Navigating the fog: SEP litigation in Europe

The European Court of Justice (CJEU) has a clear mandate. It must ensure the harmonisation of EU law. However, when it comes to lawsuits surrounding standard essential patents, which are hugely significant for the mobile communications industry, harmonisation has not yet been achieved. This is the sober assessment of many patent experts in Europe a good four years after the CJEU’s all-important ruling in the Huawei vs. ZTE case.

In the summer of 2015, the CJEU made every effort to provide clarity in SEP litigation and lawsuits, and FRAND licences. It drafted clear rules of conduct for SEP holders, defining the conditions under which a holder can justifiably make an injunction claim over an SEP without behaving in an abusive manner. Similarly, defendants must follow clear rules if they want to invoke a FRAND licence and not be seen as a querulous and unwilling licensee.

European hodgepodge

In terms of SEP litigation and FRAND, however, Europe still resembles a patchwork of different legal interpretations. The major patent courts in Düsseldorf, London, Mannheim, Munich and The Hague continue to struggle with the interpretation of the CJEU judgments.

Up to now, there were considerable differences in particular between the regional courts in Düsseldorf and Mannheim. While the Düsseldorf patent judges allow SEP holders to make subsequent improvements to their FRAND licence offer after filing a complaint, their colleagues in Mannheim were seen as much stricter. The consensus of opinion was that the judges do not allow improvements once the complaint has been filed.

But even London and The Hague interpret the CJEU judgment differently. In the dispute between Unwired Planet and Huawei, for example, the High Court and the Court of Appeal in London felt it necessary to set a global licence for a British SEP for the first time. Furthermore, the courts also set a licence rate. This was a milestone in European SEP case law.

Experts have recently begun to regard the patent courts in The Hague as SEP-holder-friendly. The Court of Appeal granted Philips two injunctions and admonished Asus and Wiko for being unwilling licensees.

Case-by-case basis

For a quick and inexpensive injunction against a difficult licensee, Germany was the place to sue. But this was before the CJEU ruling. Today, choosing the ‘right’ court is much more complex. “Many factors play a role in this. That’s what makes it so difficult,” says an in-house head of litigation at a big SEP holder. Their company usually prefers Germany, but also sees advantages in other courts.

A head of the patent development department at a global communications company says, “We are currently deciding on a case-by-case basis in which court to file injunctive relief claims for infringement of an SEP.”

Sisvel, which has conducted numerous SEP litigation proceedings in Germany over many years, is also now spreading its lawsuits throughout Europe. The non-practising entity sues alternately in Germany, Italy, the UK and Netherlands. Currently, Sisvel is waging a campaign against Xiaomi in the UK and the Netherlands.

But Sisvel is also active in Mannheim and landed an injunction against Wiko at the Regional Court just last week (7 O 115/16; JUVE Patent will report in detail next week). The NPE sees this as proof that it is still possible to successfully sue over SEPs in Germany.

But even according to Sisvel, you have to choose carefully. “We always decide on a case-by-case basis where to claim the infringement of our SEPs, depending on various circumstances specific to the implementer,” explains David Muus, program manager at Sisvel. “But the question of choosing the right court is secondary. It’s more important for us to ensure that our licence offers comply with the CJEU judgment in the Huawei vs. ZTE case, as well as the resulting case law, and moreover that we exhaust our options to find resolution based on these offers, before involving the courts.”

Crazy about Düsseldorf

Disputes between SEP holders and the automotive industry, as well as chip manufacturers, are on the rise. Therefore, choosing a court for SEP suits is becoming increasingly important. Furthermore, statements by European and US SEP holders claim the reluctance of Chinese mobile communications companies to license 3G and 4G mobile communications standards is also contributing to this.

Last Tuesday at Premier Cercle’s SEP Strategy Conference in Brussels, one person who recently had success with SEP lawsuits against Chinese mobile phone companies advocated for Germany. “It has the only reliable system in the world to enforce SEPs,” says Larry Horn, chief executive officer of MPEG LA. Horn finds the German system balanced and fair for patent holders.

Horn’s patent pool recently led a successful campaign in Düsseldorf against Huawei and ZTE. Last December the Regional Court granted different injunctions on the basis of SEP infringements. Shortly before Christmas, MPEG LA enforced the judgments. Both mobile phone manufacturers subsequently accepted the MPEG LA standard licence in early 2019.

But Horn also came in for criticism at the conference. The MPEG LA cases were not necessarily suitable models for SEP lawsuits. Ultimately, claimed some conference participants, the pool can point to a multitude of licence agreements in proving its compliance with FRAND. Others think the situation in Germany is not quite so simple.

Düsseldorf and Mannheim converge

One patent litigator advises his clients to exercise caution. Particularly in Germany, the regional courts have so far come to very different interpretations of the CJEU guidelines.

“In Germany, the licence offer must in any case be FRAND, and the SEP holder must provide sufficient evidence of this,” says an in-house litigation counsel. “Therefore, the best cases for German courts are those where you can show some good licences from other market players.”

A head of patent development says, “A lawsuit in Düsseldorf, for example, is a good idea if there is a clear infringement and the SEP’s validity is secured.” They add, “We prefer Düsseldorf to Mannheim because the judges are open to the economic background.”

