The Intellectual Property and Antitrust Review: Germany
In Germany, the legal framework for intellectual property rights most importantly consists of the German Patent Act and the German Trade Mark Act. National competition (antitrust) law is codified in the German Act against Restraints of Competition (ARC). The ARC has been widely aligned to EU competition law, which directly applies in cases with cross-border effects. The essential provisions are Section 1 of the ARC, which corresponds with Article 101 of the Treaty on the Functioning of the European Union (TFEU) (prohibition of agreements restricting competition), and Sections 19 and 20 of the ARC, which mainly correspond with Article 102 of the TFEU (abuse of a market dominant position).
Regarding the interface between intellectual property rights and competition law, there are no practically relevant specific statutory provisions. Rather, extensive case law has been developed with a view either to applying the cartel prohibition on certain types of agreements and restrictions, or to capturing certain types of behaviours as abusive. The core aspect of this IP-related competition law application is to comprehensively consider and duly respect the substance and scope of any exclusive right legitimately awarded to the IP owner.
For the sake of completeness, it should be noted that some IP-related statutory provisions, at least in appearance, have some similarity to competition law aspects; however, in substance they have a different, IP-related background. For example, Section 24 of the Patent Act provides for a compulsory licence based on public interest considerations. The German Federal Supreme Court has clarified already in its Standard-Spundfass judgment in 20042 with a view to competition law-based compulsory licences that 'these two legal institutions have different goals and different preconditions' and may thus be applied independently from each other. In addition, Section 23 of the Patent Act sounds familiar in the context of standard-essential patents (SEPs), a topic currently at the very forefront of IP-related competition law, as it provides for the possibility of a declaration by the patent holder in relation to the German Patent Office that every interested third party is entitled to use the invention in return for equitable remuneration. The main purpose of this provision, however, is merely to reduce the annual renewal fees.
Year in review
During the past year, IP-related competition law in Germany continued to be marked by court decisions dealing with the assertion of SEPs, and thereby implementing and specifying the criteria for enforcing such patents, following the Huawei v. ZTE decision handed down by the Court of Justice of the European Union (CJEU), on 16 July 2015.3 This decision, rendered in preliminary proceedings based on a set of questions referred to the CJEU by the Regional Court of Düsseldorf in 2013,4 developed a set of criteria under which the proprietor of a SEP can legitimately, without violating Article 102 of the TFEU, seek an injunction based on such a patent (and claim for recall and destruction).
This decision of the CJEU has now been further substantiated and interpreted in two fundamental decisions of the German Federal Supreme Court in 2020 in Sisvel v. Haiver. The Court took the opportunity to present detailed and broadly reasoned decisions of principle on the parties' programme of obligations based on the CJEU's decision in Huawei v. ZTE, which provides legal certainty in the form of guidelines for action for practitioners on numerous points in dispute. In both decisions, the Court rejected the defendants' antitrust objection of compulsory licensing on the grounds that the plaintiff had not abused its dominant position through the injunction action because the defendants were not sufficiently willing to license.
In its decision of 5 May 2020,5 the Federal Supreme Court for the first time placed high requirements on the characteristic of the alleged patent infringer's willingness to license. Contrary to the previous case law of the instance courts, the Federal Supreme Court does not consider the mere consideration of the conclusion of a licence agreement to be sufficient. Rather, it is required that the alleged infringer clearly and unambiguously declares its willingness to conclude a licence agreement on reasonable and non-discriminatory terms (see below). In an obiter dictum, the Court also made some general findings on the patent owner's fair, reasonable and non-discriminatory (FRAND) licence offer (see below). It was also held here that a portfolio licence offer by the patent proprietor is unobjectionable as long as it does not contain any non-standard essential patents and the remuneration is calculated in such a way that a user who only wants to develop a product for a geographically limited area is not disadvantaged.
In its decision of 24 November 2020,6 it confirmed its decision from May, in particular its requirements for willingness to license. In doing so, it also refers to Supreme Court case law from the United Kingdom7 and the Netherlands8 and considers itself to be in line with the principles established by the CJEU. The decision thus also serves precisely to harmonise European case law, so that there is hope that the decision will make a significant contribution to standardising the requirements for the FRAND-objection, not only with regard to the German instance courts, but also with regard to other European courts.
Another remarkable decision was announced by the Regional Court of Düsseldorf9 towards the end of last year. It referred questions to the CJEU for a preliminary ruling in the patent dispute between Nokia and Daimler. In particular, the questions relate to the licensing obligation for SEPs in multistage supply chains. Nokia argues that as the patent owner it is free to decide at which stage of a complex supply chain it grants licences on FRAND terms. Daimler argues that Nokia must offer its own unrestricted licence to any licence-seeker willing to take out a licence. According to the Regional Court of Düsseldorf, the decisive question for the antitrust objection of compulsory licence is whether and, if so, under what circumstances the patent owner abuses its dominant position if it brings an action for an injunction against the distributor of the end product without first having complied with the licensing request of its patent-using suppliers. This question will now be answered by the CJEU. With this decision, the Regional Court of Düsseldorf also takes the opportunity to submit further questions to the CJEU regarding the concretisation of the requirements from the CJEU's decision in the Huawei v. ZTE case (see below).
Licensing and antitrust
i Anticompetitive restraints
In German law, anticompetitive restraints in licensing agreements fall under Section 1 of the ARC and Article 101(1) of the TFEU. This includes, inter alia, market and customer sharing, pricing, output limitations or non-compete clauses.10 In this context, the Horizontal Guidelines of the Commission (2011/C 11/01) and Commission Regulation (EU) No. 316/2014 on technology transfer agreements (TTBER), which is applicable in German law according to Section 2(2) of the ARC, are of particular importance. Based on the TTBER, in particular, hardcore restrictions are of crucial relevance, such as the restriction of a party's ability to determine its prices when selling products to third parties, limitation of output, allocation of markets or customers, and restriction of the licensee's ability to exploit its own technology rights.
