On 22 November 2024, the Mannheim Local Division of the Unified Patent Court (UPC) issued its first decision on standard-essential patents (SEPs) and FRAND (fair, reasonable, and non-discriminatory) obligations in the highly anticipated case between Panasonic Holdings Corporation and Oppo (Guangdong OPPO Mobile Telecommunications Corp. Ltd. et al.). The case concerned European Patent EP 2 568 724 B1, which Panasonic asserted as essential to the 4G LTE standard. The defendants, Oppo Mobile Telecommunications and OROPE Germany GmbH, allegedly infringed the patent through their 4G-capable devices. Panasonic sought injunctive relief, damages, and other remedies, while Oppo counterclaimed for a FRAND license and alleged violations of competition law.
Given that the parties in principle settled, the patent community did not expect a decision to be made by the court. However, the Mannheim Local Division decided the case and delivered one of the first official judgements on SEP matters at the UPC.
Thanks to that, the issued decision allows an initial insight on how the UPC might handle FRAND obligations for either party – also referred to as the “FRAND dance”. Further, the admissibility of a counter claim for determining FRAND licenses has been addressed.
As expected, the court took a practical approach to the FRAND dance as set out by CJEU’s Huawei vs ZTE ruling. The court appears to refuse to pick up a too formalistic approach and – as a general standard - applies as a blue print “usual business practise” when negotiating for a license. With this approach, the UPC – even within the German divisions - seems to establish its own approach which is also sufficiently distinct from the German approach. Contrary to German practise which shifted a significant burden/risk on the implementer, the court appears to look at both parties and how they are approaching the negotiation. Thus, the current UPC approach appears to look for a “balance of willingness”. If one of the parties provides a tangible offer the other party is well adviced to take a similar step forward.
Even with this - for an implementer a bit more relaxed approach - Oppo failed to successfully raise the FRAND defence. Although Panasonic only provided a claim chart for a Chinese counterpart of the patent, the court deemed it sufficient.
The court emphasized that SEP owners must justify their licensing offers with clear, substantive arguments rather than simplistic calculations. While not fully detailed, offers must provide enough economic clarity for implementers to meaningfully respond. Panasonic’s offer met these standards, while Oppo’s objections, raised only during litigation, were deemed untimely. The court further affirmed that FRAND terms represent a range of acceptable rates, and SEP owners are not required to offer the lowest rate within this corridor.
The ruling reaffirmed that implementers must provide adequate security, including full disclosure of their SEP usage, to support their counteroffers. Oppo’s counteroffer was rejected as non-compliant with FRAND principles because it lacked transparency and restricted the license to the UPC territory.
Already, at the oral hearing, the Mannheim Local Division gave an initial indication that a FRAND determination action (statements made by the courts at oral hearings are to be understood as a preliminary assessment at best) is admissible. It was 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.
With the present decision, it is confirmed that a FRAND determination action is admissible at the UPC. However, according to the court, such an action must be directed to a world-wide license. Limiting the determination to a particular territory, e.g. the member states of the EPC might only under exceptional conditions be permissible.
For the present case, the court dismissed Oppo’s counterclaim seeking a mandatory license, emphasizing that its actions fell short of FRAND obligations.
