Over the past years, German Regional Courts and Higher Regional Courts issued several, in part diverging judgements in FRAND cases, calling for harmonization by the Federal Court of Justice. Following Haier’s successful FRAND defense against Sisvel before the Dusseldorf Court of Appeal, the Federal Court of Justice now took a stand on FRAND issues for the first time since the European Court of Justice’s decision Huawei v ZTE.
In line with the lower instance courts, the Federal Court of Justice held that the legal basis for the FRAND defense is Art. 102 TFEU and that European competition law applies for assessing FRAND compliance.
Further, the court allowed the established approach of patent holders to offer a license under the patent asserted in Germany only as part of a worldwide portfolio license. However, the Court held that being bound by European competition law, the patent holder must assemble the portfolio in compliance with the applicable competition law rules for bundling. Unlike the UK Supreme Court, the German Federal Court of Justice will not definitively set a FRAND rate. The Court made clear that FRAND is a range rather than a specific amount and that the Court’s role is to assess the parties’ offers and counter-offers for compliance with FRAND obligations, but not to determine FRAND rates itself.
The key aspect of the judgement, leading to a dismissal of Haier’s FRAND defense and an injunction against Haier, was the Court’s ruling that a high legal standard must be applied to a defendant’s willingness to take a FRAND license. In the Court’s view, the Court of Appeal wrongfully assumed Haier’s willingness to take a FRAND license, arguing that Haier’s statements and counter-offer before and during the proceedings were not genuine but constituted mere delaying tactics. Haier had only reacted one year after Sisvel established contact, had asked for discounts and made a very late counter-offer, which was obviously insufficient being limited to Germany and other EPC member states, in which the asserted patents are validated.
While the ruling emphasizes a defendant’s obligation to demonstrate its willingness to accept “whatever rate the court decides is FRAND”, it also confirms that a plaintiff on the other hand is obliged to explain why the rate offered is indeed FRAND. In particular, the Federal Court of Justice confirmed the Dusseldorf Regional Court’s ruling that a defendant must usually be given access to license agreements with third parties, to allow an assessment of the non-discriminatory nature of the plaintiff’s offer.The judgement contains good and bad news for both patent holders and implementers, but it remains to be seen what lower instant courts make of these guidelines in practice. In any case, Germany remains an attractive place of jurisdiction for FRAND cases for plaintiff’s seeking to establish their worldwide patent portfolio licenses.