Requirements in SEP License Negotiations - Substantiating a FRAND Offer – The Relation Between Confidentiality Issues and Providing Evidence for its Own Fair and Reasonable Position

Abstract

In its Huawei/ZTE decision of 16 July 2015 (Case C-170/13) concerning injunction requests based on standard essential patents (SEPs) in litigation, the ECJ provided guidance in relation to the appropriate behaviour of an SEP owner and a potential (and willing) licensee. The competent courts of the EU Member States have been in the process of applying the Huawei/ZTE principles to individual patent infringement cases. In particular, developments have occurred in the main patent litigation jurisdictions Germany and the UK. This case law is subject to further developments with respect the mutual obligations of the involved parties. Contrary to the situation in a “normal” patent dispute, a SEP is deemed to be necessary for use in a certain technical standard context (often electronics or telecommunications), i.e., for participating in a certain market. It follows that work around or design around solutions of true SEPs achieving same or similar results are not possible, making the patentee dominant in licensing that solution. Because of that, the SEP owner is generally obliged to license its SEP on fair, reasonable and non-discriminatory conditions (FRAND). Only if the user does not accept such a license, the patent owner can insist on injunctions in case the SEP is used. In this context, case law requires parties to meet certain reciprocal obligations when discussing licensing issues. This relates in particular to the respective offers and counter-offers. Courts in the UK (Unwired Planet decision) and Germany have opined on criteria for “fair, reasonable and non-discriminatory” offers. Comparable and existing license agreements with other parties have been accepted as substantial means for guidance. This has led to criticism. Subsequently, the involved interests of parties and the public – confidentiality vs. transparency - are discussed and balanced.