Context: A few days ago, the European Commission (EC) published its April 15, 2024 amicus curiae brief in VoiceAge EVS v. HMD, which does not ask the court to arrive at a particular result but in no uncertain terms exposes the German Sisvel v. Haier case law as irreconcilable with EU competition rules (August 1, 2024 ip fray article).
What’s new: The EC’s amicus brief contains a flowchart that is worth highlighting.
Direct impact: HMD lost every one of the six cases VoiceAge EVS brought: two in Munich and four in Mannheim. The EC’s amicus brief discusses differences in the two courts’ reasoning, but the ultimate outcome was the same. Affirmance is still possible, though HMD would presumably appeal the matter further to the Federal Court of Justice, which would strictly have to refer the questions raised by the EC to the European Court of Justice (ECJ) as Germany would otherwise be in breach of EU law (which requires the top national courts to do so if serious questions are raised) and could be fined.
Wider ramifications: The amicus brief is going to make a stronger impact on cases that are closer calls than VoiceAge EVS v. HMD. It also makes it very unlikely that the Unified Patent Court (UPC) would adopt Sisvel v. Haier without at least asking the ECJ for a preliminary judgment.
This chart is found on page 15 of the EC’s amicus brief (PDF (in German)):
While the brief itself was filed in German, that chart was apparently provided by the EC’s Directorate-General for Competition (DG COMP) in English.
The single most important word in the EC’s amicus brief is “Reihenfolge” (sequence). It occurs ten times throughout the document. The EC explains in a foolproof manner that step 2 (expression of willingness to take a license) must only be analyzed if step 1 has been properly completed, step 3 only if step 2 has been fulfilled, and step 4 only if step 3 has been complied with.
There should never have been a need for such foolproof instructions and hand-holding. The Huawei v. ZTE decision clearly laid out a “ping-pong” sequence of steps, where each step logically required the previous one to have been completed: the implementer does not have to declare a willingness to take a license in the absence of an infringement notice or offer FRAND terms in the absence of an offer by the SEP holder, nor does the SEP holder have to offer terms unless the implementer has declared a willingness to take a license on FRAND terms.
The EC’s inflexible take on whether the requirements for a proper infringement notice can be satisfied by providing a link to online documents is debatable, especially when the defendant is a sophisticated implementer. There can be no reasonable doubt that HMD understood the infringement notice, and it had easy access to all of the relevant information. It’s just that the Munich I Regional Court added an unfortunate “if all else fails” type of sentence about the infringement lawsuit having satisfied the notice requirements. But where the EC is undoubtedly right is that Huawei v. ZTE must be applied sequentially in order to preserve the balance the ECJ sought to strike.
Not long after the Sisvel v. Haier decision(s), then-Presiding Judge Professor Peter Meier-Beck discussed the rationale of his court’s decision as one of the speakers in a recorded webinar. The points he made were all wrong, as was his consistent use of a non-existent acronym (“EUCJ”):
- He argued that a court could not evaluate whether an offer is FRAND without seeing some back-and-forth between the parties. But a SEP holder can always make an initial FRAND offer, and the court can get the benefit of both parties’ views from the pleadings.
- The most absurd thing he said was that the ECJ didn’t want Huawei v. ZTE to become a “blame game.” It’s nonsensical for at least two reasons. First, if one party wants to argue in court that a set of requirements has been met and the other seeks to deny it, it’s inevitable that the parties will criticize each other’s conduct. The ill-conceived Sisvel v. Haier decision doesn’t change that, but the second issue is that it has turned it all into a one-sided blame game: all the blame is on the implementer. That’s why not a single implementer deemed to infringe a SEP has avoided being enjoined since Sisvel v. Haier (one temporarily did, but then the appeals court entered an injunction), the only exception being a set of related Dusseldorf cases about a patent pool’s duplicative-royalty terms. That was an outlier question that has not mattered in any other SEP case (not even with respect to other pools run by the same administrator).
It’s unsurprising that some will try to defend Sisvel v. Haier in Germany, and some of them may even try to peddle it to the UPC. But the question is not whether Sisvel v. Haier is already bad law. It’s just how quickly the German courts will adjust their jurisprudence. The EC as the Guardian of the [EU] Treaties has flagged the problem.
German courts are bound by the ECJ’s Huawei v. ZTE decision, not by Sisvel v. Haier. Decisions by the Federal Court of Justice of Germany are not binding beyond a given case, while ECJ decisions on the interpretation of EU law apply EU-wide to all cases raising the same issue. No German judge has a duty to apply Sisvel v. Haier. If they still do, the EC has various levers at its disposal. If the EC pulls any one of those levers, the matter will likely be put before the ECJ. That will only make matters worse for the German judiciary because there’s an overwhelming probability that the ECJ will confirm that Huawei v. ZTE requires a strictly sequential approach. Moreover, anyone trying to defend the German approach faces the problem that Sisvel v. Haier has demonstrably failed. If every implementer automatically loses, the legal standard just can’t be right.
The longer some German courts wait before they recognize the Federal Court of Justice’s error, the more embarrassing it will become. There can and will still be SEP injunctions, and there are reasons to assume that HMD will still be enjoined over Voice Age EVS’s patents even under the correct standard. But Huawei v. ZTE is not a smoothie mixer. Sisvel v. Haier wanted to put the cart before the horse, which for a few years reduced the FRAND parts of German SEP cases to absurdity. Reason and logic will prevail now, and that will eliminate the need for an EU SEP Regulation, which would create so many problems and not even deal with the actual issue, which is (or was) Sisvel v. Haier.