One additional IP-related highlight was the decision of the Higher Regional Court of Düsseldorf on the marketing of football media rights. The Court dismissed the appeal brought by one of the various third-party interveners, Sky, against the decision of the German Federal Cartel Office (FCO) of April 2016 on the centralised marketing of media rights for the first and second German Federal Football League (Bundesliga).11 The FCO had considered the centralised marketing by the German Federal Football League to fall under Section 1 of the ARC and Article 101(1) of the TFEU, and had cleared it on the basis of a commitment decision pursuant to Section 32b of the ARC. The commitments, inter alia, referred to how the media rights in question are to be structured in various 'rights packages' and included specific provisions on the tender proceedings, most importantly a 'no-single-buyer rule'. This rule aims to ensure, by way of a certain two-step approach, that no single undertaking would have a chance to acquire all rights for live broadcasting.
One of the joined parties of the FCO proceedings, Sky, which had acquired practically all live media rights in the previous tender, appealed against the FCO's decision, mainly attacking the 'imposition' of the no-single-buyer rule by the FCO on the German Football League (by way of accepting a corresponding commitment) as being an unnecessary and excessive restriction severely harming Sky in its rights and commercial interests.
The Higher Regional Court of Düsseldorf dismissed the complaint in its decision of 3 May 2017,12 holding the complaint to be inadmissible.
The Court denied that the FCO's decision infringed any of Sky's rights as the decision itself had no legal effect on Sky since the decision's effects materialise only upon its implementation by a private third party – the German Federal Football League offering the media rights. However, even if one were to take these effects into consideration, the decision did not infringe Sky's rights as the no-single-buyer rule was obviously pro-competition, aiming to open up markets and increase competition – an objective clearly consistent with the legal framework and thus obviously not capable of infringing Sky in any of its rights whatsoever. In addition, the claimant was considered not to be affected sufficiently in its commercial interests. The Court already denied Sky's commercial interests in this context to be legitimate, inter alia, stressing that the no-single-buyer rule aims to avoid a monopoly-like situation in the relevant end-consumer market, and that Sky's interest in a tender without this rule thus consists in avoiding competition. Furthermore, the Court raised doubts as to whether the claimant's interests were 'directly' affected and stressed that Sky, in any case, would not be 'individually' affected since the no-single-buyer rule would apply equally to all potential bidders for the media rights concerned, in a similar way. The fact that the FCO in its decision explicitly referred to Sky when explaining its concerns was seen merely as a consequence of Sky having secured nearly all live broadcasting rights in the previous tender. Whether this past success might trigger the need for Sky to modify its business strategy now, in the light of a no-single-buyer rule, was not considered relevant by the Court. The Court stressed that media rights, from the outset, are only offered for a limited period, after which all market participants have to adjust their behaviour equally to the new tender proceedings, and the Court did not see any indication why claimant Sky would have been affected by the no-single-buyer rule in an appreciably stronger or structurally different way than its competitors. Subsequently, the no-single-buyer rule has again been adopted for the next German Football League's media rights offering.13
ii Refusals to license
There are no specific statutory provisions regarding the refusal to license. Abuse of a market dominant position pursuant to Section 19(1) of the ARC is interpreted closely along the lines of its EU counterpart, Article 102 of the TFEU. In particular the conditions under which a refusal to license is deemed abusive derive from the case law of the CJEU, which has mainly been formed by the leading judgments in Magill 14 and IMS Health.15,16 Accordingly, a refusal to license may be abusive and a claim for a compulsory licence successful where (1) using the intellectual property right in question is indispensable for carrying out business on a neighbouring or downstream market; (2) the refusal to grant a licence prevents a new product for which there is a potential consumer demand; or (3) the refusal is not objectively justified and would exclude competition. According to the Higher Regional Court of Düsseldorf, a product is 'new' in this sense where, from a demand-side perspective, there is no substitutability between the product of the licence-seeking undertaking on the one side and the intellectual property right owner's existing product on the other side.17
As regards patents that have already been licensed out by the patent owner, a refusal to license may be abusive and thus lead to a compulsory licence if the licensing practice of the patent owner is discriminatory or exploitative under Sections 19 and 20 of the ARC or Article 102 of the TFEU.18
This principle was also applied in relation to a design right infringement dispute between manufacturers of automotive spare parts, namely of tail lights and headlights by the Higher Regional Court of Düsseldorf.19 The Court decided in its decision of 3 April 2019 that a refusal to license out design rights is not abusive under competition law owing to the fact that the design holder and the plaintiff did not grant design licences to third parties. In this regard, the defendant who bore the burden of proof did not sufficiently demonstrate that design licences were granted to other spare part producing companies.
Refusal to license regarding SEPs is discussed in Section IV.
iii Unfair and discriminatory licensing
Unfair or discriminatory licensing practices can fall under Sections 19 and 20 of the ARC and Article 102 of the TFEU and may be considered as an abusive (discriminatory) behaviour by a market-dominant intellectual property right owner (see Section III.ii).
iv Patent pooling
In practice, the rules established at EU level apply.
v Software licensing
With regard to a market dominant software provider, the Higher Regional Court of Munich20 ruled in its decision of 23 November 2017 that, regardless of its market dominant position, an undertaking must be free to operate its sales and distribution system at its own discretion, which also includes the possibility to set different licence conditions for different customer groups. In the specific case, the defendant software provider ceased to supply the plaintiff with software solutions at special price conditions (i.e., at conditions applied to research and teaching institutions, such as universities). The defendant, thereby, refused to offer the special conditions to the plaintiff after finding that the plaintiff did not fulfil the defendant's internal criteria under which special conditions for research and teaching institutions should be applied. The court held that refusing those research and teaching institution price conditions to the plaintiff did not violate German cartel law although the defendant software provider in the past had not consequently applied its own criteria with regard to the plaintiff.
vi Trademark licensing
In general, restrictions of competition in trademark licensing agreements are compatible with the cartel prohibition of Section 1 of the ARC and Article 101(1) of the TFEU, if they are necessary to protect the continued existence of the trademark and legitimate reasons for the restriction are given.21 Agreements on territorial protection, prohibition or restrictions on exercising, restrictions in quantity, reservation of customer groups, non-assertion and non-compete agreements are principally deemed to be infringing Section 1 of the ARC and Article 101(1) of the TFEU.22
In practice, delimitation agreements are of particular importance at the interface with competition law, as these agreements typically aim to settle disputes between the parties. Further details are provided in Section VI.iii.
