It's become one of the trickiest questions presented to patent judges, competition authorities and standard-setting bodies all over the world: if a company owns a standard-essential patent (SEP) which it commits to licensing on fair, reasonable and non-discriminatory (FRAND) terms, when (if ever) is that company entitled to injunctive relief or similar exclusion orders? Participants in these disputes include some of the biggest technology companies in the world, such as Apple, Microsoft, Motorola, Nokia and Samsung. The question has great commercial as well as legal significance: on one hand, if a patent owner can threaten to keep licensees out of standard-based technologies, innovation could be delayed and prices increased. On the other hand, if a patent owner is not entitled to an injunction, then the value of the patent is weakened and the incentive to invest in research is reduced.
A worldwide review
It's a question that courts in jurisdictions across Europe, Asia and the United States have been called on to tackle in recent years, and there are now more than 40 judgments that address the issue. To try to make sense of them, AIPPI's Special Committee on Patents and Standards recently published a report reviewing case law, antitrust actions and activities by standard-setting organisations in 10 jurisdictions, plus the EU. Members of the committee responded to a range of questions on SEPs and FRAND based on the law and cases in their jurisdictions. "We hope the report provides some empirical evidence to support the discussions," says Michael Fröhlich, senior director, EU intellectual property and strategy at BlackBerry, who chairs the Special Committee.
Fröhlich adds that the report showed that in general courts have done a good job: "The first thing that struck me is that national judges can handle it in most cases. This may be a surprise to some, but it wasn't to me because this is what judges do all the time." He acknowledges that there are divergences between jurisdictions, with some courts making it harder to get injunctions than others, but adds that it is important to look at the specifics of each case. "There is a consistent theme, which is to evaluate parties' behaviour under the rubric of good faith. It's not surprising, in that the duty of good faith is integral to the concept of FRAND." For example, some commentators have noted the different outcomes in cases between Apple and Samsung in the Netherlands and Korea, but notably in Korea Apple did not put money in escrow at the judge's request. Such details can tip the balance when courts are deciding whether an injunction is appropriate. "You need to evaluate all the behaviour of the parties leading to the negotiations and during the negotiations," says Fröhlich.
Based on its review of the case law, the report makes seven findings and six recommendations. The recommendations include that "injunctive relief should not be granted for infringement of a SEP, if the patentee has failed to comply with its obligations under FRAND" and "the fact that a potential licensee agrees to be bound by a third party determination for the terms of a licence is a relevant factor when evaluating the parties conduct, but it should not necessarily be the only factor that a court should consider in evaluating the parties conduct". It also recommends that the act of seeking injunctive relief, or the threat to do so, should not be qualified as a competition law violation.
Questions remain
While Fröhlich welcomes the progress made by the courts, he notes that uncertainties remain. In the short term, the CJEU will address five questions referred from the Düsseldorf court in the Huawei v ZTE case. A hearing is due on September 11. The first question, concerning whether an SEP owner abuses his dominant market position by seeking injunctive relief in a FRAND case, is key to a harmonised approach in Europe. Longer term, there are questions about what role the planned UPC will play in such cases in Europe, and in particular what will be the limits of its jurisdiction in cases that mix patent and competition law.
Another big uncertainty concerns what is a willing licensee. In its antitrust decisions in the Motorola Mobility and Samsung Electronics cases published in April this year, the European Commission said that "willing licensees" benefit from a safe harbour, protecting them from injunctions. But Fröhlich says there is a lack of case law on this point: "We're apparently replacing one perceived uncertainty with another: namely, 'What are the conditions under which injunctions are available for FRAND commitments?' with 'What is a willing licensee?'." Despite the progress made by courts in recent years, there are clearly some issues relating to SEPs and FRAND that still require further elucidation.
Managing IP will be publishing the AIPPI Daily Report during the AIPPI World Intellectual Property Congress from September 14 to 17. Pick up your daily copy at the Congress in Toronto or read it online at managingip.com
