THE FRAND EXCEPTION WILL BE DISCUSSED AGAIN BEFORE THE COURT OF JUSTICE: THE COURT OF DÜSSELDORF REFERS SOME OF THE MOST DEBATED ISSUES IN THE PATENT FIELD TO THE JUDGES OF LUXEMBOURG
In the proceedings that Nokia Technologies Oy brought against Daimler AG for infringement of the German part of a European patent, the Court of Düsseldorf (Germany) announced last week that it would not issue an injunction against Daimler. Instead, the Court addressed the Court of Justice with a series of questions concerning the scope of application of the so-called FRAND exception: the patent concerns a method for sending data in a telecommunication system, being essential for the LTE (4G) standard. The battle between Nokia (and other owners of patents essential for the standard) against Daimler has already seen several decisions of the courts in Mannheim and Munich that excluded referral to the Court of Justice.
The patent litigation concerns the German portion of patent EP 2 087 629 B1. Its owner, Nokia Technologies Oy, has applied for an injunction against the car manufacturer Daimler AG. This patent is essential for the LTE (4G) standard, which requires the use of LTE-enabled modules from various suppliers, which are installed in Daimler machines. These modules allow services such as music streaming or ether updates. As early as September 2014, the actress’s predecessor declared that he considered his patent essential to the LTE standard and issued a FRAND declaration, undertaking to grant licenses to third parties on fair, reasonable and non-discriminatory terms. However, not only the defendant Daimler but also many of its suppliers had so far used the standard (and thus also the patent in question) without having obtained a license. In the proceedings before the court in Düsseldorf, the defendant Daimler points out that, on the basis of the EU internal market rules and the FRAND declaration of September 2014, the plaintiff must grant a license to each applicant. In terms of scope, the license should be unlimited for all types of use that the standard allows.
The standard procedure in the automotive industry would require suppliers to obtain licenses. A central aspect of the dispute between Nokia and Daimler is, in fact, the granting of licenses in articulated supply chains, composed of various levels. It should be noted that there are different practices in different sectors: In the mobile communications sector, licenses are traditionally negotiated at the level of the manufacturer of the final product. In the automotive industry, on the other hand, licenses are traditionally granted to suppliers, leading to the exhaustion of licensing rights downstream along the supply chain. On the contrary, the actress Nokia argues that the choice of supplier within a business chain to which to grant a license is solely up to her as the owner of the patent essential to the standard. In the automotive industry, on the other hand, licenses are traditionally granted to suppliers, leading to the exhaustion of licensing rights downstream along the supply chain. On the contrary, the actress Nokia argues that the choice of supplier within a business chain to whom a license is granted is up to itself as the owner of the patent that is essential to the standard.
The Court did not reject the defendant Daimler’s argument and raised the question whether Nokia’s initiative could be considered an abuse of a dominant position. The questions submitted to the Court of Justice belong to two macro-themes. The first concerns the question whether there is an obligation of the holder of a patent essential standard to grant licenses to suppliers in priority. The second concerns specifications of the obligations formulated in the judgment of 16 July 2015 of the Court of Justice in the Huawei case. ZTE (C-170/13).
With regard to the possible obligation to grant licenses, in priority, to suppliers (intended as upstream in the commercial chain), the Court specified the question as follows: can a company that is downstream in the commercial chain invoke the abuse of a dominant position within the meaning of Article 102 TFEU if the patent holder has refused to grant a license to suppliers that are upstream in the commercial chain?
The Court of Düsseldorf – perhaps having in mind what factor could be decisive for the answer – then formulated a further question: is it relevant for the answer the existence of a commercial practice – in the field of the final product – according to which it is the supplier to take action to obtain the necessary licenses for the components supplied? Is there such a priority to grant a license to suppliers at every level of the commercial chain or only to the last supplier? Is the practice of trade decisive in this case too?
Even in the latter case, the formulation of the questions suggests a clear trend of the German court.
Regarding the second macro-theme, the Court of Düsseldorf also referred more general questions relating to FRAND’s defense to the Court of Justice: First, the Court of Düsseldorf asks whether the impending circumstances of the judgment in the Huawei case. ZTE for both parties can be fulfilled even after the initiation of legal proceedings. Secondly, the court asks what the prerequisites are for qualifying a proposal as sufficient by those who intend to use a standard essential patent within the mechanism of the decision.
The decision of the Court of Düsseldorf to make a request for referral to the Court of Justice on the one hand increases the hope of achieving greater clarity and uniformity of application in the future. However, in view of the proceedings already in progress and/or established before a final decision is made, the mere pending before the Court of Justice entails the risk of further suspension decisions, which is why one can only hope for a speedy final decision.