24 June 2020
With its judgment of 1 August 2019, the District Court of The Hague rejected Sisvel’s claim for an injunction in preliminary injunction proceedings against Xiaomi. This judgment has now been upheld by the Court of Appeal. In summary, the Court of Appeal considers a preliminary injunction unfit and disproportionate in FRAND proceedings.
The District Court of The Hague in first instance held that Sisvel lacked an urgent interest for a preliminary injunction and that the case was basically too complex for a FRAND assessment in preliminary proceedings. For these reasons, the interests of Xiaomi should prevail over the interests of Sisvel in obtaining an injunction, as discussed in our earlier article.
The Court of Appeal of The Hague in its judgment of 17 March 2020 went a step further.
According to the court, not only should the interests of Xiaomi to keep its products on the market prevail over the interest of Sisvel to an injunction, but the drastic nature of an injunction would also be disproportionate and therefore contrary to article 3 of the Enforcement Directive (Directive 2004/48/EC) and article 47 of the Charter of Fundamental Rights of the European Union.
The court held that FRAND proceedings are, by nature, much more suitable for compensation afterwards than regular patent infringement proceedings. After all, the proprietor of a standard essential patent does not exclusively bring a patented product on the market, but receives royalties for the use of their patented technology. An injunction (for the use of the EGPRS/EDGE extension of the GSM standard), on the other hand, would have drastic consequences for SEP implementer Xiaomi in this case as it would force Xiaomi completely off of the Dutch market. The consequences would be most difficult, if not impossible, to undo.
As a result, Xiaomi, in case an injunction were granted, would have no other choice than to accept Sisvel’s licence proposal. With Sisvel’s proposal, however, not just relating to the patent invoked (EP 1 129 536 B1), but to the use of over a thousand patents in its MCP portfolio worldwide in over a billion mobile devices, entering into that agreement too would have the irreversible effect that Xiaomi would have to perform its payment obligations under the agreement. With Xiaomi even having provided for sufficient security by way of a concluded escrow agreement, the court dismissed the principal claim of Sisvel.
Also the alternative claims of Sisvel, to grant an injunction as long as Xiaomi does not agree to FRAND determination in arbitration proceedings and/or to order Xiaomi to turn off the EGPRS/EDGE extension, were dismissed as being disproportionate. With regard to Sisvel’s claim to force Xiaomi into arbitration proceedings, the court additionally held that this would basically mean that Xiaomi had to waive its fundamental rights of access to a court involuntarily. A measure that would, moreover, be irreversible as Sisvel demanded that Xiaomi had to agree to arbitration unconditionally.
The Court of Appeal upheld the judgment of the District Court and ordered Sisvel in the costs of the proceedings, amounting to EUR 653.352,71.