Context: Yesterday, Huawei won a multi-country injunction against Netgear in the Unified Patent Court (UPC) over a WiFi 6 standard-essential patent (SEP) (December 18, 2024 ip fray article). The Munich Local Division’s (LD) reasoning will serve as guidance for other SEP cases at least in the near future (December 18, 2024 ip fray article).
What’s new: Today the Landgericht München I (Munich I Regional Court) held a trial in another Huawei v. Netgear WiFi 6 patent case and scheduled a decision for January 9, 2025.
Direct impact: Based on what was discussed in open court, EP3334112 (“method for transmitting he-lft sequence and apparatus”) is going to be deemed valid and infringed. Netgear’s non-technical defenses (particularly FRAND) were heard in a sealed courtroom, but whatever information is publicly available about the dispute and that court’s SEP jurisprudence makes it unlikely that an injunction could be avoided.
Wider ramifications: A closer look at the overall state of play, including the exact wording of yesterday’s UPC injunction, shows that Netgear will most likely have no commercial benefit from a finding of patent exhaustion with respect to Qualcomm chips due to territorial restrictions. That will be something for other UPC defendants to consider before they expect patent exhaustion to bail them out.
The Munich I Regional Court’s Seventh Civil Chamber (Presiding Judge: Dr. Oliver Schoen (“Schön” in German)) rules swiftly and typically within two weeks of a trial, but it is normal that everything takes a little longer when the Holiday Season comes in between. January 9, 2025 is only three weeks away.
Given that the courtroom was sealed for the non-technical (FRAND and patent exhaustion) part, the court’s inclination is not known. But no implementer of a standard has raised a successful FRAND defense in Munich. Of course, one day someone may be the first. But it is hard to imagine that Netgear’s conduct (based on what one can read in yesterday’s UPC decision) will be deemed worthy of a willing licensee when companies that (compared to Netgear) went out of their way to obtain a license were considered unwilling licensees.
Netgear’s antisuit injunction attack on the UPC and German national courts (December 6, 2024 ip fray article), which comes with an alternative request for an interim license, does nothing to underscore its willingness to take a FRAND license. The hearing is presently scheduled for January 24, 2025. In the meantime, enforcement will set in.
Will the UPC’s carve-out for patent exhaustion move the needle?
Theoretically, patent exhaustion could buy Netgear time as long as it relies on Qualcomm chipsets. But that may not really be a practical option for a simple logistical reason: such products are not made in Europe, but according to yesterday’s decision, patent exhaustion applies only to components that are for the first time placed on the market in a member state of the European Union. In section J of the remedies part, the Munich LD says the following:
“J. Von den Anordnungen gem. Ziffern C. bis I. sind diejenigen individualisierten Erzeugnisse gem. Ziffern C.I. bis C.VI. ausgenommen, die mit einem Qualcomm-Modem ausgestattet sind (vgl. Anlage FBD 56), soweit dieses Qualcomm-Modem nachweislich im Zeitraum [geschwärzt] im Gebiet der Mitgliedsstaaten der Europäischen Union erstmals in den Verkehr gebracht worden ist.”
Unofficial translation:
“J. Exempted from the [injunctive and other remedies] are particular goods that come with a Qualcomm modem (cf. Exhibit FBD 56) to the extent that the Qualcomm modem was, for the first time, placed on the market in the territory of the member states of Euroean Union in the period [redacted].”
That means a Qualcomm modem sold in Asia and incorporated into a Netgear router in Asia is outside the scope of that carve-out.
The decision points to the language of the relevant article of the UPC Agreement (UPCA):
ARTICLE 29
Exhaustion of the rights conferred by a European patent
The rights conferred by a European patent shall not extend to acts concerning a product covered by that patent after that product has been placed on the market in the European Union by, or with the consent of, the patent proprietor, unless there are legitimate grounds for the patent proprietor to oppose further commercialisation of the product.
In order to benefit from patent exhaustion, Netgear would have to buy Qualcomm’s relevant chips in an EU member state. Would Netgear want to manufacture its routers in Europe? Almost certainly not, given the high costs involved that would dwarf the costs of the patent license in question. Delays may also make it a non-option.
In many product categories, particularly the ones that are typically manufactured in China, the UPCA’s exhaustion clause may prove next to useless.