Germany's FRAND rollercoaster: courts add new (or old?) elements to the ECJ's Huawei vs ZTE dance

In the five years since the CJEU made its landmark decision on FRAND in Huawei vs ZTE (C-170/13), courts in Düsseldorf and Mannheim have been getting to grips with the implications of the judgment, with the Karlsruhe Appeal Court also adding some flavour here and then.

Now the Munich Regional Court and the German Federal Supreme Court have entered the dance floor. And, to make the FRAND landscape even more complex, one chamber of the Mannheim court recently surprised the SEP community with a new order and understanding of the dance steps. 

The Munich court's first FRAND steps

In February 2020, the Munich Regional Court I issued its long-awaited, non-binding guidelines on handling the FRAND defence (in German, PDF), which indicate how a first still to be issued decision on FRAND from the court might look like.

Naturally, the guidelines add yet another tweak to the understanding of the more than 30 recitals that established the ECJ's Huawei vs ZTE dance. In particular, while Düsseldorf and Mannheim have been in agreement that the SEP holder's licence offer needs to be assessed before the implementer's counter-offer (although both courts then again have different views on how exactly these offers need to look like and what happens next), the Munich chambers in general (meaning as long as the SEP holder's licence offer is not untenable at first glance) first test as a sort of ‘door opener’ whether the implementer has made a (again not totally untenable) counter-offer and provided sufficient accounting and security. Only if this is the case will the Munich court assess the FRANDness of the SEP holder's licence offer.

The German Federal Supreme Court's first decision on FRAND

German lower courts' inconsistency on FRAND has made life quite hard for SEP holders and implementers alike, especially in light of the automatic injunction that’s looming for every infringement case under German patent law.

For that reason, it seemed just about the perfect time for the German Federal Supreme Court to render its first decision on FRAND since the Huawei vs ZTE ruling from Luxembourg. When the court opened the oral hearing in the Sisvel vs Haier case (K ZR 36/17) at the beginning of May 2020, everybody (SEP holders, implementers, lawyers and judges) had been impatiently waiting for the newly set up antitrust senate under Presiding Judge Prof. Dr. Meier-Beck to provide guidance on how the Huawei vs ZTE steps would have to be applied – and of course patent law’s Gretchen question: ‘What is FRAND?’.

Unfortunately, the German Federal Supreme Court decided to leave the dancefloor already after the first steps as it did not consider the implementer Haier a ‘willing licensee’. This came as a surprise to some, as the lower courts had handled this ‘second step’ of the Huawei vs ZTE dance rather generously in recent cases. 

Referring to UK High Court judge Colin Birss, the Federal Supreme Court emphasised, however, that the potential licensee has to make clear it seeks a FRAND licence, whatever FRAND means, which might have even felt a bit like a resurrection of good old Orange Book standards.

With the written reasons of the decision still unpublished, it remains unclear whether the Sisvel vs Haier ruling truly means a (further) shift in balance at the expense of licence seekers and their responsibility or whether this is ‘just’ one of these cases where the facts are so peculiar that they do not provide the basis for universal law.

The SEP community is in any case eagerly waiting to dissect the statements from Germany’s highest civil court. Whether all or even most questions will be answered by the ruling is more than questionable however, given that the Federal Supreme Court only got to the second step of the negotiation obligations according to Huawei vs ZTE.

Surprises from the Mannheim court

The second chamber of the Mannheim court recently decided to spice things up even more.

In a hearing in one of the so-called ‘connected cars’ disputes (2 O 34/19) in the middle of May 2020, the chamber under Presiding Judge Kircher presented an unexpected backflip. The judges indicated that they had come to a new understanding of the Huawei vs ZTE dance and would first assess whether the counter-offer by the licence seeker was FRAND. Only if that was the case would the chamber look at the offer made by the SEP-holder.

According to the chamber, recital 66 of the ECJ’s decision in Huawei vs ZTE would require such a reversal of the dance steps as it would only allow the licence seeker to rely on the abusive nature of an action if the licence seeker itself had made a FRAND counter-offer.

This new approach of the second chamber of the Mannheim court contradicts not only every single FRAND decision since 2015 of the Düsseldorf, Mannheim and Karlsruhe courts but also its very own past decisions, something that the chamber openly admitted.

True to the motto ‘two lawyers – three opinions’, the seventh chamber of the Mannheim court seems to take a different view. In yet another hearing (7 O 107/18 and 7 O 108/19), which took place only three days later, Presiding Judge Tochtermann (diplomatically) clarified that his chamber intends to stick to its former understanding of the Huawei vs ZTE steps and order being a ‘safe harbour’ for assessing the FRANDness of the parties' behaviour as done in the past.

What does this mean for you as a business? 

All in all, everyone taking the German FRAND rollercoaster over the last weeks hoping for a calmer ride has been startled by surprising new (backwards) loop-the-loops and rapid falls and rises. 

Stumbling off at the end feeling shaky, only one thing seems to be clear: the long-awaited harmonisation on FRAND in Germany is still a long way off and all stakeholders will have to cope with the fragmentation of the law for the time being.