Federal Supreme Court's decision in Sisvel v Haier moves Germany closer to the UK

By Richard Vary

07-2020

The Federal Supreme Court's Cartel Senate has given its written reasons in the Sisvel v Haier case. In two areas, it seems that Germany has moved closer to the opinion of the Court of Appeal in Unwired Planet. The Senate found that discrimination is not hard-edged: an offer to a licensee at a higher rate than the rate paid by another licensee need not necessarily be discriminatory. It also adopted a comment made by Mr Justice Birss: that a willing licensee is one who is willing to accept a license on FRAND terms, whatever FRAND may be. 

The decision is also likely to have immediate relevance in the automotive cases before the lower German courts, where it is argued that royalty rates paid for handsets should act as a cap for royalty rates paid in the automotive sector. The Senate has confined the effect of the "non-discrimination" limb of FRAND to offers which would place the licensee at a competitive disadvantage, within TFEU Art. 102 para. 2, and Sec. 19 para. 2 No. 3 of the German Competition Act.
 
The case arose after Sisvel asserted patent EP 852 885, a patent disclosing the setup of data connections using different data carriers and carrier services. It was filed in 1996 by Nokia, who informed ETSI that it may be essential to GSM. Nokia sold the patent to Sisvel in 2012. Sisvel gave a FRAND licensing declaration to ETSI in 2013. Sisvel approached Haier and offered a global portfolio licence. The parties could not agree, and in 2014 Sisvel sued Haier at the Regional Court Düsseldorf. In November 2015, Sisvel won at first instance. The court found the patent valid and infringed, and dismissed Haier’s FRAND defence because it found that Haier had delayed the negotiations. In January 2016, the Higher Regional Court Düsseldorf stayed the enforcement of the first instance judgment, finding that the first instance court did not first evaluate whether Sisvel had made a FRAND offer. In the appeal judgment from March 2017, the Higher Regional Court Düsseldorf found the patents valid and infringed, but did not grant the injunction since it considered Sisvel’s offer was not FRAND.
 
The infringement case was appealed to the Federal Supreme Court. Whilst the matter was under appeal, the Tenth Senate of the Supreme Court confirmed validity of the patent. The matter came before the Supreme Court's Cartel Senate on 5 May 2020 with Prof. Peter Meier-Beck  as presiding judge. Sisvel was represented by Prof. Christian Rohnke and Cordula Schumacher, assisted by Eisenführ patent attorneys, and Florian Cordes (in-house). Haier was represented by Peter Baukelmann, Wolfgang Straub and Gulde, patent attorneys. Unusually, the Federal Cartel Office also intervened on the question of dominance and the effect of the PRC's actions. The Federal Supreme Court allowed the appeal. It found that Sisvel's offer to Haier was at a higher rate than a licence granted to another Haier competitor. Sisvel argued that this other licensee was a state owned Chinese phone maker, and was granted a below-FRAND royalty rate after pressure by the PRC government.

Dominance

The senate confirmed that Sisvel as the owner of the patent was market dominant. It did not matter that Haier had used the patent for many years without a licence: in assessing dominance, infringement is not considered as an alternative means of market access. The senate considered that the infringer's use of the patent without a license was relevant to the question of abuse, not dominance.
 

Abuse

The senate found that the starting point for its assessment of abuse was that the owner of a SEP must be permitted to enforce it through injunctions. Because a patent owner cannot force anyone to take a licence, the injunction claim is his only remedy to unauthorized use of his SEP. It would only be abusive to seek an injunction if the infringer was prepared to take a license under FRAND conditions. 
 
Therefore it is not necessarily wrong for a court assessing a FRAND defence to jump straight to the question of the infringer's behaviour, as the first instance court had done.  There can only be a misuse if (1) the infringer, in line with the Orangebook case law, has made a licence offer which the patentee cannot reject; or  if (2) the infringer is willing to take a licence, but the patent owner does not sufficiently engage to conclude a licence agreement under FRAND conditions.
 

Willingness

An infringer can only argue that he was willing to take a licence if he engages “seriously and in a target-oriented way” to conclude a licence agreement. The Senate made clear that delay tactics would not be consistent with this. It also found, adopting Birss J's wording, that a willing licensee is willing to accept a licence for whatever is FRAND.
 
The senate also criticised the practice of asking for more and more technical information. The infringer is entitled to be in a position where he can understand the infringement allegation – if needed with help of external experts or legal support. He can ask questions, but only within a short time frame. He is not entitled to ask for information which he could also obtain himself. In the context of a standards-essential patent, where both patent and standard are public documents, this will reduce the burden on the SEP owner to produce documents. 
 
If the infringer is not in a position to make a specific FRAND offer because he does not have sufficient information, then he can require the patentee to give information to support his licence rates. The scope of this obligation is case specific and depends on the reaction of the infringer: it appears to be the Senate's view that an infringer who does not otherwise qualify as willing would not be entitled to require disclosure of this information.  

Non-discrimination

The Senate found that non-discrimination is not, in the words of Birss J, hard-edged. It does not require a standard rate for everybody. The relevant standards for assessment are: 
 
o   Art. 102 para 2 lit. c) TFEU: “applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage”; and 
 
o   Sec. 19 para 2 no. 3 of the German GWB (Act against Unfair Competition): “demands less favourable payment or other business terms than the dominant undertaking demands from similar purchasers in comparable markets, unless there is an objective justification for such differentiation” 
 
A patent owner may protect his own business interest and act reasonably, for example by accepting conditions which are lower than normal, but which are still the best it can achieve without risking severe consequences. This would not entitle all subsequent licensees to the same rate.

Past damages

For the past, the court stated that the infringer has to pay full damages (not limited to FRAND) for the time before he started seriously to engage to get a licence.