In a decision dated November 26, 2020, the 4c Civil Chamber of the Düsseldorf Regional Court (4c O 17/19) refers several questions to the European Court of Justice (ECJ) regarding the licensing of standard-essential patents within multi-stage supply chains in a patent infringement dispute brought by Nokia Technologies Oy against Daimler AG. The infringement action at the Düsseldorf District Court is suspended.
In the action, Nokia is seeking an injunction against Daimler AG for infringement of the German part of its European patent EP 2 087 629 B1. The patent relates to a method for sending data in a telecommunications system, with the patent being essential for the LTE (4G) standard. This standard is used by LTE-capable modules from various suppliers, which are installed in the automobiles of the manufacturer Daimler. These modules enable mobile radio-based services such as music or data streaming and/or over-the-air updates.
In September 2014, the plaintiff's predecessor in title indicated that it considered its patent essential to the LTE standard and issued a FRAND statement committing to grant licenses to third parties on terms that are fair, reasonable and non-discriminatory.
Both the defendant and many of its suppliers have been using the patent to date without paying royalties.
Nokia says that as the owner of a standard-essential patent, it is free to decide at which stage of a complex production and supply chain to grant licenses on FRAND terms.
Daimler says that based on the rules in the EU single market and on the FRAND declaration from September 2014, the plaintiff as owner of the standard-essential patent must offer any license seeker willing to license its own unrestricted license for all patent-relevant types of use in the standard-essential patent. Priority was therefore to be given to license-seeking suppliers, which was also in line with standard practice in the automotive industry.
In today's decision, the 4c Civil Chamber of the Düsseldorf Regional Court assumes that Nokia is entitled to injunctive relief against Daimler for patent infringement. However, the court then raises the question of whether Nokia's assertion of the cease-and-desist claim against Daimler is to be regarded as an abuse of its indisputably dominant position on the licensing market. The decisive question is whether and, if so, under what circumstances the owner of a standard-essential patent abuses its dominant position when it brings an action for an injunction against the distributor of the end product on the grounds of patent infringement without first having complied with the licensing request of its patent-using suppliers.
The 4c Civil Chamber of the Düsseldorf Regional Court therefore refers the following questions to the European Court of Justice:
A. Is there a duty to license suppliers on a priority basis?
(1) Can a company in a downstream economic stage counter a patent infringement action for injunctive relief brought by the owner of a patent that is essential to a standard standardized by a standardization organization (SEP) and who has irrevocably undertaken vis-à-vis this organization to grant a license to any third party on FRAND terms, with the objection of abuse of a dominant position within the meaning of Art. 102 TFEU, if the owner of the patent is not obliged to grant a license to a third party on FRAND terms. (1) Can the patent proprietor of the patent in suit oppose the objection of abuse of a dominant position within the meaning of Article 102 TFEU if the standard for which the patent in suit is essential, or parts thereof, is already implemented in an upstream product purchased from the infringing defendant, whose suppliers willing to license it are refused by the patent proprietor the grant of their own unrestricted license for all patent-relevant types of use on FRAND terms for products implementing the standard?
a) Does this apply in particular if it is the practice in the relevant industry of the end product distributor that the property right situation for the patents used by the supplier part is clarified by way of licensing by the suppliers?
b) Does licensing priority exist vis-à-vis the suppliers at each stage of the supply chain or only vis-à-vis the supplier immediately upstream of the distributor of the end product at the end of the exploitation chain? Do the customs of business dealings decide here as well?
2. does the prohibition of abuse under antitrust law require that the supplier be granted its own, unrestricted license for all patent-relevant types of use on FRAND terms for products implementing the standard in the sense that the end distributors (and, if applicable, the upstream buyers) for their part no longer require their own, separate license from the SEP holder in order to avoid patent infringement in the event of use of the supplier part in question for the intended purpose?
(3) If the answer to Question 1 is in the negative: Does Article 102 TFEU impose specific qualitative, quantitative and/or other requirements on those criteria according to which the proprietor of a standard-essential patent decides which potential patent infringers at different levels of the same production and exploitation chain he claims with a patent infringement action directed to an injunction?
B. Concretization of the requirements from the decision of the Court of Justice in Huawei ./. ZTE (judgment of July 16, 2015, C-170/13):
(1) Irrespective of the fact that the duties of conduct to be mutually fulfilled by the SEP holder and the SEP user (infringement notice, licensing request, FRAND license offer; license offer to the supplier to be licensed with priority) are to be fulfilled pre-court, is it possible to make up for duties of conduct that were neglected in the pre-court area by legally preserving them in the course of court proceedings?
(2) Can a substantial request for licensing by the patent user only be assumed if a comprehensive assessment of all surrounding circumstances clearly and unambiguously shows the will and the willingness of the SEP user to conclude a license agreement with the SEP holder on FRAND terms, whatever these FRAND terms (which, in the absence of a license offer formulated at that time, are not yet foreseeable at all) may look like?
a) Does an infringer who remains silent for several months in response to the infringement notice regularly indicate that he is not interested in taking a license, so that - despite a verbally formulated license request - there is no such request, with the consequence that the SEP holder's action for injunctive relief must be granted?
b) Can a lack of a license request be inferred from license conditions which the SEP User has submitted with a counter-offer, with the consequence that the SEP Holder's action for injunctive relief is granted without prior examination of whether the SEP Holder's own license offer (which preceded the SEP User's counter-offer) complies with FRAND conditions at all?
c) Is such a conclusion prohibited in any case if the license conditions of the counter-offer from which a lack of license request is to be inferred are those for which it is neither obvious nor has it been clarified by the highest courts that they are not compatible with FRAND conditions?
Total amount in dispute 3 million euros
An immediate appeal against the decision can be lodged with the Düsseldorf Higher Regional Court.
Dr. Elisabeth Stöve