Until now, experts considered that Düsseldorf Regional Court allowed SEP holders to submit new details from ongoing licence negotiations. This is even after filing the lawsuit. In Mannheim, on the other hand, this was not permitted after the filing of the complaint.

However, this could change with the recent judgment from the 7th Civil Chamber. In the reasoning, judges wrote, “Insofar as the Chamber initially took the view that the SEP holder must provide the relevant explanations before bringing an action, in order to fulfil the CJEU’s intention to be able to conduct the hearing unencumbered by the filing of an action for injunction, recall, removal and destruction, that view will not be upheld upon further examination.”

Market confusion

Even though this indicates a certain level of harmony, Düsseldorf has lately been a source of confusion. For example, the new doctrine of the Düsseldorf Higher Regional Court on the transfer of SEPs met with a divided response in patent circles. Companies that sell SEPs must comply with specific requirements. They not only have to grant access to the buyer but also to licensees, ruled the Düsseldorf judges in the Unwired Planet vs. Huawei case early this year. Meanwhile both parties appealed the ruling at the Federal Court of Justice.

Thomas Kühnen

A new essay by Thomas Kühnen, presiding judge of the 2nd Civil Senate at the Higher Regional Court Düsseldorf, has confounded patent holders of mobile technology which are currently in dispute with the auto industry.

Kühnen assumes that anyone in a manufacturing chain for products which use SEPs can demand a FRAND licence from the patent holders. This is as well as calling on the courts to confirm a right to a licence. In the case of car connectivity, it is in the first instance suppliers of central communications modules that would be suitable licensees.

But SEP owners like Nokia or Sharp, members of the Avanci pool and currently litigating against Daimler in Mannheim and Düsseldorf, would prefer to have only the carmakers take the licence. This is because the more expensive the product, the higher the licence fee. It is this approach which Kühnen seeks to block.

Opposing the norm

On the other hand, manufacturers of communication modules would prefer to pay the same licence as for the use of the same SEPs in mobile devices. But even here, Kühnen is signalling opposition. Anyone who installs a technology in a higher-quality product such as a car would, he argues, probably have to accept a higher licence rate.

At the SEP conference in Brussels, some participants hoped that Kühnen would either change his theory in practice or that the judges at the Regional Court’s civil chambers would not follow it. The fact that this will be vowed in court is considered certain. According to sources, the first automotive suppliers are already preparing such declaratory actions in Düsseldorf.

Secrecy in London

But there are also good reasons to file SEP lawsuits in London. “If one is unsure whether the German courts will consider a licence offer to be reasonable, a lawsuit in the UK would be appropriate,” says an in-house head of patent litigation. “The London courts are also a good option if you have a lot of confidential documents to present. In the UK this is usually done under the eyes of attorneys only.”

In addition, it is noteworthy that US company Interdigital has accused Lenovo of infringing four patents essential to its 3G, 4G and LTE mobile technology services at the High Court in London. This is opposed to choosing to litigate in Germany or the Netherlands. The companies that want to sue for a global licence, and want the court to set a licence fee, will presumably go to London. The city’s patent courts are considered attractive for SEP litigation following the highly-regarded judgment of High Court Judge Colin Birss.

Richard Arnold

But the High Court in particular is facing major staff challenges. Birss’ colleague Richard Arnold will move to the Court of Appeal in November. Moreover, Henry Carr recently and unexpectedly passed away. Consequently, at the end of the year, the High Court will only have one experienced patent judge in Birss. Successors for Carr and Arnold are not yet in sight.

Insider tip: the Netherlands

“General location considerations play an additional role in the choice of court, for example validated patents, costs or the production and sales markets of the patent user,” says an in-house head of litigation. And this could benefit the Dutch patent court.  One SEP holder representative says, “I’d like to sue more often in The Hague. The judges are good, they decide quickly and efficiently, and injunctions can be enforced efficiently.”

This is particularly advantageous if you want to stop the import of patent-infringing products via Rotterdam.

Following the two judgments of The Hague Appeals Court against Wiko and Asus, these patent courts are considered SEP-holder-friendly. A disadvantage, however, is that an injunction against infringing products in the Netherlands has less of a financial impact. To exert real pressure on a potential licensee, a sales stop in Germany or the UK is more effective.

Never give up

A head of patent development says, “Due to the very high demands placed on SEP holders, lawsuits in Europe are certainly somewhat of a risk at present. But to let that stop you from suing would be strategically negligent. That would be like handing SEP users a free licence.”

However, experts also hope that the German Federal Court of Justice will soon harmonise German SEP case law. The highest German patent court still has to hear the two cases Sisvel v. Haier and Unwired Planet v. Huawei. Already, several judges from the Federal Court have publicly stated that the Federal Court of Justice is interested in expressing an opinion on German SEP case law. An oral hearing in one of the two cases is expected to take place this autumn, with a decision anticipated in early 2020.

Meanwhile in London, patent experts await a key decision from the Supreme Court in the Unwired Planet vs. Huawei case. As of now, no date has been scheduled. But 2020 could finally bring more clarity to European SEP law.