Context: Recently, the European Commission’s (EC) Directorate-General for Competition (DG COMP) published an amicus curiae brief it had filed a few months earlier with the Munich Higher Regional Court in VoiceAge EVS v. HMD that exposes the German Sisvel v. Haier case law as being in contravention of the binding Huawei v. ZTE decision by the European Court of Justice (August 4, 2024 ip fray article). HMD had lodged an EU antitrust complaint, though there is no indication of formal abuse-of-market-power investigations of VoiceAge EVS’s conduct.
What’s new: After being first to find out about Nokia’s German standard-essential patent (SEP) injunction against Amazon (September 20, 2024 article), ip fray has now unearthed an EU antitrust complaint by Xiaomi against Panasonic. The complaint, filed in July, is centered around the issue of Panasonic having reneged on a procedural agreement in the UK (to have a global FRAND rate determined there) in order to pursue SEP injunctions in the UPC and German national courts. Xiaomi also argued in the UK last week that it has already overcomplied with Huawei v. ZTE (September 22, 2024 ip fray article), while Panasonic will now have to explain how its pursuit of sales bans in the EU’s Single Market against a willing licensee is not a breach of European competition rules.
Direct impact: Upon receipt of such complaints, DG COMP routinely asks the target of the complaint to respond. That also occurred here. At some point, which in most cases takes approximately a year, the EC will decide whether to launch full-blown abuse-of-market-power investigations that could result in a fine of 10% of global annual turnover. In the meantime, decisions on various SEP injunction requests by Panasonic will come down in the UPC (which will hold a FRAND trial in Mannheim the week after next) and German national courts. Given that both Panasonic and Xiaomi voluntarily agreed to have their dispute over the correct royalty rate resolved by the UK judiciary, there would be no basis to deem Xiaomi an unwilling licensee without an exhaustive FRAND analysis (involving all comparable license agreements) of Panasonic’s demand.
Wider ramifications: Xiaomi is anything but belligerent. It typically takes licenses before injunctions come down. Panasonic is also suing OPPO, a company that left the German market more than two years ago. Today it became known that the Munich I Regional Court has enjoined OPPO over a Panasonic SEP, doubting (according to the decision) that OPPO’s FRAND counterclaim in the UPC (June 27, 2024 ip fray article) would succeed. ip fray is presently unable to form an opinion on whether OPPO is a willing licensee. While Xiaomi reached a procedural agreement with Panasonic in the UK to have a global rate set there, there is no indication of such an agreement between Panasonic and OPPO. Different outcomes with respect to SEP injunctions would not necessarily be implausible, but only after the UPC’s Mannheim Local Division (LD) has fully analyzed Panasonic’s offer, including other third-party license agreements than the three Panasonic had selected (September 25, 2024 UPC appellate roundup by ip fray).
Several very well-respected UK judges appear to be none too pleased that Panasonic, after temporarily considering a UK FRAND determination the best dispute resolution method in this case, opted for a German-style injunction-centric strategy. Mr Justice Richard Meade called this behavior a “U-turn” (July 17, 2024 ip fray article). And at last week’s appellate hearing, none of the three judges defended Panasonic’s conduct, with Lord Justice Richard Arnold even appearing receptive to the idea of entering a declaration that Panasonic is licensed on an interim basis, though the outcome could also be a strong encouragement to seek an antisuit injunction (September 22, 2024 ip fray article).
Neither Mr Justice Meade nor Lord Justice Arnold can be reasonably suspected of a SEP devaluation agenda. Both are, in principle, pro-IP. But there must be a reasonable and workable path to a FRAND license agreement.
Like the UK judiciary, DG COMP has for quite a while been seeking to strike a balance between the interests of SEP holders and those of implementers who are willing to take a license “on whatever terms are in fact FRAND.”
Xiaomi’s complaint involves a fact pattern unlike any other complaint the EC has ever received over SEPs (the first one of which was one by Nokia over Qualcomm):
For the first time, an implementer complains after a roadmap for the resolution of a SEP dispute had been put in place by both parties and a neutral third party (the England & Wales High Court of Justice) that was the SEP holder’s chosenforum. This is not about a simple disagreement over royalty rates. It’s not about the question of who in the supply chain should be licensed. It’s about a SEP holder pursuing injunctive leverage instead of simply letting a mutually agreed-upon FRAND determination proceeding run its course.
