The exercise of legal rights is legitimate. Applied to patents, this principle translates into the right of a patent holder to institute a patent infringement action and to seek an injunction preventing the infringer from continuing to practice the inventions claimed in the patent.
While injunctions are a legitimate mechanism to protect SEPs, injunctive relief can attract antitrust scrutiny
Inroads to this principle, however, are being introduced when competition is at stake.
The start of the year brought with it an important preliminary conclusion reached by the European Commission: Samsung was found to have acted in breach of competition rules by seeking court orders that would have banned Apple from selling products that relied on standard-essential patents (SEPs).
These patents are deemed essential to industry standards and are required within an industry to ensure interoperability of products within that industry, regardless of the manufacturer. Once a standard is adopted by an industry, SEPs become essential to implement industry standards.
Owing to their special nature, these patents are licensed at a fee for use on fair, reasonable and non-discriminatory terms. The Commission can levy fines of up to 10 per cent of a company’s global turnover if it finds that a company has acted in breach of competition law.
While confirming the right of patent-holders to seek injunctions to end an infringement, the European Commission took the view that Samsung acted anti-competitively once a compromise solution was at hand. Apple was willing to negotiate a licence for the use of the patent owned by Samsung. The European Commission, in its conclusion, set out clearly that intellectual property rights cannot be misused to foreclose entry by competitors through the strategic use of injunctions.
In the wake of this Commission decision, a request for a preliminary ruling was recently referred to the Court of Justice of the European Union (CJEU) by a German regional court. The question referred to the Court relates expressly to whether the holder of a SEP may obtain injunctive relief against a business infringing the patent.
At EU level, several investigations are pending but very little is known about their possible outcome, although the Commission has clearly identified the position it will be taking if an owner of a SEP seeks injunctive relief when the infringer is willing to enter into a licence. Given that the investigations of the Commission are still at their early stage, the current request of the German Regional Court is fast-forwarding the legal discussion. The answers of the Court may provide clarity to this hotly contested topic sooner than expected.
In the German case, the Court has been called in to provide guidance on the antitrust rules when holders of standard essential patents seek injunctive relief. To achieve this, the Court must necessarily do a balancing act between two interests involved: on the one hand, access to technology by third parties in the interests of consumers, and, on the other, protection of patent holders and their investments.
The German case arose as a result of a patent dispute between China’s two largest electronics companies Huawei and ZTE, where the patentee sought to enforce a patent relating to a mobile telecommunication standard through injunctive relief. In this case, the defendant ZTE raised the ‘antitrust defence’, arguing that the patent holder was required to licence its patent in order not to violate antitrust law.
Before making the reference, the German Court underlined the significant contribution of patents to new technological developments, and the necessity of ensuring compatibility and interoperability in the industry to enhance market access and increase competition and consumer choice. It expressed its view that even if the patent was one of the special type, the holder of that patent is entitled, in principle, to seek an injunction and that it would not be sufficient if the infringer only demonstrates its willingness to negotiate a licence to be able to sustain the antitrust defence.
The German Court however stopped at that and stayed proceedings to seek guidance on whether or not seeking injunctions can constitute an abuse of EU competition rules where they are sought against an alleged patent infringer, who is willing to negotiate a licence and pay a reasonable royalty fee.
The patent wars continue unabated and the battle lines are once again being redrawn. While injunctions are a legitimate mechanism to protect SEPs, injunctive relief can, in certain circumstances, attract antitrust scrutiny. The Court’s response will clarify the rights that can be invoked by patent holders and third parties alike.
The importance of the Court’s judgement goes beyond the German borders from where the reference was made. The Court’s judgement will be binding on all EU member states courts as well as national competition authorities.
jgrech@demarcoassociates.com
Josette Grech is an associate with Guido de Marco & Associates and heads its European law division.