In-depth reporting and analytical commentary on intellectual property disputes and debates. No legal advice.

Only two FRAND defenses have succeeded in Germany in 70 months, and only one in 47 months — but agenda-driven paper falsely lists two more

Context: Standard-essential patent (SEP) case law in Germany is indisputably broken: despite a large number of cases that come to judgment every year, an implementer’s FRAND defense succeeds only once every few years. Instead of recognizing the problem and their political failure so far, and engaging constructively with policy makers to address an objective issue, some stakeholders prefer to deny the undeniable. An economic advocacy firm whose founder has recently also been contracted by the European Commission put out a paper that is fundamentally flawed because it counts every single denial of a SEP injunction from a past era instead of focusing on the status quo after the sea-change Sisvel v. Haier rulings (May 18, 2024 ip fray article).

What’s new: Additional (and objective) errors have been identified in the paper that incorrectly claims German SEP case law is “nuanced” as it lists two August 2020 SEP rulings where injunctions were supposedly denied, which is not true because in one case the appeals court reversed and entered an injunction and in the other case the question of injunctive relief had been declared moot by both parties as the patent had expired. Once one strikes those two false FRANDs, the picture is this:

  • only one successful FRAND defense in any German court over the course of the last 47 months (June 19, 2020 to May 20, 2024);
  • only two successful FRAND defenses in any German court over the course of the last 70 months (July 14, 2018 to May 20, 2024); and
  • not a single successful FRAND defense in the entire history of the Munich I Regional Court (where — guess what — most cases are filed now).

Direct impact & wider ramifications: The authors of that flawed paper should withdraw it as it distorts reality through selectivity as well as factual mistakes as explained here. There are also many “arguments” raised by the net licensee camp that ip fray disagrees with. But putting out papers that are fundamentally flawed (by including irrelevant cases while not counting relevant ones) and also have errors in the details (by counting at least two 2020 cases as successful FRAND defenses that actually weren’t) is not the way for the net licensor camp to make constructive contributions to the policy debate that must be had over the unsustainable situation in Germany, which does not mean that EU legislation (much less the particular proposal on the table) is the answer.

Shortly after ip fray‘s previous article on the study that transparently tries to explain the German SEP enforcement problem away, the communications chief of a company that is both a pool administrator and a non-practicing entity disputed on LinkedIn that German SEP case law is broken. But he did not provide any factual argument.

A legal system is broken if the outcome is practically a foregone conclusion just based on whether, in a given category of cases, someone is the plaintiff or the defendant. That’s not what justice is about. It’s not what courts are for.

The only way one can arrive at a different conclusion is if one has an agenda and/or fails to do a diligent research job.

Appendix 1 of that paper lists German SEP rulings with a he Yes/No column on the right stating whether an injunction issued (Yes) or a FRAND defense succeeded (No). ip fray has not double-checked every item on that list (a list that is incomplete anyway, leaving out many SEP injunctions that have also issued in Germany), but only the three cases listed as injunction denials from the months after Sisvel v. Haier I. On two of those three cases, the paper is wrong.

Here’s a screenshot of four lines from that list:

The August 21 and 27, 2020 decisions are very important. That was a few months after Sisvel v. Haier I, the ruling that effectively gutted Huawei v. ZTE in Germany.

It’s just that neither of those cases can be counted as a successful FRAND defense:

Mannheim Regional Court, case no. 2 O 136/18

The lower court denied an injunction, but the SEP holder appealed, and sucessfully so. On February 2, 2022, the Karlsruhe Higher Regional Court reversed and immediately entered an injunction that was enforceable without even a need to provide collateral (German-language appellate decision).

In other words, the FRAND defense merely caused a delay that could also have been caused by other factors such as a judge retiring or being reassigned, or a stay pending a parallel validity determination. No case is known where a German appeals court reversed a SEP injunction (and the agenda-driven paper doesn’t point to any) other than Sisvel v. Haier, where the Federal Court of Justice then reversed the appeals court and found that the FRAND defense should have been rejected.