Put differently, it’s the first time that an implementer is basically saying it has done everything it was expected to do under Huawei v. ZTE (and more), yet the SEP holder wants to impose its preferred (supra-FRAND) rates on it, taking advantage of German SEP case law and the uncertainty of how the young UPC will adjudicate SEP injunction requests.
When DG COMP was investigating Samsung (over its SEP injunction requests against Apple) and Motorola (against Apple and Microsoft) more than a decade ago, there was no case law by the European Court of Justice (ECJ) on this question. Next year, Huawei v. ZTE will be ten years old. And now there is an EU antitrust complaint on the table where there is precisely the situation discussed in para. 68 of Huawei v. ZTE:
“In addition, where no agreement is reached on the details of the FRAND terms following the counter-offer by the alleged infringer, the parties may, by common agreement, request that the amount of the royalty be determined by an independent third party, by decision without delay.”
Huawei v. ZTE does not allow the pursuit of injunctive relief after an agreement on an independent FRAND determination. At that point, there is no more risk to the SEP holder that it could get anything less than FRAND license fees. It has to content itself with that to comply with EU competition rules.
The chosen FRAND arbiter is Mr Justice Meade of the England & Wales High Court of Justice, with a potential appeal to the England & Wales Court of Appeal (and theoretically on to the UK Supreme Court). There is no more need to discuss FRAND in the UPC’s Mannheim or Munich LDs, or in the Munich I or Mannheim Regional Courts. That part of the dispute has been put to rest, except that Panasonic changed mind, which gave rise to the EU complaint, to the request for a UK declaration of an interim license, and could culminate in an antisuit injunction.
ip fray is now trying to find out more details about the complaint. For the time being, the key thing to know is that there is such a complaint, and that the allegedly anticompetitive conduct is all about seeking injunctions after originally having agreed to let the UK judiciary determine a FRAND royalty.
The UPC’s Mannheim LD intends scheduled the FRAND part of Panasonic v. Xiaomi for Wednesday, October 9, potentially continuing on Thursday, October 10, if necessary. But in the meantime, the England & Wales Court of Appeal might declare that Xiaomi already has an interim license. Theoretically, the UPC as well as German national courts could ignore such a declaration, but a license is a defense to an infringement claim and that’s why it would be hard to imagine that anyone would enjoin Xiaomi at that point. Should the appeals court in London say that they can’t declare an interim license, but they see the requirements met for an antisuit injunction, Xiaomi would have to decide whether to take that step. The appeals court already said that if Panasonic then sought an anti-antisuit injunction, it would be in breach of a commitment made to an English court. In other words, Panasonic would be sanctioned.
Panasonic also faces the risk of an EU antitrust fine.
Moreover, Panasonic is among the companies who rightly criticize the proposed EU SEP Regulation. By not letting the FRAND dispute with Xiaomi be resolved in the UK, Panasonic regrettably provides ammunition to those who argue that SEP holders should be barred from patent enforcement in the UK until after a FRAND determination has been made under the auspices of the EUIPO.
ip fray would encourage Panasonic and Xiaomi to agree on a joint request for a stay of all proceedings in the UPC and German national courts. In the alternative, Xiaomi should seek an antisuit injunction in the UK unless a declaration of an interim license reliably defuses the pending injunction requests.
SEP injunctions have forced OPPO and its OnePlus affiliate, as well as vivo, out of the German market. InterDigital is enforcing a German SEP injunction against Lenovo. Xiaomi is needed as a competitive force in the German market, and the wider European market. It is not in the interest of German or generally European consumers to have only Apple and Samsung compete in the high-end smartphone market (and Google, but its Pixel business is small in Europe). If that was the outcome, DG COMP would have failed European consumers. DG COMP would have the power to pressure Panasonic to withdraw its injunction requests against Xiaomi just like Samsung, under pressure from the same regulator, did so against Apple more than a decade ago.