As widely anticipated, the Düsseldorf Regional Court has decided to refer to the Court of Justice of the European Union (CJEU) a series of question arising from a dispute between Nokia and Daimler regarding the alleged infringement of one of Nokia’s standard essential patent (SEPs) by Daimler’s connected cars.
The dispute in suit concerned in essence whether SEP holders like Nokia can freely decide at which level of the production chain of the final products to license their patents, with Nokia wishing to license Daimler only, whilst the latter insists that Nokia should have licensed its technology to suppliers of connectivity components located higher up in the production chain. The same issue is being discussed in other parallel cases before German courts, involving Daimler and its suppliers against several SEP holders.
The questions referred to the CJEU however go beyond the hotly debated issue of component level licensing and actually seek clarification from the top EU court as to a number of major open issues dealt with by the previous case law (including by the CJEU itself in Huawei v. ZTE). The questions articulated by the German court are as follows:
A. Is there an obligation to license suppliers first?
1. Can a company in a downstream position in an infringement action brought by the holder of a standard essential patent (SEP) who has irrevocably committed to grant a license to any third party on FRAND terms, raise the objection of abuse of a dominant position within the meaning of Art. 102 TFEU if the standard for which the patent is essential or parts thereof are implemented in an intermediate component purchased by the defendant whose supplier is willing to license the patent holder, and the latter refuses to grant an independent and unlimited license on FRAND terms covering all relevant types of use relevant under patent law?
a) Does this apply in particular if it is customary in the relevant industry that patent rights be cleared by the suppliers of components implementing said patents?
b) Are suppliers at each stage of the supply chain entitled to a license, or does this only apply to the supplier immediately upstream of the manufacturer of the final product at the end of the production chain? Does this depend as well on business practices in the industry?
- Does the prohibition of abuse under cartel law require that the supplier be granted its independent, unrestricted license for all types of use relevant under patent law on FRAND terms for products implementing the standard, so that that the manufacturers of the final product (and possibly the upstream levels of the supply chain) in turn no longer require their independent, separate license from the SEP holder in order to avoid a patent infringement claim if the relevant component was used under a license?
- If the question referred under no. 1 is answered in the negative: Does Art. 102 TFEU impose any special qualitative, quantitative and/or other requirements on the criteria according to which the SEP holder can decide against which potential infringers at different levels of the same production and value chain to request and injunction?
B. Clarification of the requirements set forth by the Court of Justice in the case of Huawei ./. ZTE (judgment of 16 July 2015, C170/13):
- Irrespective of the fact that the reciprocal duties of conduct to be met by the SEP holder and the SEP implementer (notification of infringement, license request, FRAND license offer; priority to the license offer to the supplier) must be fulfilled before court proceedings, is it possible to make up without prejudice in the course of legal proceedings for duties of conduct that were not met in the pre-litigation phase?
- Should a licensing request by the implementer only be considered relevant if, based on a comprehensive assessment of all circumstances, it clearly and unambiguously shows the willingness and readiness of the implementer to conclude a license agreement with the SEP holder under FRAND conditions, whatever these FRAND conditions (which due to the lack of a license offer formulated at that time, were not foreseeable yet) may be?
a) Does an infringer who remains silent for several months after receiving an infringement notice indicate that it is not interested in obtaining a license, so that despite a request for a license was only nominally formulated, such request shall be considered not in good faith, with the consequence that the SEP holder’s request for injunction must be granted?
b) Can it be inferred from license terms proposed by the implementer in a counter-offer that the implementer was actually unwilling to take a license, with the result that the SEP holder’s request for injunction must be granted without prior examination of whether the SEP holder’s own license offer (which preceded the implementer’s counter-offer) is actually FRAND?
c) Is the above conclusion to be avoided if the license terms of the counter-offer, from which it is to be concluded that the implementer was actually unwilling to take a license, are such that it is not obvious neither clarified by the case law of the highest court that they are not FRAND?
The referral of the above questions will provide the CJEU with the occasion for once again shaping the direction of the FRAND debate in Europe.