Cellular SEP Owners Score Two Victories In Europe

In the span of two weeks in August, two different owners of allegedly standard essential patent (SEP) portfolios—asserted against the implementation of cellular standards including 4G/LTE—won cases in Germany and in the United Kingdom. Owners of alleged cellular SEPs may attempt to argue that these cases provide leverage for their efforts to license and enforce SEP portfolios on “fair, reasonable, and nondiscriminatory” (FRAND) terms.

NOKIA/DAIMLER LITIGATION IN GERMANY

The Mannheim Regional Court (MRC) in Germany on August 18 decided a patent infringement case brought by Nokia against Daimler. This case is one of four that were filed by Nokia against Daimler in the MRC—with one dismissed, two stayed pending the outcome of nullity actions in the German Federal Patent Court, and this one proceeding to a determination of infringement.

Nokia asserted EP Patent 2 981 103 asserted against Daimler’s incorporation of cellular communications into its connected vehicles, including its Mercedes-Benz brand. The MRC decided that the Nokia patent was essential to the use of the Long-Term Evolution (LTE) standard, Daimler’s cars used the LTE standard, and therefore Daimler’s cars infringed the Nokia patent.

The MRC issued an injunction against Daimler’s use of the patent, but Nokia may be required to provide a payment of 7 billion euros ($8.2 billion) in security pending the outcome of an appeal to the Higher Regional Court in Karlsruhe. Security bonds are typical under German patent laws in connection with injunctions. In reaching its ultimate decision, the MRC found that neither party had complied with their obligations to engage in FRAND license negotiations and therefore those obligations were irrelevant to the outcome.

MRC Demurs on Referral of Threshold Questions to the EU Court of Justice

The MRC declined to act on the recommendation by the German Federal Cartel Office to stay the patent infringement case and refer threshold questions to the Court of Justice of the European Union (CJEU) relating to a cellular SEP owner’s obligations to license in the automotive supply chain.

However, such a referral could still be made by the Dusseldorf Regional Court—which indicated on September 3 that it was of a mind to do so—in separate proceedings between Nokia and Daimler in respect of Daimler’s alleged infringement of Nokia patent EP 2 087 629 and/or the Higher Regional Court in Karlsruhe (to which the earlier judgment in favor of Nokia has been appealed). In particular, the question of whether Nokia has violated antitrust laws by refusing to license Daimler’s tier 1 or tier 2 suppliers such as Continental, Robert Bosch, Bury and Gemalto could be referred to the CJEU.

While a number of automakers have taken licenses to Nokia’s portfolio, including through the Avanci patent pool, many others have not and eagerly await the outcome of this litigation, as do their suppliers. The next development could be as soon as November 12, when the Dusseldorf Regional Court is due to rule on whether to stay its proceedings and refer the above questions to the CJEU.

UNWIRED PLANET/HUAWEI LITIGATION IN THE UK

On the heels of the MRC decision, on August 26, the Supreme Court of the United Kingdom (UKSC) decided an appeal in litigation between cellular SEP owner Unwired Planet and alleged infringer Huawei.

Key Takeaways from the Unwired Planet/Huawei Decision

• The impact of the UKSC’s decision is that the global FRAND rates determined in a lower UK court decision by Mr. Justice Birss for Unwired Planet in April 2017—that Huawei should pay, for example, .052% of its mobile phone selling price for multimode phones with 4G/LTE—remains undisturbed. This rate was largely determined by his analysis of certain Ericsson licensing agreements and a top-down aggregate royalty burden of 8.8% for all SEPs essential to 4G, which cellular SEP owners may attempt to rely upon.
• The UKSC also decided that a UK court can grant an injunction against infringement of a UK patent that is an SEP if the infringer does not take a global license on FRAND terms. The UKSC reasoned that the intellectual property rights policy (IPR Policy) of the European Telecommunications Standards Institute (ETSI) does not prohibit an injunction when the implementer does not take a FRAND license for implementation of ETSI cellular standards. The UKSC also reasoned that an injunction was appropriate to avoid implementers from holding out for country-by-country enforcement.
• The UKSC further decided that a UK court can determine global FRAND rates because the IPR Policy has international effect. The UKSC reasoned that “[t]his is underlined by the fact that the undertaking required of the owner of an alleged SEP extends not only to the family of patents (subject only to reservations entered pursuant to clause 6.2 of the IPR Policy) but also to associated undertakings, as stated in the declaration forms in the IPR Policy.”
• The UKSC also decided that there was no violation of the FRAND non-discrimination requirement because that requirement is not a separate obligation, as the FRAND requirement is a “single unitary obligation” or a “composite whole.”
• Similarly, the UKSC decided that there was no violation of EU competition law because FRAND terms need not be offered before commencing UK litigation. In this regard, the UKSC distinguished UK litigation from German litigation, reasoning that “[i]n contrast [to Germany], in the United Kingdom, it is not the practice to grant a final injunction unless the court is satisfied that the patent is valid and infringed, and it has determined a FRAND rate.”

IMPLICATIONS OF THE DECISIONS

The consequence of these decisions is that, for global SEP disputes, the United Kingdom could become an even more attractive venue for SEP owners to pursue favorable FRAND and injunction outcomes while—subject to a further ruling by the CJEU—Germany may become an even more attractive venue for faster, favorable SEP infringement determinations.

While SEP owners may be looking more to Europe for favorable treatment, implementers may shift their focus to the United States to argue that different circumstances justify different conclusions on essentiality or FRAND rates. The parties will have to be aware of the possible likelihood of inconsistent rulings on these issues not only between Europe and the US but also within Europe as between Germany and the United Kingdom.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers: 

San Francisco
Brent A. Hawkins

London
Omar Shah