Context: Huawei won a WiFi 6 standard-essential patent (SEP) injunction against router maker Netgear in the Unified Patent Court’s (UPC) Munich Local Division (LD) today (December 18, 2024 ip fray article).
What’s new: Since the previous article, the decision has been published (PDF (in German)). The purpose of this article is to just quickly inform the standards ecosystem and SEP litigation community of the Munich LD’s key holdings. Also, the judgment sheds light on Netgear’s patent exhaustion defense.
Direct impact & wider ramifications: It is clear that the Munich LD, at least its first panel, will be no less prepared to order SEP injunctions than the Mannheim LD, which whose Panasonic v. OPPO decision (November 22, 2024 ip fray article) the Munich LD agrees in every respect that matters. Beyond an adoption of the German approach to FRAND, which expects the implementer to act constructively throughout the course of negotiations, today’s Munich decision also follows the Munich I Regional Court’s IP Bridge v. Ford (2022) caselaw and holds that a SEP holder can discharge its FRAND licensing obligation by making a pool offer, at least unless the implementer manages to convince the court that the pool offer is not FRAND.
First, the simple part, which is patent exhaustion (a concept that is not specific to SEPs): according to the decision, Netgear did not infringe and will not infringe with respect to devices incorporating chips that Qualcomm sold in Europe in the years 2020-2024. In other words, any chipset that Netgear receives from Qualcomm after the end of this month is not going to come with a license to Huawei’s WiFi 6 SEPs. At the late-October trial, Qualcomm’s name and the term of the license were not mentioned, and patent exhaustion was one of the topics of the confidential part of today’s announcement.
The decision stresses the territorial nature of exhaustion. Netgear would actually have to buy those Qualcomm chips in Europe. Whether they do so or actually receive those chips elsewhere (such as in Asia) is not known.
Now, with a view to SEP cases in general, the purpose of this article is not to discuss, much less critique, the Munich LD’s holdings in detail, but to sum up rapidly what the ecosystem and the litigation community need to know.
Rejection of core positions of European Commission amicus brief
The Munich LD fundamentally disagrees with the European Commission’s amicus curiae brief in VoiceAge EVS v. HMD (August 4, 2024 ip fray article):
While this may not even have been an issue in Huawei v. Netgear, the Munich LD rejects the EC’s position that the infringement notice must contain all of the required information as opposed to what VoiceAge EVS did, which was to provide some information via a link to a website. In this particular regard, ip fray has also had doubts about the EC’s position.
The Munich LD. like the Mannheim LD, adopts the German approach that the implementer’s declaration of a willingness to take a license on FRAND terms is not merely a question of the wording of such declaration, but must be viewed on the balance of the overall course of negotiations. That is the single most important aspect of the EC’s amicus brief and means that two UPC LDs, both of them based in Germany, have rejected the EC’s views. Today’s decision mentions that judges are constitutionally independent of the views of the executive government.
One of the effects of this is that an implementer is expected to make a FRAND counteroffer regardless of whether the SEP holder’s initial offer is FRAND (except, perhaps, if it was blatantly supra-FRAND). By contrast, the European Commission’s amicus brief contains a chart according to which a non-FRAND royalty demand by the SEP holder is the end of the story (no injunction).
The Munich LD rejects the notion that it should focus on the SEP holder’s first offer. Instead, like the Mannheim LD and German national courts, it focuses on the overall conduct of the parties and the last offers that could be accepted.
Failure to provide security can be dispositive of FRAND defense
The Munich Higher Regional Court has recently placed some importance on the implementer’s provision of collateral, and may in its decision further to the recent VoiceAge EVS v. HMD appellate hearing (October 31, 2024 ip fray article) emphasize that aspect of the implementer’s conduct even more. The UPC’s Munich LD is not bound by German caselaw in any way, but has taken note of the Munich Higher Regional Court’s views and holds it against Netgear that it it did not provide security at any point in time.
The UPC’s Munich LD is aware of the Munich Higher Regional Court’s inclination to allow implementers to make up until trial time for a previous failure to provide collateral, but did not have to resolve that question in today’s decision as Netgear never gave security.
SEP holder may offer only a pool license, no bilateral license (though Huawei did anyway): IP Bridge v. Ford reloaded
Today’s decision holds that Netgear would have lost the case for the simple reason that it never explained its rejection of Sisvel’s WiFi 6 pool license offer. Huawei is the largest contributor to that pool.
Huawei made a bilateral offer anyway, but the decision explains that whatever criticism Netgear may level at that one is irrelevant due to certain shortcomings of Netgear’s defense, one of which is that Netgear declined to take Sisvel’s pool license without explaining why the terms of that one would be unfair, unreasonable or discriminatory.
The judgment notes that Netgear, even at trial time, never went beyond acknowledging that the pool offer was under consideration, as opposed to explaining why it should be deemed unfair, unreasonable or discriminatory.
Going even further, the decision says that a SEP holder may meet its FRAND licensing obligation by making only a pool offer, and that implementers are not entitled to a bilateral offer unless they can show that the pool offer is not FRAND. Presiding Judge Dr. Matthias Zigann was also the presiding judge of the Munich I Regional Court panel that granted Japan’s IP Bridge a 4G SEP injunction against Ford in 2022. In that case, the patentee did not put a bilateral offer on the table, but referred Ford to the possibility of taking the Avanci 4G license. Ford was enjoined, took the pool license indeed, and a few months later virtually every non-Chinese automaker who hadn’t done so before did so as well.
UPC as SEP venue
The decision says implementers can bring a FRAND counterclaim for the purpose of obtaining a license (another respect in which today’s Munich LD decision concurs with last month’s Mannheim LD decision).
It also mentions the possibility of SEP holders bringing antitrust actions in national court for that purpose.
SEP holders seeking to enforce their rights now know that the Munich and Mannheim LDs are venues in which they are similarly likely to win injunctions as in German national court. Munich is now the first UPC LD to have taken a position on pool-only license offers (again, Huawei did make a bilateral offer anyway, but the court held that it would not have had to do so). There was no pool option in Panasonic v. OPPO, so the Mannheim LD did not have the opportunity to speak out on that question, though it may share the same view. Given the tradition of the Dusseldorf Regional Court’s jurisprudence as well as what happened at the pretrial stage in certain proceedings before the UPC’s Dusseldorf LD (June 26, 2024 ip fray article), it would be a bit of a surprise if the Dusseldorf LD held in some other case further down the road that SEP holders must always offer a bilateral license.
It now remains to be seen what will happen on appeal, but based on the published decision it is clear that Huawei would have had more than one way of defeating Netgear’s FRAND defense. Therefore, this case is actually not a good vehicle to resolve fundamental SEP-related questions. The best vehicle would be a case where the outcome hinges on a single question, such as the availability of a bilateral license (which was the case here anyway, even if deemed unnecessary by the court).