1. - http://www.ip-watch.org -
A Middle Path: Advocate-General’s Opinion On Abuse Of
Dominance For FRAND-Encumbered SEPs
Posted By Magda Voltolini On 02/12/2014 @ 6:44 pm | No Comments
For the first time, the European Advocate-General has suggested on the grounds of European
competition law the context for negotiations of fair, reasonable and non-discriminatory (FRAND)
terms, and has set criteria for the enforcement of injunctions and other remedies in actions
involving infringement of standard-essential patents (SEPs). The Court of Justice of the European
Union (CJEU) decision is still pending.
[1]
On 5 April 2013, the German Düsseldorf Regional Court referred to
the CJEU a number of questions [2] to discover whether, and if so
under what conditions, an action of infringement brought by the
owner of a FRAND-encumbered SEP constituted abuse of a dominant
position pursuant Article 102 TFEU [3] based on the case Huawei
Technologies (Huawei) v ZTE Corporation and ZTE Deutschland
Gmbh.
Background
Huawei brought an infringement action against ZTE based on the failure to reach negotiations on
FRAND terms for the licensing of a standard-essential patent (SEP). Following that action, Huawei
sought a prohibitory injunction, an order for the rendering of accounts, a recall of products and
damages.
Huawei made a commitment before the European Telecommunications Standards Institute (ETSI)
to licence under FRAND terms its European patent registered under No EP 2 090 050 B, which is
essential to the Long Term Evolution (LTE) standard – the 4G standard. Any company compliant
with the 4G standard inevitably uses that patent. ZTE uses LTE software to put in the German
market base stations.

2. According to the referring court, the European Commission did not explain the criteria set out by
the German Federal Court of Justice, judgment of 6 May 2009 in Orange-Book-Standard (KZR
39/06) concerning abuse of a dominant position of a patent holder in an action for injunction.
Nor, it said, did it specify circumstances when an SEP infringer was regarded as being willing to
negotiate in its Statement of Objections sent to Samsung Electronics [4] (COMP/C-3/39.939).
The Advocate-General’s Opinion
The Advocate-General’s opinion [5] of 20 November 2014 was limited to competition law,
specifically to the framework for FRAND negotiations: abuse of dominant position of the SEP
holder and the characterisation of the willing licensee in relation to the legality of seeking
injunction and corrective measures.
He pointed out, however, that the matters raised in that case could be adequately “resolved in
the context of other branches of law or by mechanisms other than the rules of competition law,”
as to clarify the “requisite content” of FRAND terms.
Moreover, the Advocate-General (AG) expressly underscored that a FRAND commitment does not
mean a FRAND licence, nor does it determine FRAND terms. He inferred that standardisation
bodies could establish criteria or a framework for the negotiations of FRAND licensing terms, as
follows.
[11] If FRAND licensing terms are a matter entirely for the discretion of the parties and, where
appropriate, the civil courts or arbitration tribunals, it seems clear to me that the risk of the
parties concerned being unwilling to negotiate or of the negotiations breaking down could, at
least in part, be avoided or mitigated if standardisation bodies were to establish minimum
conditions or a framework of ‘rules of good conduct’ for the negotiation of FRAND licensing terms.
Without these, not only actions for a prohibitory injunction but also the rules on abuse of a
dominant position, which should be employed only as solutions of last resort, are being used as a
negotiating tool or a means of leverage by the SEP-holder or the undertaking which implements
the standard and uses the teaching protected by that SEP.
That stated, the AG highlighted it was necessary “to find a middle” path. He asserted the
Orange-Book-Standard judgment was not applicable because it concerned de facto standards,
and as such, the patent holder had not committed before a standardisation body to licence its
patents under FRAND terms.
At the same time, as to the Samsung case, he declared the characterisation of a infringer’s
willingness to negotiate was set out “in a highly vague and non-binding fashion [that] [could
not], in any circumstances, be sufficient (18) [6]to limit the SEP-holder’s right to bring an action
(19) [7]for a prohibitory injunction.”

