issues afoot globally in both sectors. The EU Commission’s TTBE Guidelines were also updated in 2014 to include new sections relevant to pharma and telecoms (see our previous blog post here).  It is also interesting to see such a detailed approach to IP and antitrust issues being taken in other jurisdictions and that these new Guidelines are in places going further than their EU counterparts, for example in their discussion of PAEs/NPEs, SEPs and injunctions and refusal to license IPRs. 

A week of Standard Setting Conferences – Part II, the London Leg

Following up on Sophie’s recent blog, it was my pleasure to be the Bristows’ attendee at the second of this week’s FRAND/standardisation conferences, along with IP partner Alan Johnson. The conference, organised by the Competition Law Forum, was well attended with a high quality panel of speakers. Among the attendees, it was very good to catch up with a couple of Bristows alumni, including David George, until recently a prolific CLIP Board blogger and now at the CAT as a referendaire – perhaps we’ll be able to persuade him to contribute a few guest blogs in future. 

On substance, as with the LCII conference on Monday, there was quite a bit of debate about the implications of recent judicial and SSO pronouncements for hold-up theories as well as the usual disagreement about where innovation in markets reliant on standardised technology really takes place and how best to incentivise it. 

An interesting point made by a couple of people was the need to recognise that those engaged in innovation through the standardisation process, and those who use standardised technology and innovate in other ways to develop products that will attract users, rely on each other to make money. Often a company will innovate in both fields, sometimes contributions are more in one aspect of innovation than the other, but the commercial success of the technology and the resultant financial rewards depend on efforts in both fields. 

On hold-up and hold-out, a number of the usual arguments were articulated. In summary, some argued that hold-up had always been theoretical, with no empirical evidence to show it had ever been a practical problem, and that following the Judgment in Huawei v ZTE (see our earlier posts here and here) it was no longer possible at all. As on Monday, however, others were not so sure. 

Those who saw remaining hold-up concerns pointed to distinctions between the clear obligations imposed on those who gave FRAND declarations under the new IEEE IP policy (no injunctions unless an implementer refuses to accept a third party adjudicated rate) described here and the less certain position under Huawei v ZTE which focuses on procedure and imposes obligations on both parties.
  
The basic approach under Huawei v ZTE was not widely criticised, but it was noted that a number of aspects of the procedure provided in the CJEU judgment were not entirely clear, leaving scope for debate and uncertainty about when the procedural requirements had been fulfilled. Given the possibility of different approaches by the courts in different member states when interpreting those requirements, some risk of injunction was still argued to exist (even for a party which had sought to comply with the CJEU’s process) implying that risks of hold up continued in the absence of some clear boundary - as under the IEEE policy. Others felt that the ability to seek an injunction was a basic right, that a threat to seek an injunction was not an abuse and that there was no need for ‘unnecessary and revolutionary changes’ such as those in the new IEEE IP policy. Such views underpinned challenges to the adoption of the policy as described here

As is almost always the case at such conferences, following recent case law in the US (see here and here) and the adoption of the IEEE policy, the linked questions of the place in the value chain at which licensing should/must take place (component manufacturer or end device manufacturer) and the appropriate royalty base (end device or smallest saleable patent practising unit (“SSPPU”) were hotly debated. Recent US cases were discussed and some expressed scepticism about importing the SSPPU concept to Europe – although the Commission’s Rambus settlement was mentioned as an example of an approach of that type. Commissioner Vestager’s comments (reported here) on the need to offer licences to all comers were also discussed. 

It was noted that a reason that these questions are so hotly contested is because they go to the fundamental question (mentioned above) of how great a share of the profits from the success of a standardised system should go to those who develop the underlying standardised technology and how great a share should go to those who design and manufacture products which consumers want to buy and to continue buying/upgrading. Not surprisingly, no resolution was reached. As ever, and as noted by Sophie in her comments on Monday’s conference, identifying what is FRAND when granting or taking a licence remains a difficult question - and central to all these debates. 

