UPC first FRAND judgment results in injunction against OPPO

Panasonic Holdings Corporation v Guangdong OPPO Mobile Telecommunications Corp. Ltd & anor UPC_CFI_210/2023 – Mannheim Local Division (Tochtermann, Böttcher, Brinkman & Loibner) – 22 November 2024.

The UPC issued its first-ever injunction enforcing European patent no. 2568724 B1, a Standards Essential Patent (SEP) rejecting a FRAND defence in a dispute between Panasonic and the Chinese implementer OPPO. The Mannheim LD found the patent valid and infringed by OPPO and also found it to be essential to the 4G standard. The Mannheim LD took a pragmatic rather than formalistic approach to the steps set down in Huawei v ZTE for FRAND licensing negotiations. This required a detailed assessment of the respective conduct of the parties in the context of those negotiations.

Background

The patent was a first-generation divisional application directed to a mobile station configured to transmit reference signals mapped in a way that is more resilient to interference from the Physical Uplink Control Channel (PUCCH). Panasonic declared the patent essential to 4G telecommunications standards to ETSI. The ETSI IPR policy is governed by French law and provides an obligation on the SEP holder to enter into good faith negotiations for a FRAND licence. Panasonic alleged that OPPO infringed the method and apparatus claims EP2568724B1 via 4G-enabled smartwatches and mobile phones (e.g., the OPPO “Find X5 Pro”) in Germany, France, Italy, the Netherlands, and Sweden. During the four years of licensing negotiations, OPPO increased their market share of smartphone shipments in Europe from 2% in 2019 to 5% in 2021 but were forced to temporarily pull out of key European markets such as Germany due to patent disputes with Nokia over 5G patents. OPPO reached a deal with Nokia early in 2024 and subsequently returned to the key European markets.

In light of the unsuccessful licensing negotiations, Panasonic filed 12 UPC lawsuits, and 8 national lawsuits (including German, UK, and Chinese patent courts) against Oppo and in parallel, against another Chinese implementer, Xiaomi.

As part of parallel litigation in the UK courts, Panasonic and Xiaomi had committed to a FRAND rate to be determined by the UK Patents Court in advance of infringement/validity trials. The attractiveness for implementers (but not SEP holders) of the UK Court setting a FRAND rate had been impacted by two 2024 judgments where FRAND terms were significantly closer to those offered by implementers than those sought by SEP holders. As the UK CoA acknowledged, this meant that implementers had realised that it was in their interests to accept a licence determined by the Court, whereas SEP holders have reacted to this development by a more aggressive pursuit of parallel proceedings seeking injunctions to exert pressure on the implementers.

Mr Justice Meade indicated to the Mannheim LD that the UK Patents Court would hold a FRAND trial to determine global licence terms, including the rate, for the Panasonic portfolio starting on 28 October 2024 with a judgment expected before Christmas. However, a consequence of the UK CoA’s decision on 3 October 2024 to grant an interim licence to Xiaomi was that Panasonic and OPPO submitted on 25 October 2024 joint motions to the UK High Court to stay the Xiaomi and Oppo cases, having agreed in principle to finalize settlement of their global patent dispute, although the settlement agreement had not yet been signed. Therefore, the Mannheim LD decided, having heard Panasonic and OPPO’s FRAND arguments on 9 October 2024, that they would hand down their judgment to address the approach to FRAND issues in the framework of the UPC Agreement.

The Judgment

The UK CoA in Panasonic v Xiaomi, stated that SEPs differ from other “normal” patents, for which the primary remedy for infringement is an exclusionary injunction to preserve the monopoly right they represent. Instead, according to the UK CoA, the SEP regime was a liability regime in which the SEP holder’s remedy was purely a financial one. The Mannheim LD took a contrary view. The Mannheim LD held that in the legal area of the European Union, SEPs are property rights of the same status as other patents for which injunctions are a suitable remedy for infringement. This finding was based on the CJEU Judgment in Huawei v ZTE which established that it was not an abuse of a dominant position to bring an action for injunctive relief for infringement of an SEP provided certain steps had been taken prior to bringing that action.

An amicus curiae brief of the European Commission (EC) in German proceedings between HMD v VoiceAge, suggested that sequence of procedural steps according to Huawei v. ZTE must be followed in a rigid order if the SEP holder wants to seek an injunction without falling foul of EU competition law. The steps as illustrated graphically below include a first step of the SEP holder notifying an implementer of an infringement and a second step of the implementer expressing a willingness to license. The amicus curiae brief also adopted a rigid view of the content of the infringement notice, suggesting that a reference to a web page of an implementer was not sufficient and that detailed information such as a claim chart of the EP patent in suit should be provided in the notice of infringement.

The Mannheim LD (see par. 203) emphasised an obligation on the SEP holder to indicate an appropriate licence fee with plausible justification of why the suggested licence fee is FRAND. If the licence agreements with other implementers are not published, it is the patentee who knows the terms of existing licence agreements and thus which conditions are FRAND. The Mannheim LD rejected a “formalistic approach” to the requirements of Huawei v ZTE and noted that implementers should seek clarification from SEP holders in their reply to the notification letter (see para 206).

The Mannheim LD therefore adopted a more flexible approach to applying procedural step 1 than the approach set out in the EC amicus curiae brief and suggested that a strict logical ordering of steps was not mandatory with the suggestion that the implementer had a responsibility to help to cure a deficiency in the notice of infringement. The Mannheim LD were critical of OPPO’s behaviour, who did not explain their objections but repeatedly requested further information.

Similarly, for procedural step 2, the Mannheim LD put a heavier burden on the implementer than on the SEP holder by scrutinising the conduct of the implementer as an indication of true willingness to conclude a licence.

In procedural step 3, which requires the SEP holder to make a FRAND offer to the implementer, the Mannheim LD took a negative view of OPPO refusing to provide direct sales figures of infringing articles, although it had offered to provide figures estimated by a third party IDC (see para. 202).

OPPO had complained that Panasonic had not produced a full licence agreement together with a royalty computation at step 3. However, the Mannheim LD considered it had been sufficient for Panasonic to outline some general terms rather than produce a specific licensing agreement in view of the fact that OPPO had refused to produce specific sales figures. This view seems to be favourable to the SEP holder given the ECJ’s view in Huawei v. ZTE to the effect that the SEP holder at step 3 is to present “a specific written offer for a licence on such terms, specifying, in particular, the royalty and the way in which it is to be calculated”.

With regards to implementer conduct, the Mannheim LD concluded that OPPO was not acting in good faith with a willingness to conclude a licence, at least because they were resisting the setting of a global FRAND rate by asking for a territorially limited royalty rate to apply to the EPC contracting states, the USA and Japan but to exclude China and the rest of the world (see paragraph 235). The Mannheim LD were of the opinion that OPPO asking for the main part of the licence to be determined by the Beijing Intellectual Property Court only further complicated an already complex situation by asking for FRAND rate determination procedures for sub-regions of the world whose courts do not have treaties establishing relative priorities of decisions between regions. They noted that the risk of contradictory decisions in different jurisdictions is not conducive to speedy resolution of global disputes.

In this first FRAND judgment for the UPC, the Mannheim LD has adopted a stance that is favourable to the SEP holder more than to the SEP implementer. If adopted by the UPC CoA, this approach would create a more flexible approach to the steps in Huawei v. ZTE and a litigation forum that is more favourable to the SEP holder than to the implementer.

This article was prepared by Partner & Head of Law, Rachel Fetches, and Partner & Patent Attorney Susan Keston.