In a trademark infringement case, the Higher Regional Court of Frankfurt23 – as appealing court – in its decision of 30 January 2020, dismissed the trademark owner's and the plaintiff's antitrust objection, claiming that the licence agreement was invalid due to its long duration of 57 years, which in the plaintiff's opinion restrained competition. The Court argued that the raised objection of an antitrust infringement in the appeal instance was precluded according to German civil proceeding law decision. If possible, relevant facts must be presented during the first instance and in particular, they must be submitted up until the end of the first-instance oral hearing. In this regard, the Court noted that a restriction of competition also depends on factual conditions; in other words, there must be an appreciable restriction of competition in the relevant product and geographic market, which must be factually demonstrated by the party claiming that the agreement restricted competition. However, a late submission of the factual basis constitutes a new plea in the appellate body (see section 296a, 531 (2) German Code of Civil Procedure), which, in general, cannot be taken into account by the appeal court.
As mentioned above, in the recent past, the application of IP-related competition law in Germany has remained dominated by the German courts' implementation and concretisation of the decision of the CJEU in the Huawei v. ZTE case on the question of the circumstances under which the assertion of SEPs constitutes an abuse of a market dominant position in the sense of Article 102 of the TFEU, and of the safeguards under which such an assertion constitutes the legitimate use of a granted exclusionary right.24
The question of dominance linked to owning SEPs was not the subject matter of the questions referred to the CJEU by the Regional Court of Düsseldorf. Nevertheless, Advocate General Wathelet briefly commented on the issue by stressing that owning a SEP does 'not necessarily' mean that the patent owner holds a dominant position. The Advocate General went on to argue in a way that might be understood as him favouring a rebuttable presumption for market dominance as a result of owning a SEP; in any case, he stressed the importance for the national court to determine market dominance on a case-by-case basis.25 The CJEU did not deal with market dominance and confined its assessment explicitly to the criterion of an abuse in the sense of Article 102 of the TFEU.
German courts have not yet relied on a presumption of market dominance. In its decision of 26 March 2015 (i.e., prior to the CJEU's decision in Huawei v. ZTE of July 2015), the Regional Court of Düsseldorf 26 rejected the alleged infringers' antitrust objection, or 'FRAND defence', because it concluded that the plaintiff and patent owner could not be considered to hold a dominant market position. The Court stressed that there is no legal presumption linking SEP ownership and market dominance;27 rather, the existence of market dominance should be assessed on basis of the scope of the patent in suit and its actual significance in the relevant product markets. The Court specified that a SEP leads to market dominance where the use of the patent is mandatory to enter the relevant downstream product market or where it is at least necessary to compete effectively in the market. Accordingly, the Higher Regional Court of Düsseldorf stated in its decision of 3 March 2017 that a dominant market position of the patent owner has to be determined by the court, with the defendant having to bear the burden of evidence.28 Following this decision practice, the Regional Court of Düsseldorf recognised a patent holder who jointly licenses its patents with other patent holders via a patent pool administrative entity to be market dominant.29 This prevailing case law was finally also confirmed by the Federal Supreme Court. In its decisions of 5 May 202030 and 24 November 2020,31 it stated that a dominant position exists if a patent is standard-essential and its technical teaching cannot be substituted by another technical design of the product. Furthermore, the Court clarified that the dominant position ends with the expiry of the term of protection of the respective patent.
In cases where the CJEU's criteria are considered to be fulfilled (i.e., where an abuse by the plaintiff and patent owner is denied), there is a tendency not to address the patent owner's market position and leave it open as to whether the patent owner actually is market dominant.32
The question of whether or not a SEP holder acts abusively within the meaning of Section 19 of the ARC and Article 102 of the TFEU by bringing an action of injunction against an alleged infringer has been dealt with by German courts for years. This case law has most importantly been framed by the Federal Supreme Court's decision of 2009 in the Orange-Book-Standard 33 case and a large number of subsequent cases of the instance courts.
Differing significantly from this German case law, the CJEU34 set forth specific requirements under which claiming for injunctive relie (or recall or destruction) is not abusive under Article 102 of the TFEU, which are detailed below.
First, prior to bringing an action, the SEP holder must alert the alleged infringer of the infringement complained about by designating the SEP and specifying the way in which it has been infringed.
Second, the SEP holder is obliged to provide an offer for a licence on FRAND terms after the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms. This offer must also be submitted to the alleged infringer prior to bringing an action.35 It has to be stressed that the CJEU corrected the wording of the reasoning after it adopted the judgment, because of different interpretations on this point.
If the infringer does not accept the offer, he or she is obliged to make, promptly and in writing, a specific counter-offer that corresponds to FRAND terms and, if the counter-offer is rejected, from that point on to provide appropriate security, in accordance with recognised commercial practices.
Finally, where no agreement is reached on the details of the FRAND terms following the counter-offer by the alleged infringer, 'the parties may, by common agreement request that the amount of the royalty be determined by an independent third party'.
After the Huawei v. ZTE judgment was handed down, the German case law was initially focused on the question of whether some sort of 'transitional law' had to be applied to cases that were pending prior to the CJEU's judgment. In its judgment in May 2016, the Regional Court of Mannheim36 argued in favour of such a 'transitional law', and considered the plaintiff and patent owner in this case not to have acted abusively even though he did not entirely fulfil the CJEU's criteria as to the pretrial obligations; namely, the obligation to alert the standard user about the infringement by designating the SEP and specifying the way in which it has been infringed. The Regional Court of Mannheim mainly stressed that the patent owner, by bringing the action, had acted in good faith by applying the then existing German case law. The Court also interpreted the Huawei v. ZTE judgment as allowing the national courts to consider some of the CJEU's requirements not to be relevant, and based this interpretation, inter alia, on Paragraph 70 of the CJEU's decision, according to which 'it is for the referring court to determine whether the above-mentioned criteria are satisfied in the present case, in so far as they are relevant, in the circumstances, for the purpose of resolving the dispute in the main proceedings'. Nevertheless, in a later corresponding enforcement protection proceeding, the Higher Regional Court of Karlsruhe37 handed down a decision that criticised the first instance approach as such, but indicated that it is necessary to differentiate between a potential abuse in bringing action on the one hand and asserting the patent abusively up until the end of court proceedings on the other hand.
Comparable to the approach of the Regional Court of Mannheim, the Regional Court of Düsseldorf38 also decided in favour of a 'transitional period' in cases where the pretrial obligations set in the Huawei v. ZTE decision were fulfilled after bringing the action.