The economists present appeared to agree, broadly, with the Commission’s position in the horizontal guidelines that, while incentives to innovate should not be undermined, nevertheless in principle patented innovations incorporated in a standard should not be rewarded in a way which captures value beyond the value of the particular innovation. The economists present also appeared to agree that this was a difficult approach to apply in practice! Regular readers of this blog will recall that the recently created Fair Standards Alliance enshrines this as one of its key principles for FRAND licensing (see here). 

Finally, one company (and as this was a conference under Chatham house rules, I can’t reveal which one!) introduced an initiative to try and resolve some of the problems of SEP licensing in the forthcoming Internet of Things by creating a multiparty licensing platform to reduce transaction costs when licensing standardised technology. Guidance on the competition law treatment of patent pools can be found in the Technology Transfer Guidelines as discussed briefly here, and such initiatives have been tried in the past (including for 3G, where a pool arrangement was approved by DG Comp, when such things were still possible). It will be interesting to see how this one fares and we shall be looking out for more information…

Pat Treacy

The Commission’s consultation on the IP Enforcement Directive – a competition as well as an IP issue

In December 2015, the European Commission launched a public consultation on whether Directive 2004/48/EC on the enforcement of intellectual property rights (the Enforcement Directive) is still fit for purpose.  The Commission is seeking input from a wide range of stakeholders – IP owners; the judiciary and legal profession; intermediaries such as internet service providers and social media platforms; public authorities; and consumers and civil society – about their experiences of enforcing IP rights in the EU.  According to the Commission, this input is intended to support its assessment of the current legal framework governing the enforcement of IP rights and the potential need for amendments to the Enforcement Directive.  The consultation consists of five different questionnaires for the different stakeholder groups, and will end on 15 April 2016.

Origins of the consultation

The consultation stems from the Commission’s Digital Single Market and Single Market strategies, on which we have written previously (see e.g. here and here).  The Commission sees modernisation of IP enforcement as an important element of these strategies.  It has shown particular interest in adopting a ‘follow-the-money’ approach to IP enforcement, which seeks to deprive commercial-scale infringers of the revenue that draws them into such activities (rather than penalising citizens who often infringe IP rights unknowingly).  As the Commission puts it on the ‘Enforcement of intellectual property rights’ page of its website: “An efficient and effectively enforced intellectual property infrastructure is necessary to ensure the stimulation of investment in innovation and to avoid commercial-scale [IPR] infringements that result in economic harm”.  It is also focusing on the cross-border applicability of IP enforcement, suggesting that a “comprehensive enforcement policy is required to successfully combat these infringements at EU and national level, especially given the borderless nature of the internet”.

But why are competition lawyers interested in all this?

The primary purpose of the Enforcement Directive, as originally conceived in 2004, was to require all EU countries to apply equivalent sets of measures to enable IP owners to enforce their rights effectively.  Of particular relevance from a competition law perspective, however, is its further aim of preventing the abusive or disproportionate exercise of IP rights.  Recital 12 of the Preamble to the Directive directly refers to the importance of avoiding harm to competition, stating: “This Directive should not affect the application of the rules of competition, and in particular Articles 81 and 82 [now Articles 101 and 102] of the Treaty. The measures provided for in this Directive should not be used to restrict competition unduly in a manner contrary to the Treaty.”

In the run-up to this consultation, the CJEU referred to the Enforcement Directive’s treatment of the intersection between IP law and competition law in its Huawei v ZTE judgment of July 2015 (which we have written about here).  In that judgment, the CJEU considered whether the holder of a standard essential patent can seek injunctive relief against a manufacturer of standard-compliant products without abusing a dominant position under EU competition law.  In answering that question, the Court emphasised the importance of striking the right balance between “maintaining free competition” on the one hand and safeguarding IP holders’ rights – and particularly their “right to effective judicial protection” – on the other.  

