Federal Court of Justice lays down new FRAND rules for implementers

Yesterday, the German Federal Court of Justice ruled that Haier is infringing an SEP of Sisvel and acted as an unwilling licensee in FRAND negotiations. The ruling could significantly raise the bar on FRAND rules for implementers. The judgment is considered a game-changer in FRAND law in Europe.

6 May 2020 by Mathieu Klos

Peter Meier-Beck, Federal Court of Justice, patent law, FRAND Presiding judge Peter Meier-Beck, who leads a new antitrust senate, handed down the important Sisvel/Haier decision in Karlsruhe ©Jürgen Markus

Yesterday, the Federal Court of Justice heard the first decision on FRAND rules since the ground-breaking CJEU ruling on FRAND in Europe. The global patent community had waited months for a FRAND decision by the highest German patent court. Presiding judge Peter Meier-Beck had been working towards this day for a long time.

Meier-Beck’s retirement is approaching and last year he took over the newly-established antitrust senate at the Federal Court of Justice. Nevertheless, as the German patent community has heard many times, the patent judge did not want to miss the opportunity to provide clarity about FRAND law in Germany.

FRAND rules, finally

On the same evening as the hearing, the court announced its judgment. The Federal Court of Justice ruled that Haier infringed Sisvel SEP EP 08 52 885, thus overturning the ruling of the Higher Regional Court Düsseldorf (case ID: K ZR 36/17). Sisvel had appealed against this. Effectively, the decision means the reinstatement of the previous ruling by the Regional Court Düsseldorf.

Federal court of Justice, Germany, Karlsruhe SEP cases

Yesterday the German Federal Court of Justice layed down new FRAND rules for implementers ©BGH

In 2015, the Regional Court decided against Haier for the infringement of the two Sisvel patents. This is despite Haier making Sisvel a licence offer. Then, the Regional Court judges found another fault; Haier did not make its FRAND offer on time (case ID: 4a O 93/14 and 4a O 144/14).

Two years later, the Higher Regional Court Düsseldorf turned the ruling around. The court also sentenced Haier to damages and disclosure for patent infringement but the Düsseldorf judges – unlike their Regional Court colleagues – saw no need to prohibit Haier from selling its mobile devices.

Then, the judges found that Sisvel had treated Haier differently to first licensee, Hisense. Therefore, Sisvel had not submitted a FRAND-compliant licence offer (case ID: I-15 U 65/15 and I-15 U 66/15).

Past decisions

But yesterday, the antitrust senate judges at the Federal Court of Justice saw things differently. The judges largely reinstated the Regional Court’s ruling in favour of Sisvel. The reasons behind the ruling are not yet available and are expected in a few weeks.

Previously, the X. Civil Senate of the Court had confirmed the two Sisvel patents – EP 885 with limitations and EP 1 264 504 B2 without (case ID: X ZR 44/18 and X ZR 35/18). The patents protect a technology used in mobile communications to establish a data call.

However, SEP EP 885 has already expired. Thus the dispute yesterday is about past damages, rather than the parties seeking injunctive relief.

World keeps on turning

The case is of minor economic relevance. Haier is not a big player in the mobile communications sector, and the Sisvel patents expired long ago. However, the dispute is significant in terms of legal policy. This is because, for the first time since the CJEU’s decision on Huawei against ZTE, it gives the highest German civil court the chance to unify the varying FRAND case law from the patent courts in Düsseldorf, Mannheim and Munich.

Exactly eleven years ago Meier-Beck, as a member of the patent senate, helped shape the then-authoritative German case law for SEPs. The “Orange Book” judgment was extremely well-known in the global patent community. At the time, any company suing for injunctive relief from an SEP in Europe could expect to encounter it.

But, back then, the decision  referred to industry standards such as printing CD-ROMs. Mobile communications standards were not in dispute nearly as often as today. Now SEPs for mobile communications standards dominate; not only in the telecoms sector, but also in the use of connected cars patents by the auto industry.

Central connections

So it was no surprise that yesterday a large number of trial observers were from firms currently representing parties such as Nokia, Harman Becker or Peiker in the connected cars suit. FRAND is a central issue for all connectivity aspects of the future.

SEPs are subject to special conditions, Meier-Beck emphasised. The holders have committed to license the SEPs to all market participants under FRAND terms. But the courts have long disputed just how, and under what financial terms, this is done.

Indeed, in summer 2015, the CJEU overturned the “Orange Book” judgment co-developed by Meier-Beck. The judgment had imposed heavy duties on SEP infringers seeking a FRAND licence.

However, the CJEU considers the SEP holder and the infringer equally liable with regard to negotiating a FRAND licence.

Since then, the German patent courts have interpreted the FRAND rules from Luxembourg differently. With the decision in the case of Sisvel vs. Haier, industry companies and patent lawyers hoped for uniform FRAND rules and more legal certainty in Germany.

