On September 4 2019, the Mannheim Regional Court (case no: 7 O 115/16) issued an injunction against a smartphone manufacturer based on a standard-essential patent (SEP). The case sheds some light on the current developments in the SEP assertion environment in Germany as the Federal Court of Justice has not clarified its view on the matter since the CJEU’s decision in Huawei v ZTE (C-170/13).
The plaintiff had been negotiating a pool license for SEPs relating to the mobile communication standards 2G, 3G and 4G with the defendant group of companies since 2015 and sued the German distribution company before the Mannheim court in June 2016. A counter-offer was submitted in November 2016 when the defendant also rendered account and posted a security for German sales. The parties exchanged further offers during litigation and the plaintiff provided claim charts for some of its portfolio patents. The case was stayed until a first instance validity decision between January 2018 and November 2018.
The Mannheim court injuncted the defendants, finding that: (a) their conduct of the negotiations followed a strategy of delay, and (b) the last offer submitted to them during the period of the stay was FRAND.
Confidentiality in SEP licensing
In its comprehensive judgment, the Mannheim court clarified that confidentiality was in principle allowable in SEP licensing contracts and that the obligations to disclose needed to be balanced based on the parties’ interests and behaviour (it should noted here that the Munich and Dusseldorf courts are stricter). Only if the license seeker substantiated the possibility of discrimination, the SEP owner could be ordered to substantiate its offer by producing license agreements. License schemes with a public pool structure require less detail as everyone is paying the same royalty rate.
Test of conduct
The Mannheim court assessed the FRAND offer with a “test of conduct” to identify whether the parties have complied with their respective obligations. Further, a FRAND offer did not require mathematical precision but rather that the SEP owner needed to point to the basic structural valuation methodology on which the requested royalty rate is based. Accordingly, individual clauses alone would normally not have an anti-competitive effect but rather the entire agreement would have to be assessed.
In addition, the court confirmed its approach that a FRAND offer can be remedied during the proceedings if the parties return to a pressure-free negotiation situation.