[Ip-health] EU Advocate General backs sweeping compulsory licenses on standard essential patents for mobile computing devices

Jamie Love james.love at keionline.org
Sat Dec 20 10:46:27 PST 2014

The EU continues to move toward the US policy of granting compulsory
licenses on patents that are infringed, through withholding of injunctions,
including in this instance, for standard essential patents for mobile
computing devices.   (Note, this is consistent with TRIPS Article 44, and
permits exports).   It is quite important to watch what havoc the TPP and
TTIP rules will create, to undermine this flexibility.   Jamie


EU Advocate General: No Injunction Against Users Of Standard Essential
Patents Without An Offer To License

Last Updated: 19 December 2014
Article by Mark A. Prinsley, Gillian Sproul and Zsolt Vertessy of Mayer

The owner of a standard essential patent (SEP) may have to make a licence
offer before seeking an injunction, following the non binding opinion of
the Advocate General in the Huawei/ZTE case before the EU's top court. The
Court of Justice of the European Union is set to rule on a reference from
the Regional Court of Düsseldorf, asking for guidance on the application of
the EU prohibition on abuse of market dominance to the enforcement of SEPs.
The dispute relates to an essential patent for the 4G 'LTE' standard for
mobile telecommunications; moreover, this guidance will be helpful for SEP
owners and licensees not only in the telecommunications industry but more
generally where one standard involves a large number of patents.

The Court is not required to follow the Advocate General's opinion,
however, to date, it has done so in approximately 70 - 80% of cases.

There are three main points in the Advocate General's opinion.

1. No injunction against a ready, willing and able SEP licensee

For its patent to achieve SEP status, the owner of a SEP must commit to
grant third parties a licence on fair, reasonable and non-discriminatory
(FRAND) terms. The Advocate General considers that, before it can take
action to stop an alleged infringement by a SEP user, the SEP owner must
actually have made that user an offer to license its patent on FRAND terms.

If the SEP owner fails to do this, or if it fails to pursue a FRAND licence
with a SEP user that has indicated it is "ready, willing and able" to enter
into such a licence, then the SEP owner is likely to abuse a dominant
market position if it seeks an injunction or corrective measures (such as a
recall of the allegedly infringing products) against the SEP user. (The
Advocate General notes that there is a rebuttable presumption that a SEP
owner is market-dominant.)

2. The SEP owner and user both have obligations in licence negotiations

The Advocate General addresses in some detail the practical steps that need
to be taken by the SEP owner and the user in negotiating a licence.
Although these may be described as common sense, it is useful to have them
clearly articulated.

Before seeking an injunction or corrective measures, the SEP owner should
write to the user, notifying it of the details of the alleged infringement
and offering it a licence on FRAND terms. Those terms should include all
the terms normally included in a licence in the sector, in particular, the
proposed amount of the royalty and how it is calculated.

The user must then provide a considered and serious response to the SEP
owner's offer within a reasonable time. If it does not accept the offer,
its response should contain a reasonable written counter-offer, setting out
the clauses it does not accept. Where it can be shown that the user is
engaging in conduct that is purely tactical, dilatory or not serious, the
SEP owner may obtain an injunction or corrective measures without breaching
competition law.

If the parties are unable to reach an agreement in good faith, they may
request that the FRAND terms be fixed by a court or an arbitration
tribunal. The SEP holder may also ask the infringer to provide a bank
guarantee for the payment of royalties or to deposit a provisional sum for
its past and future use of the patent.

None of these scenarios deprives the user of the right to challenge the
validity of the SEP and it can insist on this right being a term of any
licence that is agreed.

3. The SEP owner can seek damages or rendering of accounts

Although the SEP owner cannot stop the alleged infringement until it has
taken the steps described above, it can take legal action in respect of
past conduct. If it succeeds, firstly, it can obtain compensatory damages
for the past use of the patent. Secondly, it can secure the rendering of
accounts to determine the extent to which the user has used the SEP and the
amount of royalty due, although its actions must be reasonable and


The pragmatic steps the Advocate General proposes seek to strike a balance
between ensuring that SEP users do not face unnecessary delays in bringing
their products to the market and that SEP owners receive the protection and
royalties they are due. If the Court of Justice follows the Advocate
General's approach, the SEP owner will bear the burden of identifying the
SEPs allegedly being infringed and of proposing FRAND licence terms to
govern the further use of the SEP. However, the SEP owner will also benefit
from certain safeguards against abuse and in particular will not be
prevented by the rules against abuse of market dominance from taking action
where the SEP user's approach to negotiating the licence is not genuine.

Whether the Court of Justice, which is expected to publish its final
judgment in the Huawei/ZTE case in early-mid 2015, will follow this
approach remains to be seen.

Originally published December 2014

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James Love.  Knowledge Ecology International
KEI DC tel: +1.202.332.2670, US Mobile: +1.202.361.3040, Geneva Mobile:
+41.76.413.6584, twitter.com/jamie_love

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