EU 2015: JUDGMENT OF THE COURT (Fifth Chamber)
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16 July 2015 (*)

 

(Competition Article 102 TFEU Undertaking holding a patent essential to a standard which has given a commitment, to the standardisation body, to grant third parties a licence for that patent on fair, reasonable and non-discriminatory terms (FRAND terms) Abuse of a dominant position Actions for infringement Action seeking a prohibitory injunction Action seeking the recall of products Action seeking the rendering of accounts Action for damages Obligations of the proprietor of a patent which is essential to a standard)

 

In Case C170/13,

 

REQUEST for a preliminary ruling under Article 267 TFEU from the Landgericht Düsseldorf (Germany), made by decision of 21 March 2013, received at the Court on 5 April 2013, in the proceedings

 

Huawei Technologies Co. Ltd

 

v

 

ZTE Corp.,

 

ZTE Deutschland GmbH,

 

THE COURT (Fifth Chamber),

 

composed of T. von Danwitz, President of the Chamber, C. Vajda, A. Rosas, E. Juhász and D. Šváby (Rapporteur), Judges,

 

Advocate General: M. Wathelet,

 

Registrar: K. Malacek, Administrator,

 

having regard to the written procedure and further to the hearing on 11 September 2014,

 

after considering the observations submitted on behalf of:

 

–        Huawei Technologies Co. Ltd, by C. Harmsen, S. Barthelmess and J. Witting, Rechtsanwälte, D. Geradin, avocat, and M. Dolmans, advocaat,

 

–        ZTE Corp. and ZTE Deutschland GmbH, by M. Fähndrich, Rechtsanwalt,

 

–        the Netherlands Government, by M. Bulterman, C. Schillemans and B. Koopman, acting as Agents,

 

–        the Portuguese Government, by L. Inez Fernandes and S. Oliveira Pais, acting as Agents,

 

–        the Finnish Government, by J. Heliskoski, acting as Agent,

 

–        the European Commission, by F.W. Bulst, A. Dawes and F. Ronkes Agerbeek, acting as Agents,

 

after hearing the Opinion of the Advocate General at the sitting on 20 November 2014,

 

gives the following

 

Judgment

 

1        This request for a preliminary ruling concerns the interpretation of Article 102 TFEU.

 

2        The request has been made in proceedings between Huawei Technologies Co. Ltd (Huawei Technologies), on the one hand, and ZTE Corp. and ZTE Deutschland GmbH (ZTE), on the other hand, concerning an alleged infringement of a patent which is essential to a standard established by a standardisation body (standard-essential patentor SEP).

 

 Legal context

 

 International law

 

3        The Convention on the Grant of European Patents (EPC), which was signed in Munich on 5 October 1973 and entered into force on 7 October 1977, in the version applicable to the facts in the main proceedings, establishes, as Article 1 states, a system of law, common to the Contracting States, for the grant of patents for invention.

 

4        Apart from common rules relating to the grant of a European patent, a European patent remains governed by the national law of each of the Contracting States for which it has been granted. In that regard, Article 2(2) of the EPC states:

 

The European patent shall, in each of the Contracting States for which it is granted, have the effect of and be subject to the same conditions as a national patent granted by that State …’

 

5        With regard to the rights conferred on the proprietor of a European patent, Article 64(1) and (3) of that convention provides:

 

(1)      A European patent shall confer on its proprietor from the date of publication of the mention of its grant, in each Contracting State in respect of which it is granted, the same rights as would be conferred by a national patent granted in that State.

 

 

(3)      Any infringement of a European patent shall be dealt with by national law.

 

 EU law

 

6        Recitals 10, 12 and 32 of the preamble to Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual-property rights (OJ 2004 L 157, p. 45) state the following:

 

(10) The objective of this Directive is to approximate legislative systems so as to ensure a high, equivalent and homogeneous level of protection in the Internal Market.

 

 

(12)      This Directive should not affect the application of the rules of competition, and in particular Articles 81 and 82 of the Treaty. The measures provided for in this Directive should not be used to restrict competition unduly in a manner contrary to the Treaty.

 

 

(32)      This Directive respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union [(the Charter)]. In particular, this Directive seeks to ensure full respect for intellectual property, in accordance with Article 17(2) of th[e] Charter.

 

7        Article 9 of that directive, entitled Provisional and precautionary measures, states, in paragraph 1:

 

Member States shall ensure that the judicial authorities may, at the request of the applicant:

 

(a)      issue against the alleged infringer an interlocutory injunction intended to prevent any imminent infringement of an intellectual-property right

 

…’

 

8        Article 10 of that directive, entitled Corrective measures, provides, in paragraph 1:

 

Without prejudice to any damages due to the rightholder by reason of the infringement, and without compensation of any sort, Member States shall ensure that the competent judicial authorities may order, at the request of the applicant, that appropriate measures be taken with regard to goods that they have found to be infringing an intellectual-property right and, in appropriate cases, with regard to materials and implements principally used in the creation or manufacture of those goods. Such measures shall include:

 

(a)      recall from the channels of commerce;

 

(b)      definitive removal from the channels of commerce; or

 

(c)      destruction.

