Standard essential patents

New FRAND guidelines published by Munich Regional Court

Today, the Regional Court Munich published new guidelines for infringement cases concerning standard essential patents. The guidelines had been expected for some time and could have an impact on numerous connected cars disputes between Nokia, Sharp and Conversant against Daimler and its suppliers.

4 February 2020 by Mathieu Klos

Munich Regional Court, patent disputes Munich, Düsseldorf and Mannheim are home to the three most important courts for patent cases in Germany. ©JUVE Patent

The 7th and the 21st Civil Chambers of the Regional Court Munich have jointly developed guidelines on how to deal with the FRAND defence in patent disputes in the so-called ‘Munich procedure’ (a procedure for adhering to strict deadlines). The FRAND guidelines mainly concern the procedure for pending patent infringement cases and the burden of proof.

The guidelines stem from those issued by the European Court of Justice in its judgment Huawei v. ZTE from 2015 (case ID: C-170/13).

Key FRAND guidelines in detail

The CJEU had given both parties specific obligations with regard to FRAND offers in an SEP dispute. In the Munich procedure, the parties to the dispute now have until the end of the oral hearing to specify their offers. In concrete terms, this means the end of the second main hearing. FRAND issues should ideally be discussed in the first hearing.

If an SEP holder initially only sues for damages, the rendering of accounts and information, but later intends to sue for injunctive relief, in Munich they must now announce this in the statement of claim in the first hearing at the latest.

In addition, the court also specifies the parties’ obligations to provide information in the case of licences for dynamic patents. The problem is that while the CJEU does lay down requirements for individual patents, it does not do so for portfolios, which are constantly changing.

The court does not provide the parties with specific rules in this respect, but the parties can keep this problem out of the proceedings by means of an opt-out clause. They can then adapt the licence to the patents which the implementer actually uses.

In addition, the court wants to reduce the risk of defendants taking an initial licence that may be higher than subsequent licences for other implementers. The parties can agree on a clause, to adapt the licence retroactively.

The two chambers have also issued separate instructions on the confidentiality of sensitive information. Currently, the German government is planning to incorporate the corresponding regulations from the EU directive on the protection of trade secrets into a new patent law. The Regional Court Munich wants to apply the regulations now until this law comes into force.

Commitment of the court

The guidelines are not binding for the court as they are not part of the Rules of Procedure. Rather, they constitute an offer to the parties in cases concerning SEPs. If the parties agree to them, the court will in turn ensure the proceedings are speedy, because often-contentious issues will have already been clarified.

By issuing these guidelines on FRAND, the court is consolidating its Munich procedure, which celebrated its tenth anniversary in 2019. The strict deadlines ensured by the procedure ideally lead to a ruling in the first instance after a good 12 months.

In contrast to the Regional Court Düsseldorf, for example, the court in Munich has a detailed first hearing in which it discusses critical issues with the parties. The parties then have until the second hearing to make further written statements.

Initial reaction from the community

The connected cars disputes between Nokia, Sharp and Conversant against Daimler were the catalyst for publishing joint guidelines. These cases are heard by both Munich patent chambers and the same FRAND issues keep cropping up. The chambers thus wanted to coordinate their approaches.

Last autumn, the court initiated an intensive consultation with lawyers, patent attorneys and in-house representatives to solicit suggestions for dealing with FRAND issues from both the industry and users.

Initial reactions to the FRAND guidelines are mostly positive. “The guidelines now provide both parties with specific advice on how the court intends to deal with FRAND issues,” says an in-house lawyer. “That’s very welcome.” However, he considers the adjustment clauses to be impractical.

“The clauses are in themselves reasonable offers to the parties, but we will have to wait and see whether they meet the requirements of practice and are accepted by the companies,” says another Munich lawyer.

Lawyers are undecided as to whether the FRAND guidelines are more beneficial to the plaintiff or the defendant. One Munich-based patent attorney believes that they favour patent holders. “Especially because the SEP owner can still readjust his FRAND offer until the end of the second hearing,” he says.

“Synchronising the rules with the first hearing makes sense,” says a lawyer. “In this way, the relevant FRAND issues can be filtered out early on.”

Hot spot for connected cars claims

In recent years, Munich has become one of the most attractive patent courts for mobile phone lawsuits. The speed of the court in particular makes it attractive to sue for injunctions here.

In 2019, for example, it attracted much attention for the global patent battle between Qualcomm and Apple. Significant parts of the disputes between the Avanci patent pool members Nokia, Sharp and Conversant against Daimler and its suppliers of connectivity modules are taking place here. On 6 February, the Regional Court Munich will hear a key lawsuit by Nokia against Daimler.

However, related lawsuits are also pending in the regional courts of Mannheim and Düsseldorf. The first judgment from the Mannheim Regional Court in the case is expected on 11 February.

If the Munich judges have their way, the new rules could already be applied in these proceedings. But that is at the discretion of the parties. The probability that they will do this is low.

Nokia is currently negotiating intensively with Daimler and its suppliers of connectivity modules in an effort to resolve the dispute. The EU Commission initiated the mediation, but the outcome remains uncertain.

Two years on

From April 2022, Munich Regional Court will separate FRAND from infringement in SEP proceedings. In doing this, the three patent chambers aim to speed up disputes over standard essential patents. The court is currently testing this procedure in individual lawsuits, the first being Nokia vs. Oppo at the end of March.

This supplement to the FRAND guidelines, published at the beginning of 2020, is part of the so-called ‘Munich Procedure’. In adding the supplement, the court is also implementing the results of a 2020 survey among the German patent community, which demonstrated that the procedure is contributing to heightening the perception of Munich as an attractive patent location.

New additions to the Munich Procedure also include questions on video hearings, the electronic lawyer mailbox and changes due to the 2021 reform of the German Patent Law. However, according to Munich Regional Court, the core of the Munich Procedure remains unaffected by the changes. This is, namely, the focus on two dates for the merits and a strict time frame.

This article was updated on 11.04.2022 to reflect the latest developments with regard to the Munich Procedure.