Munich Local Division Weighs in on FRAND in the SEP case Huawei v. Netgear

Munich Local Division Weighs in on FRAND in the SEP case Huawei v. Netgear

The Unified Patent Court (UPC) continues to refine its jurisprudence on standard-essential patents (SEPs) and FRAND (fair, reasonable, and non-discriminatory) obligations.
On December 18, 2024, the Munich Local Division delivered another key UPC ruling in Huawei v. Netgear (UPC_CFI_9/2023), addressing SEP holder and implementer responsibilities under the FRAND framework. This decision aligns largely with previous UPC ruling Panasonic v. Oppo of the Mannheim Local Division but introduces also own considerations which are not fully in alignment with Mannheim.

In the following, we will focus on some aspect which seem worth mentioning in addition to our report on the Mannheim decision.

Initial Offer

One striking elements of the Munich ruling is the statement that the initial offer of the implementer must not be FRAND but is a starting point for further negotiation. At first sight this statement appears to be in contrast with what the European Court of Justice is postulating. However, in the end, it just illustrates the fact the SEP owner can only take best efforts to provide a FRAND license proposal. Further facts provided by the implementer can only considered once they have been made known to the owner. Therefore, depending on the feedback from the implementer the SEP owner might have to reformulate the offer. The Munich division made sure to point out that in such a scenario of several offers only the last offer on the table must be evaluate on its FRAND conformity.

Further, the court clarified that it may only evaluate these offers substantively if the implementer fulfils their obligations. Notably, the decision leaves room for a less formal review of the SEP holder's conduct compared to the Mannheim approach.

Evaluation of the Implementer Behavior

Event stricter than the Mannheim Division Munich set out that the standards that an implementer has to meet are high. The court emphasized that a party that wants to relay on the FRAND defence must meet specific conditions. This includes:

• Submitting a FRAND-compliant counteroffer without delay tactics.
• Providing adequate security to cover potential liabilities.
• Disclosing precise details regarding the use of the SEP.

Failure to meet these obligations could result in the court skipping a detailed review of the SEP holder's licensing offer. This approach creates a strong incentive for implementers to act promptly and transparently during negotiations.

Security Deposits

The ruling also clarifies the requirements for security deposits. At a minimum, the deposit should cover the implementer’s counteroffer. Whether it must extend to the higher licensing demands of the SEP holder was left undecided in this case, as the implementer had failed to provide any security. This clarification aligns with a more implementer-focused standard in German case law but tightens expectations for financial transparency.

Burden of Proof on Dominance and Essentiality

Another significant aspect of the decision is its treatment of market dominance and essentiality. The Munich court declined to assume Huawei’s dominance in the SEP licensing market because of insufficient evidence presented by the Defendant.

Our Key Takeaways:

• With its decision, the Munich Local Division confirms many aspects that the Mannheim Local Division has set-out in its most recent ruling on FRAND and SEP.
• The Munich Local Division emphasise that implementers must meet procedural requirements, like offering a FRAND-compliant counteroffer and providing security, before the SEP holder’s terms are reviewed.
• The decision highlighted that market dominance cannot be presumed without strong evidence, shifting the burden of proof onto SEP holders.

To the decision To the Blog Overview