Published: 7/16/15
This case was referred by a German court to the European Court of Justice to assess whether the invocation of injunctive relief by a holder of a FRAND-encumbered SEP may constitute an abuse of a dominant position. The Advocate General concluded in an advisory opinion that “the commitment given by [the SEP holder] … bears some similarity to a ‘licence of right,’” and that “where a patent licensee has a licence of right, an injunction may not, in principle, be issued against him.” Thus, where “the infringer is and remains ‘able’ to conclude and comply with a licensing agreement on FRAND terms and, in particular, to pay an appropriate royalty, the SEP holder must, given the importance of what is at stake, take certain specific steps before bringing an action for a prohibitory injunction in order to honour its commitment and discharge its special responsibility [as a dominant firm] under Article 102 TFEU.” These steps include proving the alleged infringement with a writing “specifying the SEP concerned and the way in which it has been infringed” and providing “a written offer for a licence on FRAND terms that contains all the terms normally included in a licence in the sector in question, in particular the precise amount of the royalty and the way in which that amount is calculated.” If negotiations are not commenced or are unsuccessful, the alleged infringer must be given the opportunity to ask for the FRAND terms “to be fixed either by a court or an arbitration.” Further, the alleged infringer must not be denied the right to challenge either the validity of the asserted SEP or the fact of infringement.
In response to a request from a German court, the European Court of Justice (ECJ) issued an advisory opinion regarding whether the invocation of injunctive relief by a holder of a FRAND-encumbered SEP may constitute an abuse of dominance. The ECJ held that SEP holders may not seek injunctive relief without notice or prior consultation with the alleged infringer that identifies the SEP and specifies the way in which it has been infringed. (Par. 61). Further, if the alleged infringer expresses a willingness to conclude a license on FRAND terms, “it is for the proprietor of the SEP to present to that alleged infringer a specific, written offer for a licence on FRAND terms, in accordance with the undertaking given to the standardisation body, specifying, in particular, the amount of the royalty and the way in which that royalty is to be calculated.” (Par. 63). The SEP holder may then seek an injunction only if “alleged infringer has not diligently responded to that offer, in accordance with recognised commercial practices in the field and in good faith,” such as by engaging in “delaying tactics.” (Par. 65). Otherwise, the SEP holder would be abusing its dominance under European Union competition law. (Par. 71).
The court explained that the “irrevocable undertaking” to grant licenses on FRAND terms given to the SSO by a SEP holder justifies imposing on that proprietor an “obligation to comply with specific requirements when bringing actions against alleged infringers for a prohibitory injunction or for the recall of products.” (Par. 59). The court stated that the rules it was establishing for FRAND-encumbered SEPs created an exception to the ordinary right of patent holders to seek injunctions. (Art. 47, 59). It explained that a SEP holder “can prevent products manufactured by competitors from appearing or remaining on the market,” and because FRAND commitments create “legitimate [licensing] expectations on the part of third parties,” then “a refusal by the proprietor of a SEP to grant a license on those terms may, in principle, constitute an abuse [of dominance].” (Art. 52 & 53). The court further held that bringing a suit for damages only does not constitute an abuse of dominance by the SEP holder. (Art. 74-77).