 

 German law

 

9        Under the heading Performance in good faith, Paragraph 242 of the German Civil Code (Bürgerliches Gesetzbuch) lays down that an obligor has a duty to perform the obligation in accordance with the requirements of good faith, with due regard for customary practice.

 

10      Paragraph 139(1) of the Law on Patents (Patentgesetz, BGBl. 1981 I, p. 1), as amended most recently by Paragraph 13 of the Law of 24 November 2011 (BGBl. 2011 I, p. 2302), states:

 

The injured party may, where there is a risk of recurrence, bring an action for an injunction against any person who uses a patented invention in breach of Paragraphs 9 to 13. The injured party shall also have that right if an infringement is liable to be committed for the first time.

 

11      Paragraphs 19 and 20 of the Law against Restrictions of Competition (Gesetz gegen Wettbewerbsbeschränkungen) of 26 June 2013 (BGBl. 2013 I, p. 1750) prohibit the abuse by one or more undertakings of a dominant position on a market.

 

 The ETSI rules

 

12      The European Telecommunications Standards Institute (ETSI) is a body the objective of which, according to Clause 3.1 of Annex 6 to the ETSI Rules of Procedure, which annex is entitled ETSI Intellectual-Property Rights Policy, is to create standards which meet the technical objectives of the European telecommunications sector and to reduce the risk to ETSI, its members and others applying ETSI standards, that investment in the preparation, adoption and application of standards could be wasted as a result of an essential intellectual-property right for those standards being unavailable. To that end, Annex 6 seeks a balance between the needs of standardisation for public use in the field of telecommunications and the rights of the owners of intellectual-property rights.

 

13      Clause 3.2 of that annex provides that owners of intellectual-property rights should be adequately and fairly rewarded for the use of their intellectual-property rights.

 

14      Under Clause 4.1 of Annex 6, each of the members of ETSI is required to use reasonable endeavours, in particular during the development of a standard in the establishment of which it participates, to inform ETSI of that members intellectual-property rights which are essential to that standard, in a timely fashion.

 

15      Clause 6.1 of Annex 6 to the ETSI Rules of Procedure provides that, when an intellectual-property right essential to a standard is brought to the attention of ETSI, the Director-General of ETSI must immediately request the owner of that right to give, within three months, an irrevocable undertaking that it is prepared to grant licences on fair, reasonable and non-discriminatory terms (FRAND terms) in relation to that right.

 

16      Under Clause 6.3 of that annex, for so long as such an undertaking has not been given, ETSI is to assess whether work on the relevant parts of the standard should be suspended.

 

17      Clause 8.1 of Annex 6 provides that, if the owner of the intellectual-property rights refuses to give that undertaking, ETSI is to seek an alternative technology and, if no such technology exists, to stop work on the adoption of the standard in question.

 

18      Under Clause 14 of Annex 6 to the ETSI Rules of Procedure, any violation of the provisions of that annex by a member of ETSI is deemed to be a breach of that members obligations to ETSI.

 

19      Clause 15.6 of that annex provides that an intellectual-property right is regarded as essential where, in particular, it is not possible on technical grounds to make equipment which complies with the standard without infringing the intellectual-property right (essential patent).

 

20      However, ETSI does not check whether the intellectual-property right, the use of which an ETSI member has brought to its attention as being necessary, is valid or essential. Nor does Annex 6 define the concept of a licence on FRAND terms.

 

 The dispute in the main proceedings and the questions referred for a preliminary ruling

 

21      Huawei Technologies, a multinational company active in the telecommunications sector, is the proprietor of, inter alia, the European patent registered under the reference EP 2 090 050 B 1, bearing the title Method and apparatus of establishing a synchronisation signal in a communication system, granted by the Federal Republic of Germany, a Contracting State of the EPC (patent EP 2 090 050 B 1).

 

22      That patent was notified to ETSI on 4 March 2009 by Huawei Technologies as a patent essential to the Long Term Evolutionstandard. At the same time, Huawei Technologies undertook to grant licences to third parties on FRAND terms.

 

23      The referring court states, in the order for reference, that that patent is essential to that standard, which means that anyone using the Long Term Evolutionstandard inevitably uses the teaching of that patent.

 

24      Between November 2010 and the end of March 2011, Huawei Technologies and ZTE Corp., a company belonging to a multinational group active in the telecommunications sector and which markets, in Germany, products equipped with software linked to that standard, engaged in discussions concerning, inter alia, the infringement of patent EP 2 090 050 B 1 and the possibility of concluding a licence on FRAND terms in relation to those products.

 

25      Huawei Technologies indicated the amount which it considered to be a reasonable royalty. For its part, ZTE Corp. sought a cross-licensing agreement. However, no offer relating to a licensing agreement was finalised.

 

26      None the less, ZTE markets products that operate on the basis of the Long Term Evolutionstandard, thus using patent EP 2 090 050 B 1, without paying a royalty to Huawei Technologies or exhaustively rendering an account to Huawei Technologies in respect of past acts of use.