In a later decision, the Higher Regional Court of Düsseldorf even stressed the possibility to fulfil the pretrial obligations after bringing the action also in cases filed after the CJEU decision. In this regard, the Higher Regional Court of Düsseldorf (and also the Regional Court of Düsseldorf)39 generally accepts that the patent owner can still make a FRAND offer after proceedings have begun, if German procedural rules on delay are not violated.40
On the other hand, the Regional Court of Mannheim, which in the past has excluded the possibility of fulfilling pretrial obligations after bringing an action, explicitly considered changing its decision practice and allowing the patent owner to fulfil its FRAND obligations; in particular, revealing the calculation of the licence fee, after bringing an action.41 However, the Court stressed that this should not be seen as complete relativisation of the pretrial obligations and that certain conditions have to be met. In particular, in the Court's view, a patent owner who seeks to fulfil its pretrial obligations after bringing an action is obliged to re-establish a pressure-free negotiation situation (i.e., by suspending the proceeding temporarily) (according to Section 251 of the German Code of Civil Procedure) for the purpose of (settlement) negotiations. Against this background, the Regional Court of Mannheim42 dealt with the question, under which conditions a pressure-free negotiation situation is given, in a later decision. It decided that a pressure-free negotiation situation is granted only if a reasonable time period to assess the plaintiff's licence offer as FRAND was granted to the alleged patent infringer before continuing the trial. Subsequently, the Higher Regional Court of Karlsruhe issued a decision that reflected the view of the Regional Court, in terms of the possibility for the patent owner to fulfil the FRAND obligations after bringing action, and it provided the definition of a pressure-free negotiation situation.43 However, this question will now be answered by the CJEU by way of preliminary ruling proceedings following the decision of the Regional Court of Düsseldorf of 26 November 2020.44 More specifically, the Court poses the question of whether it is possible to legally enforce obligations of conduct (infringement alert, licensing request, FRAND-offer, etc.) in the course of court proceedings. This is intended to concretise the requirements set out by the CJEU in the Huawei v. ZTE decision, under which a claim for injunctive relief is not abusive.
One other major issue is the question of whether the Huawei v. ZTE criteria must be fulfilled 'step by step' or whether a more general approach, weighing each party's activities, is appropriate. Both, the Regional Court of Düsseldorf45 and the Regional Court of Mannheim46 initially applied a more flexible approach. They did not assess the FRAND character of the plaintiff's and patent owner's licence offer in each and every detail. Following a more general assessment, the courts finally left it open whether the plaintiff's licence offer actually was FRAND and considered the relevant defendants not to have acted diligently by failing to swiftly provide a FRAND counter-offer. The competent Higher Regional Courts of Düsseldorf47 and Karlsruhe48 respectively overturned this approach (in enforcement protection proceedings) and ruled in favour of a step-by-step approach, according to which a plaintiff's and patent owner's licence offer has to be scrutinised in detail as to whether it is FRAND; only upon such a FRAND offer are standard users and defendants then obliged to make a FRAND counter-offer.49 However, in its decision of 24 November 2020,50 the Federal Supreme Court is against a strict application of the Huawei v. ZTE steps and in this respect against the decision of the Higher Regional Court of Düsseldorf. According to the Federal Supreme Court, Huawei v. ZTE offers a negotiation programme that, if followed, excludes abusive conduct by the patent owner (safe harbour). In other cases, special circumstances may also justify stricter or less stringent conduct obligations to meaningfully balance the interests of the parties.
In its decision of 8 January 2019, the Regional Court of Düsseldorf51 also dealt with the question of whether the patent holder is obliged to provide a licence offer in cases where information about the patent holder's licence agreements or standard licence agreements are publicly available (e.g., on the patent holder's website). The patent holder and plaintiff argued that an obligation to provide a licence offer does not exist in the case of public availability of existing licence agreements or standard licence agreements. The plaintiff, thereby, referred to the Orange-Book-Standard decision of the Federal Supreme Court, which, in the plaintiff's opinion, continued to apply. In particular, the plaintiff held that the requirements set by the CJEU in its Huawei v. ZTE judgment should only apply in cases of information asymmetries between the patent holder and the alleged patent infringer in relation to closed licence agreements and applied licence fees. Nevertheless, the Regional Court of Düsseldorf refused to apply the criteria set in the Orange-Book-Standard case, confirming the infringer's obligation to provide a licence offer under FRAND terms regardless of the existence of publicly available information related to existing licence agreements. In this regard, the Court stressed that the Orange-Book-Standard decision took place long before the CJEU's Huawei v. ZTE judgment in which generally applicable criteria were set, and that there was no indication in the CJEU's judgment that the set criteria shall only apply in cases of information asymmetries between patent holder and alleged infringer. Furthermore, in the Regional Court's view, the patent holder's obligation to provide a FRAND offer, as set in the CJEU's decision, follows from the fact that holders of SEPs have committed themselves to license every willing licensee under FRAND conditions.
In a further decision,52 the Higher Regional Court of Karlsruhe discussed the issue of disclosure requirements by the patent owner of licence agreements with third parties. It stated that if a SEP holder's licence offer corresponds to a standard licence programme for the relevant patent and the standard licence programme is uniformly used by the SEP holder for the purpose of licensing the patent, then the SEP holder is only obligated to refer to the conformity of the licence offer with the standard licence programme. Conversely, if a SEP holder has entered into licence agreements with third parties with diverging terms and conditions, then the SEP holder is obliged to disclose and explain the major content of these agreements in a reliable manner to allow licensees to discern if and where it is applicable, and why different terms and conditions are being offered to them. Furthermore, if legitimate interests are shown to be affected by this kind of disclosure, a confidentiality agreement between the parties can be agreed to in order to allow necessary disclosures by the SEP holder. However, the Court stresses that a complete disclosure of third-party licence agreements is not necessary and therefore not required.
