The long-awaited ruling on the seeking of injunctions in the context of standard-essential patents encumbered by fair, reasonable, and non-discriminatory (FRAND) terms has been delivered by the Court of Justice of the European Union, in Huawei v. ZTE C 170/130. Although the judgment lays down the legal test applicable to injunctions involving standard-essential patents, and significantly clarifies the landscape that had previously been shaped by the European Commission, a number of issues remain unresolved.
Huawei Technologies entered into negotiations with ZTE Corporation over the possibility of concluding a licence agreement in relation to Huawei’s patent that is essential to the long-term evolution (commonly known as 4G) standard, on FRAND terms. Given that negotiations between the companies were unsuccessful, and because Huawei contends that ZTE continued using the standard-essential patent (SEP) without paying royalties, Huawei brought an infringement action against ZTE, seeking an injunction to stop the sale of certain ZTE products.
In adjudicating the matter, the Regional Court of Düsseldorf considered that the outcome of the litigation largely depended on whether or not the action brought by Huawei constituted an abuse of dominance. Given this consideration, and the uncertainty surrounding the topic of SEP injunctions, the Court made a reference for a preliminary ruling to the CJEU. The Court asked in what circumstances a dominant SEP holder, who has committed to grant licences to third parties on FRAND terms, can seek an injunction to stop an infringement of that SEP, or to recall products manufactured using the SEP, is to be regarded as committing an abuse contrary to Article 102 of the Treaty on the Functioning of the European Union (TFEU).
The Test for SEP Injunctions
The CJEU decided that the following conditions must be satisfied before a dominant SEP licensor can validly bring an injunction against a party infringing an SEP, without acting contrary to Article 102 TFEU.
Notification From The SEP Holder
Prior to taking any action, a SEP holder that has given an irrevocable undertaking to a standardisation body to grant a licence to third parties on FRAND terms, must alert the alleged infringer to the infringement complained about. This prior notice must designate the SEP in question, and specify the way in which it has been infringed.
“Willingness” of The Alleged Infringer
After the alleged infringer has been informed about the infringement, it must (somehow) express its willingness to conclude a licensing agreement on FRAND terms. Presumably, this willingness refers to the alleged infringer agreeing to receive a FRAND offer from the SEP holder. It would seem, therefore, that an alleged infringer who is not prepared to enter into any sort of bona fide negotiations would be presumed to be unwilling.
Unfortunately, although the CJEU refers to the concept of “willingness”, it does not address the criteria for determining the alleged infringer’s willingness. The ruling therefore does not make it entirely clear what the potential licensee should do in order to be treated as willing.
The SEP holder must present to the alleged infringer [...]