Dusseldorf Regional Court, case no. 4b O 6/19

Contrary to denying an injunction, the court stated the following in paragraph 14 (German-language text of judgment):

“Der Rechtsstreit ist im Hinblick auf den Ablauf der Schutzfrist des Klagepatents am 22. Februar 2020 hinsichtlich des Unterlassungs- und Rückrufanspruchs in der Hauptsache übereinstimmend für erledigt erklärt worden.”

Unofficial translation:

“The parties stipulated to dismiss the claim to injunctive relief and a recall as moot in light of the expiration of the patent-in-suit on February 22, 2020.”

The court nevertheless reached the FRAND question (in a purely monetary, not injunctive, context), and decided it in favor of the SEP holder, so this was in fact another failed FRAND defense. Paragraph 78:

“Die Beklagten erheben den kartellrechtlichen Zwangslizenzeinwand ohne Erfolg. Die Kammer kann nicht feststellen, dass die Klägerin ihre marktbeherrschende Stellung (dazu unter Ziff. 1.) missbräuchlich ausnutzt (dazu unter Ziff. 2.).”

Unofficial translation:

“Defendants’ antitrust affirmative defense seeking a compulsory license is unavailing. The Court does not find that the plaintiff abused [internal reference] its dominant market position [internal reference].”

Tellingly, the authors of that paper state in footnote 63 that they decided not to count a case in which the court threw out a FRAND defense, arguing that the case “was initiated after the expiration of the asserted patent, and the plaintiff therefore did not request injunctive relief.” So when it suits their needs, they ignore a decision on a FRAND defense, but then they count a case as a successful FRAND defense in which the FRAND question was moot.

Conclusion

The German SEP enforcement problem must be fixed. If some net licensors believe things can go on this way, they’re being delusional, and the price they will pay in the form of misguided and hostile EU-level legislation is higher than if they recognize that there is incontrovertibly a serious problem in Germany that needs to be addressed intelligently (i.e., without throwing out the baby with the bathwater).

The criticized paper is agenda-driven as opposed to serious “empirical analysis.” Given that structural shortcomings as well as objective errors in the data set have been shown, it should be withdrawn because it does not reflect favorably on its authors and other entities (universities and darts-ip) they are affiliated with. For a quick recap of the criticism that ip fray has previously voiced and the issues shown above:

  • To count cases from the episode before Sisvel v. Haier makes as little sense as an analysis of U.S. abortion case law that includes a century before Roe v. Wade. On the same basis, one could also do a study on U.S. patent injunctions (about all patents, not just SEPs) and count cases from before eBay v. MercExchange.
  • The paper relies only on published decisions, though serious academic researchers can actually request access to court files.
  • The Munich court publishes its decisions least frequently, so the number one SEP injunction hotspot became to some extent a blind spot for the “empirical analysis.”
  • There’s a cutoff date for cases that predates the publication of the thin paper by 9.5 months, a period during which many more SEP injunctions came down in Germany, most of which were also reported on.
  • Parts of the paper attempt to muddy the water by discussing the technical (not FRAND-related) merits of those cases. For instance, the term “validity” (on its own or as part of the word “invalidity”) comes up 41 times on 40 pages.
  • Two of the four post-Sisvel v. Haier decisions in which the paper claims that an injunction was denied were actually false positives: in one case, the appeals court reversed and entered an injunction that became instantly enforceable, and in the other case, the prayer for injunctive relief was dropped simply because the patent expired, and the court reached FRAND nonetheless (in a monetary context) and sided with the patent holder, which is the very opposite of a successful FRAND defense.

Two of the three authors (with the third one being clearly just a junior contributor) were also commissioned by the European Commission’s Directorate-General for the Internal Market (DG GROW) to perform other “empirical” studies.

The problem is real and serious. The question is not whether it exists, but how to solve it without collateral damage to innovation. Flawed papers may create new problems for their authors’ reputation, but don’t solve the real-world problem at hand.