With regard to the SEP holder's obligation to alert the alleged infringer of a patent infringement, the Regional Court of Düsseldorf53 decided that the infringement alert does not require a detailed (technical or legal) explanation of the infringement. In the Regional Court's view and, in particular, in contrast to the decision practice of the Regional Court of Mannheim,54 the patent holder and plaintiff shall not be required to point out the patent's standard essentiality or to provide a claim chart to the alleged infringer. In the same decision, the Regional Court of Düsseldorf also stated that the requirement of an infringement alert is even fulfilled if it comes from another group entity; in particular, from the patent holder's parent company. Consequently, the obligation is also fulfilled in cases in which the infringement alert is sent to the alleged infringer's parent company. Furthermore, the Regional Court pointed out that the infringement alert may also be sent to the alleged patent infringer or its respective parent entity simultaneously with the licence offer. In this context, the Court also stated that the infringement alert must not necessarily be transmitted before any claim is filed (e.g., damage claims) but, in any case, must be brought before bringing an action for injunction. This case law of the instance courts was also confirmed by the Federal Supreme Court in its decision of 5 May 2020,55 in which it considered the infringement alert of the patent owner to be sufficient if the patent, the infringing act (e.g., by submitting claim charts) and the challenged embodiment are designated. It was precisely not necessary to provide detailed technical or legal explanations – the alleged patent infringer only had to be put in a position to be able to verify the allegation of infringement, if necessary, with external advice.
In its decision of 5 May 2020, the Federal Supreme Court also interpreted and applied for the first time the requirements defined by the CJEU in its Huawei v. ZTE decision, in particular with regard to the infringer's willingness to license, and confirmed its decisions made there once again in its subsequent judgment on 24 November 2020. In doing so, the Court placed high demands on the willingness to license and clarified (contrary to the previous case law of the instance courts) that it is not precisely sufficient if the infringer only shows willingness to consider concluding a licence agreement or to enter into negotiations about it. Rather, the Court requires a clear and unambiguous declaration of willingness to conclude a licence agreement on reasonable terms and must subsequently participate in the negotiations in a targeted manner. In this context, it refers to the High Court of England and Wales (J Birss), who, in the eyes of the Court, aptly expressed: 'a willing licensee must be one willing to take a FRAND licence on whatever terms are in fact FRAND'. Against this background, the Federal Supreme Court denied that the defendant was willing to take a licence in the case at hand, because the relevant letters merely expressed the hope that the defendant would enter into a formal negotiation ('We hope to have a formal negotiation with you') and asked for information about a prospective discount ('You mentioned that there will be a discount if we sign the licence timely. Please let me know the information such as specific discount amount and the current licence royalty arrangement . . .'). Rather, the patent owner could only conclude from this and from further letters from the defendant that the defendant was using delaying tactics.
However, the CJEU will finally assess the requirements to be placed on the characteristic of 'willingness to license' after the order for reference by the Regional Court of Düsseldorf of 26 November 2020. Specifically, the Court has asked the CJEU whether a willingness to license can only be assumed if a comprehensive assessment of all the circumstances clearly and unambiguously shows the patent user's intention to enter into a licence agreement with the patent owner on FRAND-terms, whatever these may be.
In another fundamental decision of 12 December 2019 on a FRAND-related cross-border dispute, a German higher court – the Higher Regional Court of Munich – upheld an interim injunction against an 'anti-suit-injunction' under US law56 for the first time, confirming the previous first-instance decision of 30 August 2019 of the Regional Court of Munich.57 The Regional court had issued an interim injunction upon submission of a patent holding company to prevent a US subsidiary of a patent infringing company filing an 'anti-suit injunction' against the patent holder in the United States. By way of such an 'anti-suit injunction', the patent holder should be prohibited from bringing suits outside the United States before a final decision of the US court regarding a worldwide FRAND-licence sought by the patent infringer. The Regional Court as well as the Higher Regional Court found that an 'anti-suit injunction' filed under US law, to prevent a patent holder from claiming for injunctive relief to protect its patent rights, constitutes an illegal attack on the patent holder's property-like legal position related to its patent. A patent holder must therefore be free to defend its property interest by suing a potential patent infringer, whereas the latter has the possibility to defend its patent usage by way of claiming a FRAND-objection within an infringement process.
iii Licensing under FRAND terms
A major issue in the field of SEPs is the question of defining FRAND terms and conditions. Although a large number of German court cases have dealt with the FRAND defence to date, the exact determination of FRAND criteria remains open to discussion.58 One important aspect in considering the FRAND character of an offer is the established licensing practice of the licensor or of other market participants.59 Accordingly, the Higher Regional Court of Düsseldorf defined the term 'non-discriminatory' to the effect that the patent owner has to offer the willing licensee a licence on conditions similar to those offered to other licensees or that the patent owner comprehensibly shows reasonable grounds for an unequal treatment. In this regard, the Regional Court of Düsseldorf considered a patent holder's licence offer as not being FRAND (i.e., being discriminatory from the outset due to the fact that the patent holder enforced its patent rights selectively). In particular, the Court objected to legal action being brought against the alleged patent infringer when no legal action was brought against the defendant's competitors that used the disputed patent without the respective licence. The Court considered this conduct as de facto granting of free licences to some competitors while demanding remunerated licences from others.
Concerning the fairness of the offered conditions, the Court also pointed out that a FRAND offer must, in any case, cover all relevant (legal) business activities of the licence seeker. Carving certain business activities out of the licence offer would be exploitative and, therefore, would not comply with the established FRAND criteria from the Court's point of view.60
The Higher Regional Court of Düsseldorf 61 stated further that a judicial finding regarding a 'non-discriminatory' offer requires – especially with regard to the amount of the licence fees – specific submission of facts by the patent owner with respect to licence agreements with third licensees. In the Court's opinion, this would include specific statements to conditions agreed with other licensees as well as their importance on the relevant markets. Thus, the patent owner may not assert that a non-disclosure agreement with third licensees excludes a specific submission of facts.62 Furthermore, the Higher Regional Court of Düsseldorf stated in its judgment of 30 March 2017 that the higher the discount the patent owner grants to the licensee is, the higher the requirements to justify an unequal treatment of different licensees are.63 The Court considered several factors as relevant for determining the amount of the licence fee, such as quick acceptance of the licence and whether the licensee is the 'first mover'. However, in its decision of 17 November 2018, the Higher Regional Court of Düsseldorf stressed that there is no requirement for a mathematically precise derivation of FRAND-compliant licensing fees. Rather, what is required is an approximate decision reliant on estimates and valuations. Thus, the Court confirmed that comparable licensing agreements can constitute an important indicator for the reasonability of the proposed licensing terms and conditions.64 In an obiter dictum of its landmark ruling from May 2020, the Federal Supreme Court also stressed that the question of reasonable and non-discriminatory terms of a licence agreement regularly depends on a variety of circumstances of the individual case. However, the patent owner is not fundamentally obliged to grant licences in the manner of a 'uniform tariff' that grants all users the same conditions. In this context, the Court also stated that, in principle, the infringer bears the burden of proof for unequal treatment and obstruction by the patent proprietor; the patent proprietor bears the burden of proof for the justification of unequal treatment (i.e., the presentation of an objective reason). However, the patent owner has a kind of secondary burden of proof insofar as he or she must substantiate his or her licence claim to enable the licensee to verify the claim.