Infringer must show willingness

According to observers, Meier-Beck was thorough and well-prepared for the FRAND part of the oral hearing. The judge made it clear that, even under the CJEU’s FRAND rules, the infringer is obliged to make a concrete licence offer. It must subsequently demonstrate this through its overall conduct in negotiations with the SEP holder.

“It is not enough to simply declare your willingness to take a licence. You have to be more specific,” said Meier-Beck. He expressly referred to the ruling of High Court judge Colin Birss in Unwired Planet vs. Huawei, quoting him in saying “the potential licensee has to make clear it seeks for a FRAND licence, whatever FRAND means.”

Sisvel’s lawyers accused Haier of deliberate delaying tactics during the negotiations. But the court had no desire to go that far. Both companies negotiated a FRAND licence during the dispute. Yesterday, however, the court expressed doubts that Haier had done enough to demonstrate its willingness to sign the licence agreement.

Orange book reloaded

As the ruling shows, yesterday’s pleading by Haier’s lawyers did not change much. If the written reasoning confirms the antitrust senate’s argument, the German patent courts are likely to place much higher demands on implementers in Germany in the future. The patent courts in Düsseldorf, Mannheim and Munich have recently taken different views on this.

However, one trial observer notes, the Federal Court of Justice is likely to take a stance more in line with the Orange Book judgment. Nevertheless, some trial observers were disappointed with how the oral hearing played out. Observers had hoped the court would provide more details into the FRAND rules matter.

Special case

There will probably be no concrete calculation of a FRAND licence, such as that presented by the London High Court in Unwired Planet vs. Huawei. However, the court did touch on the issue of a comparative licence. The court also clarified that it must apply a sense of proportion and the appropriate economic framework.

But the case of Sisvel vs. Haier is too specific for a landmark decision. The Federal Court of Justice is unlikely to provide concrete instructions on how SEP holders and infringers must behave in every step of the negotiations, according to the CJEU.

View on London

However, the case will continue as a second patent is still in dispute between the parties. The Federal Court of Justice upheld EP 1 264 504 B2 without limitations at the end of April (case ID: X ZR 35/18). The infringement proceeding has not yet been scheduled (case ID: K ZR 35/17), but it is unlikely that the court will come to a different conclusion.

Of course, the court could express its views on FRAND rules in another case. The appeal in the dispute between Philips and Wiko is currently pending at the court (case ID: X ZR 101/19). The parties have settled a third appeal between Unwired Planet and Huawei in Germany.

But after yesterday’s ruling, the patent community is anticipating a ruling by the UK Supreme Court. Here, the UK case between Unwired Planet and Huawei is still pending. The patent community is expecting the highest UK court to issue an important verdict.

The Supreme Court heard the appeal in the Unwired Planet vs. Huawei case in November 2019 (case ID: UKSC 2018/0214). The judges are examining whether a UK court may order a global licence on the basis of a UK patent in conjunction to setting a licence rate.

Side of the attorneys

Cordula Schumacher, Arnold Ruess, patent litigation

Cordula Schumacher

Christian Rohnke represented Sisvel at yesterday’s hearing. Rohnke is one of the best-known Federal Court of Justice lawyers in IP matters. Cordula Schumacher, a leading litigation lawyer, also represented Sisvel alongside Rohnke.

In fact, Düsseldorf-based Arnold Ruess  has led the case for the NPE since the beginning. Patent attorney firm Eisenführ Speiser has advised on the technical side of the case throughout. Eisenführ has a long-standing client relationship with Sisvel.

In 2013, Sisvel added Düsseldorf law firm Arnold Ruess to its panel. The latter recently led a dispute against Hisense, ended by the parties for unknown reasons.

Mixed IP law firm Gulde & Partner has good relations with China, especially concerning patent applications. However, the Berlin firm does not work on patent applications for Haier. On the other hand, Haier retained Gulde to represent the company in court. The Chinese company was represented by Federal Court of Justice lawyer Peter Baukelmann.

For Sisvel
Rohnke Winter (Karlsruhe): Christian Rohnke (lawyer admitted to the Federal Court of Justice)
Arnold Ruess (Düsseldorf): Cordula Schumacher (lead), Marina Wehler, Arno Riße, Bernhard Arnold
Eisenführ Speiser (Hamburg): Désirée Heintz, Jochen Ehlers (patent attorneys)
In-house (Italy): Florian Cordes (head of European IP Litigation)

For Haier
Baukelmann Tretter (Karlsruhe): Peter Baukelmann (lawyer admitted to the Federal Court of Justice)
Gulde & Partner (Berlin): Marco Scheffler, Jörg Grzam, Nicolas Haße, Martin Thimm (both patent attorneys)
Klaka (Munich): Wolfgang Straub (antitrust law)

German Federal Court of Justice, Karlsruhe (antitrust senate)
Peter Meier-Beck (presiding judge), Patricia Rombach (judge rapportuer), Jan Tolkmitt, Johannes Berg, Birgit Linder