Infringement action and patent essential to a standard

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Chapter 1. Essential Patent to a Standard

Section 1.1. Standard

A standard (or "standard") is a standard issued by a standards body or a group of organizations.

We can cite, for example, the IEEE (which manages including WIFI standards, networks, etc.), ETSI (which manages the GSM standard) or 3GPP (which manages including 3G, LTE, etc.) .)

A standard describes in detail how a technology works: it details the mandatory or optional features of the standard.

Section 1.2. The operation of the standard

In practice, manufacturers participate in standardization committees and propose new methods and functionalities to be integrated into the standardization committee (eg innovative compression method, interference management method, etc.).

These proposals are then discussed in committee and are found (or not) in the final standard (or at least one of its versions).

Of course, the participation of manufacturers in these committees is not totally disinterested: most often, these manufacturers have patents that cover the features they offer.

Section 1.3. Declaration of Industrial Property Rights

Most often (it is difficult to make generalizations), the industrialists participating in these standardization committees have the contractual obligation to declare all the industrial property rights they possess which are essential to the implementation of 'a standard.

For example, Article 55 of the 3GPP Regulation states:

Individual Members should declare at the earliest opportunity, any [Intellectual Property Rights] which they believe to be essential, or potentially essential, to any work ongoing within 3GPP. Declarations should be made by Individual Members to their respective Organizational Partners.

Section 1.4. Industrial compensation

Depending on the standardization bodies and according to standards, the remuneration of industry can vary:

  • those wishing to implement a standard directly contact individual industrialists to obtain a license on their industrial property rights,
  • either these people contact the standardization body in order to pay them a license, the standardization body then having the task of distributing this license among its members (most often depending on the number of industrial property titles).

Section 1.5. Principle of conditions called "FRAND"

Some standards (more and more) impose on industrialists participating in the standard the obligation to grant licenses on their industrial property rights covering the standard under the so-called "FRAND" conditions.

This means that the license must be:

  • Fair: the license must not contain terms unduly restricting competition;
  • Reasonnable: the price of the license must not be prohibitive in the light of the advantage afforded by the inventions covered by industrial property rights;
  • Non-Discriminatory: It is not possible to refuse to grant a license to a particular third party, even a direct competitor.

Chapter 2. Counterfeiting action

Section 2.1. Principle

Industrialists participating in the standard possessing industrial property rights, we can legitimately think that these can introduce actions in counterfeiting against the persons implementing the standard, without taking a license.

But is it so simple?

Section 2.2. Abuse of dominant position ?

Indeed, in a 2015 case, ZTE argued that the infringement action brought by Huawei Technologies constituted an abuse of a dominant position by Hutei Technologies because Huawei Technologies' claims were disproportionate to a third party (ZTE ) willing to pay a license, but could not reach an agreement with the rights holder.

ZTE claimed that Huawei Technologies' conduct was contrary to Article 102 of the Treaty on the Functioning of the European Union:

Is incompatible with the internal market and not allowedto the extent that trade between Member States is likely to be affected, the fact for one or more abusing a dominant position in the internal market or in a substantial part of it.

These abusive practices may include:

(a) directly or indirectly impose purchase or selling prices or other trading conditions unfair,

(b) limit production, markets or technical development to the detriment of consumers,

(c) apply dissimilar terms to equivalent transactions with trading partners, thereby placing them at a competitive disadvantage

(d) make the conclusion of contracts conditional on the partners accepting additional services which, by their nature or according to commercial practice, are not related to the subject-matter of those contracts.

Section 2.3. Conditions established by case law

The CJEU had to analyze this article in the light of the ZTE-Huawei conflict.

In its judgment of 16 July 2015, the CJEU distinguished two types of action for infringement:

  1. Actions to stop the infringement or recall of products
  2. Actions to Obtain Accounting Data and Damages

As regards point 1, there is no abuse of a dominant position if, cumulatively:

  • prior to the introduction of the action, the patentee has
    • warned the alleged counterfeiter that one of his actions was potentially infringing by designating the right of IP concerned and specifying the manner in which it is infringed, and
    • transmitted to this counterfeiter, after the latter has expressed its willingness to conclude a license agreement under FRAND conditions, an offer of license specifying in particular the royalty and its calculation methods;
  • the alleged infringer continuing to exploit the IP right did not respond to this offer with diligence, "in accordance with accepted commercial practice and in good faith ", which must be determined on the basis of objective elements and implies in particular the absence of any delaying tactics.

In short, you will understand, there is still a lot of subjective ...

Regarding point 2, the CJEU considers that there is no abuse of a dominant position under any assumption, the request for accounting information and the claim for damages having no direct impact on competition in the commercial sense.

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