Context: Just yesterday, an important order by the Unified Patent Court’s (UPC) Dusseldorf Local Division (LD) became discoverable and granted a patent pool administrator’s motion to intervene in a standard-essential patent (SEP) case in which the defendant disputed that the pool rates were FRAND-compliant (June 26, 2024 ip fray article).
What’s new: The UPC’s Mannheim LD just entered, in a Panasonic v. OPPO litigation, what may be the most important procedural order by the UPC in a SEP case to date as it (1) addresses a FRAND rate-setting counterclaim reminiscent of some implementers’ (counter)claims in the U.S., UK and China. And not only that: the order (PDF (in German)) also provides important guidance on (2) the timeliness of claim construction arguments and of (3) proposals to amend claims if necessary as a result of a revocation counterclaim.
Direct impact: At this point, the order does not resolve anything definitively in that litigation, but it gives the parties to that case important guidance and makes it likely that further briefing will be required.
Wider ramifications: It is undoubtedly one of the most important orders by a UPC LD for practitioners with a view to their cases, especially (but not only) SEP cases.
The dispute between Panasonic and OPPO is being litigated not only in the UPC but also in German national courts, where Panasonic appears rather likely to win an injunction soon (June 27, 2024 ip fray article).
Presiding Judge and judge-rapporteur Dr. Peter Tochtermann’s incredibly thoughtful order in a Panasonic v. OPPO case before the Mannheim LD raises issues and gives guidance, but for now the parties will just have to provide further briefing before any of the disputed procedural and jurisdictional questions can be resolved.
1. OPPO brought FRAND counterclaim seeking determination of rate and other contract terms; court doubts admissibility
In the U.S. and the UK, where judges enjoy great equitable powers and wide latitude, it is rather common for implementers to respond to SEP enforcement actions with FRAND counterclaims. More recently, UK courts even entertain free-standing FRAND claims (Kigen v. Thales) as Chinese courts have been doing for several years.
OPPO brought a FRAND counterclaim (or multiple counterclaims by U.S. standards) in one (but not all) Panasonic v. OPPO UPC cases (case no. UPC_CFI_ 210/2023).
The wording of those claims has not been made public. Some inferences can be made from Judge Dr. Tochtermann’s order, though:
OPPO would like to obtain a license on FRAND terms and therefore asks the court to determine the royalty rate that it “should pay” as well as “other relevant terms and conditions.” The OPPO entities who are the defendants to this lawsuit say that they covenant to take a FRAND license, pay the FRAND rate set by the UPC for the territory of the European patent(s) in question, and are willing to extend this obligation to the U.S. and Japanese markets. ip fray believes that OPPO does not seek a global rate, but leaves out China and certain other markets, for the purpose of leaving those determinations to a Chinese court.
The order does not take a definitive position, but states the concern that the counterclaims may not be actionable in their current form for lack of expressing a serious willingness to enter into an agreement on the rates that the court may determine. Judge Dr. Tochtermann interprets the counterclaims in their current form as seeking neither a specific performance nor a contract to be provided by the court. Instead, they appear to seek a mere declaration, and that raises a jurisdictional question that “will have to be discussed.”
That concern is somewhat similar (but not identical) to the refusal of Article III courts in the U.S. to provide mere advisory opinions. The order does not make reference to foreign jurisdictions.
The order goes on to explain that OPPO seeks a declaration that it is entitled to a license to all of Panasonic’s 3G and 4G SEPs on FRAND terms, and furthermore to declare that the FRAND rate is a specific amount or range stated in the counterclaim.
One of the wordings that confuse the court as to OPPO’s actual willingness to enter into a FRAND license agreement on court-determined terms is that OPPO’s counterclaim asks the court to impose an oligation on OPPO to pay FRAND royalties “subject to the existence of a FRAND license agreement.” Judge Dr. Tochtermann wants clarification as to what that means, and indicates that a mere request for a declaration of terms without OPPO being definitively bound, while reserving the right to decline to actually conclude such an agreement, might not be actionable.
Apparently OPPO argues that the ETSI FRAND declaration itself entitles it to the specific performance of a license grant by Panasonic.
The order does not elaborate on OPPO’s fallback requests to its FRAND counterclaims, but expresses an understanding that it is far from clear whether OPPO would actually accept a licensing offer.
OPPO also brought a claim asking the court “to declare what the essential terms and conditions of such a FRAND license are, which comprises, at minimum, the royalty rate that OPPO has to pay for using those patents in the territories of the contracting states of the European Patent Convention (“EPC Territory.” Judge Dr. Tochtermann has concerns about that part as well. There can be multiple different sets of contract terms, each of which may be FRAND-compliant, and he does not believe his court can be called upon to provide comprehensive legal advice. In that context, the wording is very close to the U.S. concept of a mere advisory opinion.