The Commission’s consultation on the Enforcement Directive also raises questions relating to the intersection between IP law and competition law, albeit more obliquely.  For instance, the questionnaires for the different stakeholder groups include sections on the availability of injunctive relief, posing questions such as “Do you see a need for criteria defining the proportionality of an injunction?” and “Should the Directive explicitly establish that all types of intermediaries can be injuncted?”.  Given the past and current interventions by DG Competition into the seeking of injunctive and similar mandatory relief by holders of SEPs, these questions have direct relevance to the way in which competition law is enforced in the EU – both through public authority investigations and in private actions.

In addition, the questionnaires for the judiciary and legal profession and member states and public authorities both include the question: “Do you think that the existing rules strike the right balance between the need to effectively protect IPR and preventing IPR infringements and the need to protect fundamental rights including the right to respect for private life, the right to protection of personal data, the freedom to conduct a business as well as the freedom of information?” (emphasis added).  

If, after having reviewed the responses to its consultation, the Commission comes to the view that it is necessary to make changes to the Enforcement Directive, it is to be hoped that the Commission will bear in mind the need to maintain an appropriate balance between free competition on the one hand and the ability of IP holders to protect and enforce their rights on the other. 

Huawei v ZTE - three months on

Three months have gone by since the Huawei v ZTE judgment.  Having considered the judgment on behalf of both licensors and licensees, I find myself wondering if my views have changed, compared to when the judgment was first handed down. 
 
It was clear on initial review that the judgment was potentially more favourable for licensors than licensees. If anything, this impression has been reinforced by looking at how the judgment may work in practice: whereas licensors can avoid (most of) the obligations by not seeking injunctive relief; licensees are in the dark as to what patents may be asserted until it happens. At that point it may be too late to correct any non-compliant conduct (although that is still far from clear). 
 
This may be a desirable or undesirable outcome depending on your market position. However, there is undoubtedly an information asymmetry which can favour the licensor. 
 
The judgment is (at least in the recitals) also extraordinarily prescriptive in a way which has no clear legal foundation.  Neither Article 102 nor the Enforcement Directive contain any basis for the imposition of such obligations on (unproven) patent infringers.  
 
In fact, the operative parts of the judgment (i.e. the final two paragraphs) are much less prescriptive. Given the procedural autonomy of national courts, the detailed provisions in relation to matters such as provision of security may well become a matter of national judicial discretion. 
 
For those who would like to read more, an article (here) we have written on the judgment has been published in Competition Law Insight. 

Sophie Lawrance

Huawei may not be the end of the story

On 11 September  2015 the Antitrust Commissioner Margrethe Vestager announced in a speech at the 19th IBA Conference in Florence that certain companies are potentially circumventing the rules established by the Court of Justice in the recent Huawei v ZTE judgment (see our blog posts here, here and here and here).
 
In that judgment, the Court of Justice held that in certain circumstances a holder of a standard essential patent which has committed to licensing it on fair, reasonable and non-discriminatory (FRAND) terms would be abusing its dominant position if it seeks an injunction against an implementer (typically a manufacturer) which is willing to licence on FRAND terms.  However, some companies are now seeking injunctions not against manufacturers, but against other parties further down the distribution chain (for example telecoms operators selling phones), which are exercising the same patent right. 

Of course, this isn’t a breach of patent law, which countenances the possibility of “infringing acts” at many different levels of the supply chain.  In her Florence speech, however, Vestager made clear that the Commission will consider it an abuse of dominance to impose an injunction on any party exercising the same patent right even if they are not the actual product manufacturer.  

Vestager also suggested a broadening of the debate, referring elliptically to “new questions arising in patent enforcement that have a competition law dimension”.  Which exact aspect of the exercise of a right-holder’s patent she had in mind is not clear, given there have been a number of types of conduct in this area that have caused DG Competition consternation.  Given the Huawei ruling’s endorsement of patentees’ right to seek damages, it is to be presumed that Vestager has claims for injunctive relief primarily in mind.  

Vestager also suggested that, as with copyright law, competition law may not always be the solution and that a re-design of certain patent laws and practice may be required.  Those involved in the negotiations to reach agreement on the UPC will no doubt wish the Commissioner “good luck” with that particular enterprise…