In its decision of 22 March 2019,65 the Higher Regional Court of Düsseldorf also dealt with the question of how FRAND terms and conditions must be defined in cases where patents previously included in a (split) patent pool have been transferred to different acquirers and, in particular, to what extent a patent acquirer is bound to the disposing patent holder's FRAND commitment made to the standardisation body. In doing so, the court also had to clarify the preliminary question on whether the patent was transferred to the plaintiff's patent acquirer at all. In this respect, the defendant and patent infringer claimed the invalidity of the patent transfer because the underlying transfer agreement did not provide the obligation for the patent acquiring party to take over the disposing patent holder's FRAND declaration; that is, the obligation to offer the patent licences only under FRAND conditions to willing licensees. The defendant considered this to be an abuse of a dominant market position because, in its view, the lack of such an obligation was intended to enable the patent acquirer to demand higher royalties than would have been possible under FRAND conditions. In this regard, however, the Court dismissed the defendant's objection of invalidity, arguing that once a FRAND commitment is declared by a patent holder, it is not then possible to transfer the patent independently so that the FRAND commitment is connected to the patent as a quasi 'right in rem'. Furthermore, the Court found that patent acquirers are not only bound by their predecessor's FRAND commitment 'on the merits', but are also bound to the extent that, as it concerns the future FRAND licensing of the acquired patent, they have to also consider the terms and conditions of all of their predecessor's existing licences, into which patent acquirers, in any case, enter automatically under German patent law (Section 15, Paragraph 3 Patent Act). According to the Court, the future licensing of the patent acquirer must, therefore, be in line with the patent disposer's previous licensing practice. The acquirer, in particular, may not rely on difficulties related to the previous disposing and splitting of the patent pool, which may complicate the calculation of a non-discriminatory licence. In this regard, there is already an obligation of the disposing patent holder, resulting out of his or her FRAND commitment, to provide the patent acquirer with the necessary information to ensure a non-discriminatory licensing. Furthermore, the Court stated that, in determining a non-discriminatory licence fee, the proportionate licence fee of the predecessor's entire portfolio attributable to the acquired part of the portfolio had to be taken into account.
Intellectual property and mergers
i Transfer of IP rights constituting a merger
Under German competition law, the transfer of intellectual property rights can constitute a merger by way of an acquisition of control within the meaning of Section 37(1), No. 2(a) of the ARC, if the acquisition involves a substantial part of the assets.66
ii Remedies involving divestitures of intellectual property
In a clearance decision, the FCO67 decided on ancillary provisions, inter alia, with regard to intellectual property rights: the Funke Media Group intended to acquire assets of TV programme guides. The FCO found that the acquisition would have led to the strengthening of a collective dominant position of the acquirer. Therefore, the acquirer was obliged to sell intangible assets regarding TV programme guides.
An example of an exploitative abuse within the meaning of Section 19 of the ARC is the investigation of the FCO regarding Google. The FCO had to decide on Google's practice of displaying snippets of search results regarding news publishers.68 Google refused to pay a fee for the displayed content and did not purchase any licences for the content. As a reaction to this unauthorised use of the content, several news publishers filed a complaint to the FCO with regard to their respective ancillary copyrights. After examining the complaint, the FCO held that it was highly likely that Google's behaviour was objectively justified, and therefore did not constitute abusive conduct within the meaning of Section 19 of the ARC and Article 102 of the TFEU.
i Sham or vexatious IP litigation
In line with EU law, it is accepted under German law that the alleged infringer can raise the objection that the patent holder's claim is abusive within the meaning of Section 19 of the ARC and Article 102 of the TFEU because of a 'patent ambush'.69 This means a situation where the patent holder does not disclose the existence of a patent application during the standard-setting process, and subsequently asserts that a patent is infringed.
In a civil case before the Regional Court of Düsseldorf,70 a holder of design rights regarding wheel rims claimed for injunctive relief regarding the use of design rights without a licence. The defendant argued that the assertion of design rights would be abusive in the sense of Article 102 of the TFEU because he had to produce parts that matched the car and would otherwise not be purchased ('must match' part). The Court rejected this argument. With reference to the case law of the CJEU (Magill 71 and Volvo/Veng72), the Court stated that the assertion of design rights can only be considered abusive in exceptional circumstances. The concrete design of the wheel rims is not technically necessary. It is possible, rather, for the defendant to produce wheel rims of similar quality, but with a different design. Beyond that, the Court held that it is acceptable for a customer to purchase a wheel rim of the claimant or a complete set of wheel rims of other producers.
Furthermore, in a case regarding the infringement of a SEP, the Regional Court of Düsseldorf stated that a patent ambush with the intention of demanding excessive royalties does not necessarily lead to the patent owner's loss of a patent law claim to a cease-and-desist order. Rather, the legal consequence would be the patent owner's obligation to provide an offer for a licence on FRAND terms to the alleged infringer.73 The Higher Regional Court supported the Regional Court's view in its decision of 9 May 2016.74 In this respect, the Federal Supreme Court additionally clarified in its fundamental judgement of 24 November 2020 that the objection of 'patent ambush' can only be directed against the party that caused the patent ambush, which in the case at hand was not the plaintiff but its legal predecessor.