3. Concurrently, he noted the referring court assumed Huawei held a dominant position, and that
this presumption was rebuttable “with specific, detailed evidence.” Against this background, he
suggested an interpretation of Article 102 TFEU applicable to the context of the case and
provided a safe harbour for both the SEP holder and the alleged infringer.
Concerning the SEP holder safe harbour on abuse of dominance, it must take certain specific
steps prior to seeking an injunction or requesting corrective measures against the SEP infringer,
unless it can provide evidence the infringer is fully aware of the infringement. (The grant of an
injunction can exclude a company from using the SEP and if so, from the market.)
The SEP holder does not abuse a dominant position where the infringer is not fully aware of the
infringement, and
[84] … [it] alert[s] [the infringer] to that fact in writing, giving reasons, and specifying the SEP
concerned and the way in which it has been infringed… [and]
[85]…, in any event, present[s] to the alleged infringer 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.
The SEP holder does not constitute abuse of dominant position by bringing action to secure the
rendering of accounts and/or “to claim for damages for acts of use for the sole purpose of
obtaining compensation for previous infringements.”
Also, the SEP holder does not constitute abuse of a dominant position when the conduct of the
infringer is regarded as “purely tactical and/or dilatory and/or not serious.”
As to the criteria determining the alleged SEP infringer is a willing licensee:
[88] It must respond in a diligent and serious manner to the offer made by the SEP-holder. If it
does not accept that offer, it must promptly submit to the SEP-holder, in writing, a reasonable
counter-offer relating to the clauses with which it disagrees. As the referring court has pointed
out, the bringing of an action for a prohibitory injunction would not constitute an abuse of a
dominant position if the infringer’s conduct were purely tactical and/or dilatory and/or not
serious.
[99] … the conduct of the alleged infringer cannot be regarded as dilatory or as not serious if it
asks for those terms to be fixed either by a court or an arbitration tribunal.
In addition, the conduct of the infringer cannot be regarded as dilatory or as not serious if it
reserves the right to challenge validity, use and essentiality of an SEP before a court or
arbitration tribunal, even after if it entered into a FRAND licensing agreement and the
negotiations are over.

4. Image Credits: CJEU [8]
Related Articles:
Libraries Can Digitise Books Without Consent, European Advocate General Says [9]
For Experts, Questions Still Abound On IP And Standard-Setting [10]
United States Confounded By Standard-Essential Patents [11]
Article printed from Intellectual Property Watch: http://www.ip-watch.org
Published in: Access to Knowledge, Education/ R&D/ Innovation, English, Europe, Finance, IP
Law, IP Policies, Language, Patents/Designs/Trade Secrets, Regional Policy, Subscribers, Technical
Cooperation/ Technology Transfer, Themes, Venues
URL to article: http://www.ip-watch.org/2014/12/02/a-middle-path-advocate-
generals-opinion-on-abuse-of-dominance-for-frand-encumbered-seps/
URLs in this post:
[1] Image: http://www.ip-watch.org/weblog/wp-content/uploads/2014/12/CJEU-
logo.png
[2] a number of questions: http://curia.europa.eu/juris/document/document.jsf?
docid=139489&mode=req&pageIndex=1&dir=&occ=first&part=1&text=&doclang=EN
&cid=111076
[3] Article 102 TFEU: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?
uri=CELEX:12008E102:EN:HTML
[4] Statement of Objections sent to Samsung Electronics: http://europa.eu/rapid/press-
release_IP-12-1448_en.htm
[5] The Advocate-General’s opinion:
http://curia.europa.eu/juris/document/document.jsf?
docid=159827&mode=req&pageIndex=1&dir=&occ=first&part=1&text=&doclang=EN
&cid=111076
[6] (18) : http://curia.europa.eu/juris/document/document.jsf?
text=&docid=159827&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1
&cid=70143#Footnote18
[7] (19) : http://curia.europa.eu/juris/document/document.jsf?
text=&docid=159827&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1
&cid=70143#Footnote19
[8] CJEU: http://www.ip-watch.org" target=
[9] Libraries Can Digitise Books Without Consent, European Advocate General Says :
http://www.ip-watch.org/2014/06/05/libraries-can-digitise-books-without-consent-
european-advocate-general-says/
[10] For Experts, Questions Still Abound On IP And Standard-Setting : http://www.ip-
watch.org/2014/09/16/for-experts-questions-still-abound-on-ip-and-standard-
setting/
[11] United States Confounded By Standard-Essential Patents : http://www.ip-
watch.org/2013/07/29/us-confounded-by-standard-essential-patents/