Context:
- German standard-essential patent (SEP) case law is in flux after HMD appealed the FRAND (fair, reasonable and non-discriminatory licensing) part of a VoiceAge EVS appellate win to the Bundesgerichtshof (Federal Court of Justice), the top German court (in practice) for patent cases (March 29, 2025 ip fray article), from where the matter may go to the European Court of Justice (ECJ).
- Presently, one of the most important SEP disputes is ZTE v. Samsung. Samsung brought FRAND claims in (at minimum) four jurisdictions while ZTE proposes dispute resolution in China, which used to be Samsung’s preference. In the U.S., Samsung’s case faces an increasing risk of being thrown out or at least not getting traction anytime soon (July 9, 2025 ip fray article). A UK interim-license declaration is not going to move the needle either (June 27, 2025 ip fray article).
What’s new: The Munich I Regional Court’s 7th Civil Chamber held a FRAND hearing today relating to certain infringement actions that are part of the wider ZTE-Samsung dispute. Presiding Judge Dr. Oliver Schoen (“Schön” in German) sealed the courtroom for the case-specific matters, which in the impression of third-party observers are going better for ZTE than for Samsung. But prior to doing so, he spent about two hours outlining the FRAND guidance he will soon provide in writing. The Munich I Regional Court continues to develop its FRAND case law and disagrees with the Munich Higher Regional Court’s VoiceAge EVS v. HMD decision not in terms of the outcome but the myopic focus on the defendant’s willingness to give security. By extension, this also means opposing the basis of recent England & Wales Court of Appeal (EWCA) and High Court of Justice for England & Wales (EWHC) decisions granting interim licenses.
Direct impact: If the “vibes” reported by observers are correct, Samsung is on the losing track in Germany and will be enjoined. It is unclear, however, whether making unconditional payments to ZTE at this stage would still help. Based on what Judge Dr. Schoen outlined in public, it would be too late. Samsung’s bet on UK interim-license declarations and worldwide scattershot FRAND litigation may backfire now. In the German patent litigation community, the operating assumption is that the Munich I Regional Court will forcefully and decisively clamp down on any attempt to derail the German proceedings by capitalizing on UK judicial imperialism.
Wider ramifications: Judge Dr. Schoen is a thoughtful judge who has a better understanding of business realities than many of his peers across jurisdictions, apart from U.S. federal judges who frequently deal with economic matters outside of patent law. He is known to be very efficiency-focused and strict, but whether or not one agrees with his judicial philosophy, he is an immensely important (and practically powerful) contributor to the debate over how to recalibrate German FRAND case law in light of what is happening in VoiceAge EVS v. HMD, a case in which the European Commission intervened with an amicus curiae brief.
ZTE v. Samsung
Samsung may hope that the disagreement between the two Munich courts on FRAND would result in a stay of a potential SEP injunction. But there is considerable risk:
- In a worst-case scenario, ZTE would prevail in Munich on a basis consistent with the appeals court’s VoiceAge EVS approach. In that case, a stay would be harder to win. The lower court could still explain that it believes its own (stricter) FRAND stance is right. But courts can always provide alternative rationales that lead to the same result.
- Even if Samsung obtained a stay of a Munich SEP injunction, the Munich Higher Regional Court is unlikely to condone foreign attempts to usurp on its jurisdiction. Both Munich courts have previously presented a united front to cross-border encroachment, and have effectively defanged foreign antisuit injunctions. The UPC (first in Munich, but recently also in Mannheim (May 30, 2025 ip fray article)) has adopted a stance consistent with that of the Munich national courts. A Munich anti-antisuit injunction (AASI) or equivalent measure against any attempts to coerce ZTE into a license agreement based on the UK interim-license declaration would shield all German proceedings (potentially also all UPC proceedings with respect to the German parts of European patents) from interference. Injunctions could still come from other venues, such as the Mannheim Regional Court.
FRAND case law development
Judge Dr. Schoen has identified the fundamental problem of security-centric FRAND jurisprudence:
A deposit or bond is not equivalent, for all practical (i.e., accounting and financial) intents and purposes, to actual royalty payments.
As we have previously explained, it is better than nothing in jurisdictions like India, where the proceedings on the merits take very long. But it also depends on the amount, and today’s Delhi High Court decision ordering smartphone maker Lava to give security to Dolby to the tune of reportedly $2-3 million is not likely to move the needle. And security is helpful if an implementer is in a financially weak position. That is rarely the case as patentees usually deprioritize such companies when picking the targets of their enforcement efforts.
Judge Dr. Schoen expects implementers (or net licensees in bidirectinal patent spats) to begin, without undue delay and apparently already during negotiations (not just when litigation is pending), making actual royalty payments.
Once it is clear that someone will be the net payer, or there is only one implementer and it considers a certain royalty rate FRAND, it must start to pay. Good hard cash, not just bonds, not just deposits.
Those payments will then constitute recognized revenues for the SEP holder’s purposes. Of course, if that amount was ridiculously low, it would also be held against the implementer or the net licensee. But even if the amount was right, a delay per se can already result in a party being deemed an unwilling licensee.
Judge Dr. Schoen’s position is that if the (net) licensor has a reasonably large SEP portfolio, it’s only a question of when (not if) there will be an infringement finding. That is also what UK judges like to say, but only for the case management purpose of persuading parties to proceed straight to a FRAND trial, either by dropping or by deprioritizing the infringement actions.
From a legal point of view, a probabilistic approach is debatable. A court is not a stock exchange, much less a casino. There have been patent enforcement campaigns with a high number of losses, such as a dozen patent assertions going nowhere. There is probably no other field of law in which a determination of actual liability would be skipped not because of someone waiving their defenses but purely on the basis of the court assuming that there must be some liability. Also, the question is whether it would have implications for the FRAND rate if, for example, a plaintiff prevailed on only one out of ten or twenty patents.
It remains to be seen what the net effect of this “you’ll lose sooner or later” doctrine is. Will licensees have to make payments that are non-refundable even if they end up prevailing on the technical merits over any number of patents? We shall see.
Regardless of whether one has concerns over due process for establishing liability and/or the requirement to make such payments at the earliest opportunity during negotiations, Judge Dr. Schoen is obviously right that security is not the answer (refundable interim payments as envisioned by some UK judges are just another form of security). In that regard, he is far more in touch with reality than the appeals court above him and the English courts. He’s legally trained, but understands how business and finance work. That’s what sets him apart and makes him such an important contributor to the debate. One can disagree philosophically or politically as to whether his approach to FRAND would result in supra-FRAND royalty levels, but his views are consistent, coherent, transparent, and pragmatic.
When he outlined his thinking today, he was reading from notes that appeared to be a draft order. Hopefully, his thinking will become available in a written form soon.