Panasonic brought a fallback claim asking the court “to declare which license capable of justifying the defendant’s acts of infringement of EP25687224 and which license fee per 3G/4G (multimode) device are FRAND.” That, too, does not appear actionable to Judge Dr. Tochtermann.
The court would also like to understand what consequences the invalidity or non-infringement of the patent-in-suit would have (with the clarification that the court is not stating a preliminary opinion on the merits). It is unclear to the court whether the counterclaim is conditioned upon the patent-in-suit being valid and infringed, and how this counterclaim relates to other Panasonic v. OPPO proceedings before the same LD in which other patents are at issue and no such FRAND counterclaim has been brought.
Another important question (and again without the court meaning to imply a preliminary view) is whether a finding of OPPO being an unwilling licensee would dispose of the FRAND counterclaim.
Panasonic brought a fallback claim seeking a declaration that “a license justifying the defendant’s acts of infringement of EP258724 is a worldwide license to the plaintiff’s 3G and 4G (multimode) portfolio and that a royalty rate for such license amounting to US$ [redacted number] per 3G/4G (multimode) device is FRAND.” The court fundamentally doubts the admissibility of such a fallback claim brought for the event that the court deems OPPO’s FRAND counterclaim admissible.
Finally, the court also suggests that Panasonic might want to clarify what its proposal of a specific royalty rate (in the event that OPPO’s FRAND counterclaim is admissible) means with a view to its damages claim. Presumably, Panasonic is, at this stage, merely seeking a declaration that OPPO owes damages (with a separate proceeding needed to determine the amount of a damages award), but what Judge Dr. Tochtermann apparently wants to know is whether Panasonic’s position on a FRAND rate effectively quantifies its damages claim.
ip fray‘s view is that all of Judge Dr. Tochtermann’s questions about the FRAND counterclaim (and Panasonic’s related and conditional counter-counterclaims) are highly pertinent and very well considered. The parties must provide briefing on those questions. The case could break new ground and (provided the Court of Appeal affirms) could make the UPC a FRAND forum, but it appears that OPPO would have to amend its counterclaims and make it clear that it is willing to enter into a license “on whatever terms are in fact FRAND” as it is called in the UK. And even then it would not be a given that the UPC would determine that it has jurisdiction over a contract claim, given that it is (just) a patent court.
2. Guidance: make claim construction arguments early if technical subject matter is complex; and respond to revocation counterclaim with specific reference to claim limitations
Pointing to Rule 13(1)(n) of the UPC’s Rules of Procedure (RoP), Judge Dr. Tochtermann reminds Panasonic of the need to make claim construction arguments in a complaint if some claim limitations are not self-explanatory.
Here, the court finds Panasonic’s complaint lacking and wanting in that regard, but Panasonic still has the chance to make up for that.
Also, Panasonic is criticized for not having made clear reference to individual claim limitations in its response to the revocation counterclaim. In this context, the order does not merely say that further clarification “may” be needed, but says Panasonic must make up for that (meaning: that shortcoming).
Apparently Panasonic commented on OPPO’s invalidity arguments, but without sufficiently specific references to claim limitations and explanations as to why a given claim limitation is allegedly not disclosed in the prior art.
3. Claim amendments: Rule 30(2) RoP must be applied strictly
In Rule 30(1), the RoP say that proposed amendments to the claim language must be incorporated into the patentee’s defense to the counterclaim. According to today’s order, Judge Dr. Tochtermann believes Rule 30(2) RoP is strictly preclusionary. What does it actually say?
2. Any subsequent request to amend the patent may only be admitted into the proceedings with the permission of the Court.
That wording means the UPC can grant leave to a patentee to propose amendments at a later stage. But Judge Dr. Tochtermann stresses that the rule is meant to prevent that a patentee will propose multiple rounds of amendments at different times, thereby depriving its adversary of the opportunity to react and the court of the ability to properly adjudicate those applications for amendment. Therefore, a key criterion to the court will be whether a certain amendment would already have been warranted at an earlier stage of proceeding and whether such amendments (if made later) may delay the proceedings.
Panasonic is now called upon to explain in detail why the court should deem its proposed amendments at a later procedural stage timely.
Counsel
Panasonic’s counsel of record is Kather Augenstein’s Christopher Weber, and OPPO’s counsel of record is Dr. Andreas Kramer of Vossius (or Vossius & Brinkhof as the Dutch and German firms cooperate on UPC litigation).