Another example for a possible abuse of intellectual property rights litigation is the BMW-Emblem case of the Federal Supreme Court.75 The claimant, BMW, filed an action against a producer of spare parts that, inter alia, produces and supplies BMW emblems without a licence. The Court rejected the defendants and held that the action was founded. Additionally, in an obiter dictum, the Court stated that a manufacturer of spare parts for BMW that are visible (e.g., front or rear parts) could, under certain circumstances, be entitled to supply original BMW emblems from the intellectual property rights holder or at least grant the retrofitting by customers or by workshops on the customer's order under competition law.
ii Misuse of the patent process
In accordance with EU law, under the German provisions, the strategic misuse of the patent process can be deemed to be abusive (Sections 19 and 20 of the ARC and Article 102 of the TFEU).76
iii Anticompetitive settlements of IP disputes
Settlements of intellectual property disputes between competitors may, under certain conditions, constitute an infringement within the meaning of Section 1 of the ARC and Article 101(1) of the TFEU. In line with EU law, under German antitrust law, patent settlements are generally accepted as a compromise to a bona fide legal disagreement.77 If there are serious objective indications for the settled right and the restrictions remain within the frame of objective uncertainties, the antitrust prohibition does not apply.78
Agreements between undertakings that aim to prevent the access of substitutes to the market, such as pay-for-delay or reverse-payment agreements, especially the delay of generic drugs' entry into the market, also fall under Section 1 of the ARC and Article 101(1) of the TFEU.79
With regard to trademarks, undertakings also settle disputes on conflicting similar trademarks by 'delimitation agreements'. The compatibility of these agreements can constitute an infringement of Section 1 of the ARC and Article 101(1) of the TFEU. As a general rule, delimitation agreements regarding trademarks constitute cartel infringements, if market sharing or other restrictions of competition are intended.80 In its decision in Winn & Coales v. DENSO, the Higher Regional Court of Düsseldorf stated that a delimitation agreement does not restrict competition, if it is neutral (i.e., if it only specifies the existing intellectual property rights).81
In a further decision, the Federal Supreme Court stressed that a trademark delimitation agreement does not necessarily include a prohibition against advertising in the other party's business district.82 Thereby, it contradicted the decision of the Court of Appeal, which held the relevant clause to be an unlimited delimitation agreement also prohibiting advertising with clarifying additional wording in the other party's business district, and therefore inadmissible under antitrust law. In contrast, the Federal Supreme Court's interpretation of the relevant clause was that it had not been intended by the parties to prohibit advertising with additional distinguishing wording in the other's district.
Outlook and conclusions
The development at the interface between intellectual property and antitrust law remains highly dynamic in Germany. It can be expected that the specific interface between patent and antitrust law, mainly with regard to SEPs, will remain of crucial importance and will probably also have some influence on similar cases in other Member States of the European Union.
1 Jörg Witting is a partner at Bird & Bird LLP.
2 Federal Supreme Court, judgment of 13 July 2004, KZR 40/02, Standard-Spundfass. On the differences between a compulsory licence based on Section 24 of the Patent Act and a competition law-based compulsory licence, see also BPatG, judgment of 31 August 2016, 3 LiQ 1/16 (EP), Isentress.
3 CJEU, judgment of 16 July 2015, C-170/13, Huawei Technologies v. ZTE.
4 Regional Court of Düsseldorf, decision of 21 March 2013, 4b O 104/12, LTE-Standard.
5 Federal Supreme Court, judgment of 5 May 2020, KZR 36/17, FRAND-Einwand.
6 Federal Supreme Court, judgment of 24 November 2020, KZR 35/17, FRAND-Einwand II.
7 High Court of England and Wales [J Birss], decision of 5 April 2017, EWHC 711.
8 Court of Appeal of The Hague, decision of 2 July 2019, 200.219.487/01.
9 Regional Court of Düsseldorf, decision of 26 November 2020, 4c O 17/19.
10 See Nordemann, Loewenheim/Meessen/Riesenkampff/Kersting/Meyer-Lindemann, 3rd Edition, 2016, Chapter 3, Paragraph 14 et seq.
11 FCO, decision of 11 April 2016, B6-32/15.
12 Higher Regional Court of Düsseldorf, decision of 3 May 2017, VI Kart 6/16.
13 See press statement of the FCO from 20 March 2020 available under https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2020/20_03_2020_DFL.html?nn=3591568.
14 CJEU, judgment of 6 April 1995, C-241/91 P and C 242/91 P, Magill.
15 CJEU, judgment of 29 April 2004, C-418/01, IMS Health.
16 See Wolf, Münchener Kommentar zum Kartellrecht, 2nd Edition, 2015, Section 19 GWB, Paragraph 33.
17 Higher Regional Court of Düsseldorf, judgment of 20 January 2011, I-2 U 92/10. See Kühnen, Handbuch der Patentverletzung, 11th Edition, 2018, Chapter E, Paragraph 245; see also Higher Regional Court of Düsseldorf, judgment of 29 April 2016, I-15 U 47/15.
18 Kühnen, Handbuch der Patentverletzung, 11th Edition, 2018, Chapter E, Paragraph 247.
19 Higher Regional Court of Düsseldorf, judgment of 3 April 2019, 6 U 6/18.
20 Regional Court of Munich, decision of 23 November, 29 U 142/17.
21 See, e.g., Federal Supreme Court, judgment of 12 March 1991, KVR 1/90, Golden Toast; Higher Regional Court of Hamburg, judgment of 12 December 2013, 3 U 38/11, St Pauli II; Bechtold/Bosch, GWB, 9th Edition, 2018, Section 1, Paragraph 84.
22 See Jestaedt, Langen/Bunte, Volume 2, Europäisches Kartellrecht, 13th Edition, 2018, Nach Article 101 AEUV, Paragraph 1265.
23 Higher Regional Court of Frankfurt, judgment of 30 January 2020, 6 U 94/18.
24 CJEU, judgment of 16 July 2015, C-170/13, Huawei Technologies v. ZTE.
25 Advocate General's Opinion of 20 November 2014, C-170/13, Huawei Technologies v. ZTE, Paragraphs 57 and 58.
26 Regional Court of Düsseldorf, judgment of 26 March 2015, 4b O 140/13.
27 See also LG Düsseldorf, judgment of 13 July 2017, 4a O 154/15.
28 Higher Regional Court of Düsseldorf, decision of 3 March 2017, I-15 U 66/15; Regional Court of Düsseldorf, decision of 28.03.2019, 4b O 144/16.
