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Huawei v ZTE: Is seeking an injunction abusive?

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Phone by  Fancycrave1 CC 0 via Pixabay

This year the Court of Justice (CJEU) gave its long-awaited judgment in Huawei v ZTE. This describes when a holder of a standard essential patent (SEP) may abuse a dominant position by seeking injunctive relief against an alleged infringer. The case arose from German proceedings for an SEP used in smart phone technology – the background is described in this Competition Law Insight article. Other competition law issues relating to SEPs are discussed by Miguel de la Mano, Renato Nazzini and Hans Zenger:  ‘Specific Abusive Practices in Relation to IP Rights’ in The EU Law of Competition (OUP 2014).

The CJEU held that seeking an injunction in patent enforcement proceedings against an undertaking needing a FRAND licence may be abusive. On the other hand, the CJEU recognised that those who need a licence must negotiate diligently. The CJEU tries to balance the interests of IP owners and the imperatives of competition law, describing how parties should act when negotiating a FRAND licence. If the CJEU’s rules are not observed then:

  • The SEP owner (‘Licensor’) may infringe Article 102 by seeking an injunction; and/or
  • The party allegedly infringing the SEP (‘Licensee’) may not be able to raise an Article 102 defence against an injunction. 

Briefly, in a judicially designed game of ping pong:

  • The Licensor must identify the SEP and the alleged infringement. 
  • The Licensee must express its willingness to take a FRAND licence.
  • The Licensor must make a written FRAND offer specifying some basic terms.
  • The Licensee must respond diligently, in line with “recognised commercial practices” and make a counter-offer if it does not accept.
  • If the counter offer is rejected the Licensee must then provide appropriate security. 
  • An independent third party may be asked to adjudicate.

The ruling provides some guidance on when an injunction can legitimately be sought; but leaves a number of other important questions unanswered (see more detailed commentary on the Bristows’ CLIP Board blog).

 

Pat Treacy, Partner, Associate, Bristows LLP and Francion Brooks, Associate, Bristows LLP