The Unified Patent Court (UPC) has made an impressive start: the number of cases being very high, at least from a German perspective. The judges are also doing everything necessary to bring about a first-instance decision within twelve months, at least in the majority of cases.
The flood of lawsuits in the area of standard essential patents (SEPs), however, has not materialized.
Despite everything, proceedings before the UPC concerning SEPs represent a non-negligible proportion of the pending patent infringement proceedings. In this respect, it is eagerly awaited how the UPC will implement or adopt the national and supranational mechanisms established so far - in particular those of the national courts, which are intended to enable everyone to obtain an SEP license on fair, reasonable and non-discriminatory (FRAND) terms.
At a national level, it has been shown that the question of what is fair and reasonable is very much in the eye of the beholder. The manner in which the holder of an SEP and the potential licensee have to behave when negotiating a corresponding licence has also been extensively discussed before the national courts. The term “FRAND dance” makes it clear that both parties are expected to follow a predetermined choreography. If one of the parties deviates from the predetermined pattern of behaviour, this can have serious consequences in infringement proceedings.
A particularly interesting question in this context is whether the UPC will agree to determine (global) FRAND rates. The German courts have, so far, consistently refused to do so. There is therefore not a single German decision in which a court set a FRAND rate. The German courts are of the opinion that they are ill-suited to determine the correct price for a FRAND licence (according to the former presiding judge of the X. Civil Senate of the BGH Professor Dr. Meier-Beck in an interview with the legal journal JUVE in 2021). Since the majority of SEP proceedings pending before the UPC are pending before the German Local Divisions, which are composed of the same judges who have so far resisted setting such a FRAND rate in national proceedings, it remains to be seen whether they will take a different stance in the new UPC environment. A corresponding case before the Local Division of Mannheim (case ID: ACT_545551/2023 UPC_CFI_210/2023) was therefore followed with great interest from all sides (more on this in a moment).
In contrast, US, Chinese and British courts show significantly less restraint. Courts in all three countries have set FRAND licence rates. The UK High Court (and, on appeal, the UK Supreme Court) has even set a global FRAND rate (without both parties agreeing; Unwired Planet v. Huawei, Case ID: HP-2014-000005).
Chinese courts have also set global FRAND rates (Property Tribunal of the Supreme People's Court, Oppo v Sharp; People's Court of Chongqing Municipality, Oppo v Nokia). The Supreme People's Court of China has already clarified in a decision earlier (Oppo v Sharp in September 2021) that the Chinese courts generally have the necessary jurisdiction to grant a worldwide FRAND licence.
The UK courts, in particular, have recently excelled in repeatedly setting FRAND rates (UK High Court of Justice, Optis v. Apple, [2021] EWHC 2564 (Pat); UK High Court of Justice, InterDigital v. Lenovo, [2023] EWHC 529 (Pat)).
Further pending proceedings between Panasonic on the plaintiff side and Xiaomi and Oppo on the defendant side (in the United Kingdom, in Germany in national proceedings and before the UPC) ended a few days ago (end of October) with a settlement.
As a result, Oppo's FRAND determination counterclaim in the patent infringement proceedings between Panasonic and Oppo was also terminated prematurely by the Mannheim Local Division, much to the regret of many observers who had been eagerly awaiting a decision (this had been announced for December 6).
Oral proceedings were held in Mannheim at the beginning of October. At the oral hearing, the Mannheim Local Division at least gave an initial indication of what it might think about such a FRAND determination action (statements made by the courts at oral hearings are to be understood as a preliminary assessment at best). The points to take away from the oral hearing are that at least the Mannheim Local Court does not consider it impossible to accept such a FRAND rate determination. However, it indicated that it would consider an existing SEP patent infringement action to be necessary as a sort of “anchor” for such a (counter-)FRAND rate determination action. It sees no scope for detached FRAND rate determination actions that are not related to an SEP patent infringement action. The UPC sees itself as a patent court that only takes action when patents are specifically affected. An exclusive FRAND rate determination, on the other hand, would fall within the legal area of competition or antitrust law.
Furthermore, the UPC considers itself responsible with regard to the territorial scope of such a FRAND licence only for the member states of the UPC (in the case of a unitary patent) or for the countries in which the asserted European patent is validated. Finally, the UPC cannot force the parties to conclude a licence at the FRAND rates set by the UPC. The only consequence for an SEP patentee who would refuse to conclude a FRAND licence at the terms set by the UPC would be that a corresponding injunction would be denied in the parallel patent infringement proceedings.
Since - as already mentioned - the parties have reached an agreement ahead of schedule, a definitive answer to the question of whether the UPC will set a FRAND rate remains open. It will therefore be necessary to await a corresponding application for the determination of a FRAND rate to be filed again at which point the UPC will hopefully be able to make a decision.
In addition, with regard to the approximately 30 pending proceedings, it can be assumed that SEP holders have waited in recent months for an understanding as to how the new court will adopt the FRAND dance. It is likely that the first decisions on this issue (on “normal” SEP proceedings without determination counterclaims) can be expected in November and December of this year. As soon as there is clarity on this point, we expect that the number of SEP-related cases will significantly increase.
Due to the fact that the settlement between Panasonic and Oppo was not finalized in time, the Mannheim Local Division had the opportunity to hand down the UPC's first FRAND decision on November 22, 2024 (UPC_CFI_ 210/2023), ruling – inter alia – on Oppo's FRAND defence and its counterclaim for FRAND determination.