 

27      On 28 April 2011, on the basis of Article 64 of the EPC and Paragraph 139 et seq. of the German Law on Patents, as amended most recently by Paragraph 13 of the Law of 24 November 2011, Huawei Technologies brought an action for infringement against ZTE before the referring court, seeking an injunction prohibiting the infringement, the rendering of accounts, the recall of products and an award of damages.

 

28      That court considers that the decision on the substance in the main proceedings turns on whether the action brought by Huawei Technologies constitutes an abuse of that companys dominant position. It thus observes that it might be possible to rely on the mandatory nature of the grant of the licence in order to dismiss the action for a prohibitory injunction in particular, on the basis of Article 102 TFEU if, by its action, Huawei Technologies were to be regarded as abusing its dominant position. According to the referring court, the existence of that dominant position is not in dispute.

 

29      The referring court states, however, that different approaches may be taken in order to determine the point at which the proprietor of an SEP infringes Article 102 TFEU as a result of bringing an action for a prohibitory injunction.

 

30      In this connection, the referring court observes that, on the basis of Article 102 TFEU, Paragraph 20(1) of the Law of 26 June 2013 against Restrictions of Competition and Paragraph 242 of the Civil Code, the Bundesgerichtshof (Federal Court of Justice, Germany) held, in its judgment of 6 May 2009 in Orange Book (KZR 39/06), that, where the proprietor of a patent seeks a prohibitory injunction against a defendant which has a claim to a licence for that patent, the proprietor of the patent abuses its dominant position only in certain circumstances.

 

31      First, the defendant must have made the applicant an unconditional offer to conclude a licensing agreement not limited exclusively to cases of infringement, it being understood that the defendant must consider itself bound by that offer and that the applicant is obliged to accept it where its refusal would unfairly impede the defendant or infringe the principle of non-discrimination.

 

32      Secondly, where the defendant uses the teachings of the patent before the applicant accepts such an offer, it must comply with the obligations that will be incumbent on it, for use of the patent, under the future licensing agreement, namely to account for acts of use and to pay the sums resulting therefrom.

 

33      In the light of the fact that ZTEs offers to conclude an agreement could not be regarded as unconditional, inasmuch as they related only to the products giving rise to the infringement, and that ZTE did not pay Huawei Technologies the amount of the royalty that it had itself calculated or provide to Huawei Technologies an exhaustive account of past acts of use, the referring court observes that it ought to preclude ZTE from being able validly to rely on the compulsory nature of the grant of the licence and, accordingly, ought to uphold Huawei Technologiesaction for a prohibitory injunction.

 

34      However, the referring court notes that, in the press releases No IP/12/1448 and MEMO/12/1021 of 21 December 2012, concerning a Statement of Objections sent to Samsung and relating to patent-infringement proceedings brought by Samsung in the field of mobile telephony, the European Commission appears to regard the bringing of an action for a prohibitory injunction as unlawful, under Article 102 TFEU, where that action relates to an SEP, the proprietor of that SEP has indicated to a standardisation body that it is prepared to grant licences on FRAND terms and the infringer is itself willing to negotiate such a licence. Accordingly, it may be irrelevant that the parties in question cannot agree on the content of certain clauses in the licensing agreement or, in particular, on the amount of the royalty to be paid.

 

35      In the present case, if those criteria alone are to be applied by the referring court, the latter court observes that it ought to dismiss Huawei Technologiesaction for a prohibitory injunction as constituting an abuse within the meaning of Article 102 TFEU, since it is common ground that the parties in the main proceedings were willing to negotiate.

 

36      The referring court takes the view that, in the case in the main proceedings, the fact that the infringer was willing to negotiate and the proprietor of patent EP 2 090 050 B 1 was prepared to grant licences to third parties ought not be sufficient to constitute an abuse of a dominant position.

 

37      The referring court takes the view that, in assessing whether the conduct of the proprietor of an SEP is abusive, an appropriate and fair balance has to be struck in relation to all the legitimate interests of the parties, which, it must be recognised, have equivalent bargaining power.

 

38      Thus, the referring court considers that the positions of the proprietor of an SEP and of the infringer ought not to make it possible for them to obtain excessively high royalties (a hold-upsituation) or excessively low royalties (a reverse hold-upsituation), respectively. For that reason, but also on the grounds of equality of treatment between the beneficiaries of licences for, and the infringers in relation to, a given product, the proprietor of the SEP ought to be able to bring an action for a prohibitory injunction. Indeed, the exercise of a statutory right cannot, in itself, constitute an abuse of a dominant position, for characterisation as such requires other criteria to be satisfied. For that reason, it is not satisfactory to adopt, as a criterion of such an abuse, the notion of the infringers willingness to negotiate, since this may give rise to numerous interpretations and provide the infringer with too wide a freedom of action. In any event, if such a notion is to be held to be relevant, certain qualitative and time requirements must be imposed in order to ensure that the applicant for the licence is acting in good faith. Accordingly, a properly formulated, acceptable, unconditionalrequest for a licence, containing all the provisions normally found in a licensing agreement, ought to be required to be submitted before