29 Regional Court of Düsseldorf, decision of 8 January 2019, 4c O 12/17.
30 Federal Supreme Court, judgment of 5 May 2020, KZR 36/17, FRAND-Einwand.
31 Federal Supreme Court, judgment of 24 November 2020, KZR 35/17, FRAND-Einwand II.
32 See, for example, Regional Court of Mannheim, judgment of 8 January 2016, 7 O 96/14.
33 Federal Supreme Court, judgment of 6 May 2009, KZR 39/06, Orange-Book-Standard.
34 CJEU, judgment of 16 July 2015, C-170/13, Paragraph 60 et seq, Huawei Technologies v. ZTE.
35 See Kühnen, Handbuch der Patentverletzung, 11th Edition, 2019, Chapter E, Paragraph 345, footnote 565.
36 Regional Court of Mannheim, judgment of 4 March 2016, 7 O 96/14.
37 Higher Regional Court of Karlsruhe, decision of 31 May 2016, 6 U 55/16.
38 Regional Court of Düsseldorf, judgment of 3 November 2015, 4a O 93/14.
39 Regional Court of Düsseldorf, judgment of 13 July 2017, 4a O 154/15.
40 Higher Regional Court of Düsseldorf, decision of 3 March 2017, I-15 U 66/15; see also Kühnen, Handbuch der Patentverletzung, 11th Edition, 2018, Chapter E, Paragraph 365 seq.
41 Regional Court of Mannheim, judgment of 10 November 2017, 7 O 28/16.
42 Regional Court of Mannheim, decision of 28 September 2018, 7 O 165/16.
43 Higher Regional Court of Karlsruhe, decision of 30 October 2019, 6 U 183/16.
44 Regional Court of Düsseldorf, decision of 26 November 2020, 4c O 17/19.
45 Regional Court of Düsseldorf, judgment of 3 November 2015, 4a O 144/14.
46 Regional Court of Mannheim, judgment of 4 March 2016, 7 O 96/14.
47 Higher Regional Court of Düsseldorf, decision of 13 January 2016, I-15 U 66/15; see also decision of 9 May 2016, 15 U 35/16; judgment of 30 March 2017, I-15 U 66/15.
48 Higher Regional Court of Karlsruhe, decision of 31 May 2016, 6 U 55/16.
49 See Regional Court of Düsseldorf, judgment of 31 March 2016, 4a O 126/14.
50 Federal Supreme Court, judgment of 24 November 2020, KZR 35/17, FRAND-Einwand II.
51 Regional Court of Düsseldorf, decision of 8 January 2019, 4c O 12/17, according to its decision of 9 November 2018, 4a O 16/17.
52 Higher Regional Court of Karlsruhe, decision of 30 October 2019, 6 U 183/16.
53 Regional Court of Düsseldorf, decision of 11 July 2018, 4c O 72/17; also Higher Regional Court of Karlsruhe, decision of 30 October 2019.
54 Regional Court of Mannheim, decision of 29 January 2016, O 66/15.
55 Federal Supreme Court, judgment of 5 May 2020, KZR 36/17, FRAND-Einwand.
56 Higher Regional Court of Munich, decision of 12 December 2019, 6 U 5042/19.
57 Regional Court of Munich, decision of 30 August 2019, 21 O 9512/19.
58 See, e.g., Picht, Frandwars 2.0 – Rechtsprechung im Anschluss an die Huawei/ZTE – Entscheidung; WuW, 2018, pp. 234-241; and Hauck/Kamlah, 'Was ist 'FRAND'? Inhaltliche Fragen zu kartellrechtlichen Zwangslizenzen nach Huawei/ZTE', GRUR Int, 2016, pp. 420-426.
59 See Regional Court of Düsseldorf, judgment of 31 March 2016, 4a O 73/14.
60 Regional Court of Düsseldorf, decision of 11 July 2018, 4 c O 72/17; see also Kühnen, Handbuch der Patentverletzung, 11th Edition, 2018, Chapter E, Paragraph 332.
61 See Regional Court of Düsseldorf, judgment of 31 March 2016, 4a O 73/14.
62 Higher Regional Court of Düsseldorf, decision of 17 November 2016, I-15 U 66/15.
63 Higher Regional Court of Düsseldorf, judgment of 30 March 2017.
64 Regional Court of Düsseldorf, judgment of 9 November 2018, 4a O 16/17.
65 Higher Regional Court of Düsseldorf, decision of 22 March 2019, I-2 U 31/16.
66 See Federal Supreme Court, decision of 10 October 2006, KVR 32/05, National Geographic I.
67 FCO, decision of 25 April 2014, B6-98/13.
68 FCO, decision of 8 September 2015, B6-126/14; see also Kersting/Dworschak, 'Leistungsschutzrecht für Presseverlage: Müsste Google wirklich zahlen? – eine kartellrechtliche Analyse', NZKart 2013, pp. 46-53.
69 See, e.g., Regional Court of Mannheim, judgment of 10 March 2015, 2 O 103/14.
70 Regional Court of Düsseldorf, judgment of 10 March 2016, 14c O 58/15.
71 CJEU, judgment of 6 April 1995, C-241/91 P and C 242/91 P, Magill.
72 CJEU, judgment of 5 October 1988, 238/87, Volvo/Veng.
73 Regional Court of Düsseldorf, decision of 31 March 2016, 4a O 126/14.
74 Regional Court of Düsseldorf, decision of 9 May 2016, I-15 U 35/16.
75 Federal Supreme Court, judgment of 12 March 2015, I ZR 153/14, BMW-Emblem.
76 See Huttenlauch/Lübbig, Loewenheim/Meessen/Riesenkampff/Kersting/Meyer-Lindemann, Kartellrecht, 3rd Edition, 2016, Article 102, Paragraph 289 et seq; and Schnelle, 'Missbrauch einer marktbeherrschenden Stellung durch Patentanmeldungs – und – verwaltungsstrategien', GRUR-Prax, 2010, pp. 169-173.
77 See Guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union to technology transfer agreements, 2014/C 89/03, Paragraph 235.
78 See, e.g., Federal Supreme Court, 5 July 2005, X ZR 14/03, Abgasreinigungsvorrichtung.
79 See Wolf, Münchener Kommentar zum Kartellrecht, 2nd Edition, 2015, Volume 1, Einleitung, Paragraph 1377 et seq.
80 Jestaedt, Langen/Bunte, Volume 2, Europäisches Kartellrecht, 13th Edition, 2018, Nach Article 101 AEUV, Paragraph 1270; Federal Supreme Court, judgment of 7 December 2010, KZR 71/08, Jette Joop.
81 Higher Regional Court of Düsseldorf, judgment of 15 October 2014, VI-U (Kart) 42/13, Winn & Coales v. DENSO.
82 Federal Supreme Court, decision of 12 July 2016, KZR 69/14, Peek & Cloppenburg II.