Standard essential Patent

“No more Wild West” in SEP transfer, rules Düsseldorf Patent Court

The result of yesterday's appeal hearing between Unwired Planet and Huawei means selling standard-essential patents to boost licence revenues could soon become difficult in Germany. The hearing in Düsseldorf, regarding patents for the mobile radio standard, saw the Higher Regional Court call for clear FRAND rules to ensure that licensees are not discriminated against by the transfer of SEPs. This could have consequences for the business models of NPEs.

22 February 2019 by Mathieu Klos

Düsseldorf, Huawei, patent litigation, Ericsson Yesterday saw a showdown at the Düsseldorf Higher Regional Court. The dispute between Unwired Planet and Huawei saw Thomas Kühnen criticise the transfer of SEP licences. ©OLG Düsseldorf

Thomas Kühnen made one of his feared emotional appearances yesterday in the oral hearing between Unwired Planet and Huawei at the Higher Regional Court in Düsseldorf (case ID: I-2 U 31/16).

Thomas Kühnen, presiding judge, Higher Regional Court Düsseldorf

Thomas Kühnen

Huawei had previously been found guilty of infringement and had appealed. But Kühnen, the presiding judge of the 2nd Civil Senate, quickly made it clear that the court does not doubt Huawei’s infringement and considers the patent EP 1230818 valid.

In terms of damages and the rendering of information and accounts, however, things went much better for Huawei.

Kühnen clearly and severely criticised the transfer of SEPs when used to achieve higher licence rates and revenues. “It is crystal clear to us that this is a flagrant violation of the ban on discrimination under the FRAND rules,” said Kühnen. “It’s like the Wild West.”

The parties had not expected this new legal interpretation. The presiding judge explained that one cannot expect higher licence rates by virtue of purchasing SEPs, as this would mean different licensees are treated differently. A holder that brings its patent into a standard such as ETSI undertakes to licence the SEP on equal terms. However, different licence rates resulting from the sale of an SEP could discriminate between licensees. This is prohibited under the FRAND rules.

Companies that sell SEPs have to comply with specific requirements. They not only have to grant access to the buyer but also to licensees. Licensees should be able to see active licence agreements in order to assess whether they are discriminated against or not, Kühnen said. “The measure of all things are the licence agreements of the legal predecessor. They must be presented in full.”

Look to London

However, a licence agreement administered by the court, such as that confirmed in October by the Court of Appeal in London, is no yardstick for the assessment of discrimination. Previously, the London High Court had granted Unwired Planet a global licence and calculated the fee accordingly.

According to Kühnen, this was FRAND-compliant but it was not the benchmark for all subsequent licence agreements. The Düsseldorf court thus stands in opposition to the London patent courts.

Christian Donle, patent litigator, Preu Bohlig

Christian Donle

In the specific case, Ericsson and Huawei initially attempted to negotiate a continuation of the expired licence agreement but to no avail. In the course of these negotiations Ericsson sold patents to Unwired Planet in 2013. As a result, the NPE then called on Huawei to accept a licence. “At a much higher price,” said Huawei attorney Christian Dohnle yesterday.

Whether Unwired Planet and Ericsson conform to the guidelines drafted by the senate is unlikely to be clarified. Neither disclosed any licence agreements with other companies during the course of the proceedings.

Kühnen and his two fellow judges left no doubt that they would uphold Huawei’s appeal on this point. But they did give the NPE and its co-litigant the opportunity to respond to the new guidelines by making an appropriate offer.

Unwired Planet and Ericsson did not make use of this, however. Now the Higher Regional Court will decide on 4 April. Kühnen and his colleagues will allow both companies to appeal at the German Federal Court of Justice.

New approach

Directly after the hearing, the parties described this as a new guideline on how to deal with FRAND in the event of a transfer of an SEP.

Benjamin Grzimek, Fieldfisher, Unwired Planet

Benjamin Grzimek

Unwired Planet wanted to avoid a FRAND issue and therefore refrained from applying for an injunction against Huawei. However, the FRAND issue came back into play with the discussion about providing information on costs and profits.

It is certain that the new guideline will also apply to suits for injunctive relief. The stricter rules would make the overall transfer of SEPs more difficult.

Ericsson’s counsel Frank-Erich Hufnagel complained in the courtroom that the considerations are not feasible.

Multiple mobiles

The case began in 2014 after Unwired Planet acquired six patents from Ericsson. Five of them are classified by Unwired Planet as essential for the mobile radio standards GSM, UMTS and LTE. Initially, Unwired Planet accused Samsung, Google and Huawei in the UK of violating these patents. In Germany, the patent holder also sued HTC and LG.

While Samsung, Google and LG reached a settlement with Unwired Planet, HTC and Huawei continue to fight the suits in Düsseldorf and London respectively.

After winning in the UK, Unwired Planet saw success in Germany as well. In 2016, the Regional Court Düsseldorf found Huawei, LG and Samsung had infringed three patents. One of the six patents was recently confirmed by the German Federal Court of Justice with amended claims.

Frank-Erich Hufnagel, patent litigator, Freshfields

Frank-Erich Hufnagel

For Unwired Planet
Fieldfisher (Düsseldorf): Benjamin Grzimek; associates: Lisa Herrmann, Jörn Peters
df-mp Dörries Frank-Molnia & Pohlman (Munich): David Molnia, Dominik Ho (both patent attorneys)

For Ericsson
Freshfields Bruckhaus Deringer (Düsseldorf): Frank-Erich Hufnagel; counsel: Juliane Ziebarth; associate: Coring Gittinger

For Huawei
Preu Bohlig & Partner (Berlin): Christian Donle
Braun-Dullaeus Pannen Emmerling (Munich): Friedrich Emmerling (patent attorney)
In-house (Munich): Georg Kreuz

Higher Regional Court Düsseldorf, 2nd Civil Senate
Thomas Kühnen (presiding judge), Thomas Fricke, Ronny Thomas