Context: Transparency is one of the two favorite terms (the others being SMEs and IoT) of those supporting the European Commission’s proposal for an EU regulation on standard-essential patents (SEPs) (January 29, 2024 ip fray article). But it is not a scheme by patent holders to require the confidential treatment of licensing terms.
What’s new: The Unified Patent Court has yet to hold a SEP trial, but in the young judiciary’s first-ever SEP-specific order (PDF (in German)), the Presiding Judge of the new judiciary’s Mannheim Local Division, Judge Dr. Peter Tochtermann, has taken a balanced but crystal clear pro-transparency position. In a Panasonic v. Xiaomi SEP infringement action, Panasonic successfully asked the court to enable, through an order to produce documents, the disclosure of licensing terms with a third party (not to the general public, but to everyone actively involved with that litigation). While Judge Dr. Tochtermann did not consider Panasonic’s motion to compel itself as falling within the scope of Rules 172 and 190 of the UPC’s Rules of Procedure (RoP), he based his decision on the primacy of EU law, in this case the FRAND negotiation framework as defined by the European Court of Justice in Huawei v. ZTE, in conjunction with the active role the UPC Agreement (UPCA) and the RoP envision for presiding judges and rapporteurs (he has both roles in the case at hand). As an aside, he also notes that the production of SEP license agreements is capable of spurring settlements. But this is not arbitrary: the affected third party must be asked beforehand, and has the opportunity to intervene with respect to the protection of its confidential business information.
Direct impact: The decision enables Panasonic to present SEP license agreements that the company apparently believes strengthen its argument that Xiaomi should accept Panasonic’s licensing offer. The impact of the decision is at this point limited to that case and presumably other UPC cases litigated in Mannheim. It may very well be deemed persuasive by other UPC Local Divisions, though ip fray (while favoring transparency in SEP licensing and enforcement) believes a motion by a party to compel itself may constitute an abuse of procedure or should at least not be granted. Ultimately, it will be up to the UPC Court of Appeal to provide definitive clarification.
Wider ramifications: The UPC’s first SEP-related order shows that some of the issues that the European Commission sought to address through new legislation may be addressed in the near term by the UPC. While the UPC does not have exclusive jurisdiction over SEP cases in Europe (at this point, not even in cases involving EPO-granted patents), its decisions have the potential to significantly shape the SEP enforcement landscape.
Judge Dr. Tochtermann was one of the first full-time UPC judges to be appointed, and is a member of the UPC’s presidium.
His order “compelling” (in fact, authorizing) Panasonic to produce license agreements with two third parties is meticulous and thoughtful. While the RoP, viewed in isolation, would have doomed Panasonic’s motion, Judge Dr. Tochtermann believes to have found a way to grant the motion by invoking the UPC’s obligation to apply EU law (here, EU antitrust law as clarified by the European Court of Justice in Huawei v. ZTE).
He is also being considerate of third-party interests by clarifying that prior to seeking a court order to produce documents, the moving party has to reach out to the third party, enabling it to raise potentially availing objections and potentially to intervene in the UPC proceedings for the limited purpose of protecting its confidential business information (CBI).
The order also explains that SEP license agreements are typically under U.S. law, failing to take EU law into account. Therefore, production of relevant license agreements will typically require a court order. Furthermore, Judge Dr. Tochtermann does not want to enable the parties to SEP license agreements to perform an end-run around their transaprency obligations in the EU, such as by contractual requirements to give notice of an upcoming court order to produce documents so long in advance that the purpose of early production in a UPC proceeding would be defeated.
All of that is laudable, and the thoughtfulness of the order shows that the UPC benefits from having highly qualified judges available who get to spend a large part (or ideally 100%) of their time on UPC cases. The UPC is currently in the process of increasing its resources (April 30, 2024 ip fray article).
In Panasonic v. Xiaomi, there were no specific third-party objections that would have dissuaded the court from granting the motion. Nor is there a sign, so far, of any third-party intervention. Such an intervention may at some point provide the best basis for clarification by the UPC Court of Appeal.
While favoring transparency and respecting the enormous amount of thought that Judge Dr. Tochtermann put into his April 30, 2024 order, ip fray respectfully disagrees. It does not appear reasonable that a party should be allowed to move to compel an affiliate entity (which, as Judge Dr. Tochtermann also notes, amounts to a motion to compel oneself). At most, ip fray would support the idea that a judge-rapporteur and/or presiding judge of a UPC panel may sua sponte order the production of all relevant license agreements (“all relevant license agreements” so as to avoid cherrypicking by a SEP holder). Other than that, ip fray welcomes a trend toward transparency in SEP litigation.