All eyes on Luxembourg – Düsseldorf refers Nokia v. Daimler FRAND dispute to CJEU
On Thursday, 26. November 2020, the Regional Court Düsseldorf announced its long-awaited decision in Nokia’s first instance infringement suit against Daimler. Observers had tried to predict whether the court would hand down another injunction against the luxury car manufacturer, as courts in Mannheim and Munich had done, or decide against an injunction, or even refer certain legal questions of the dispute to the Court of Justice of the European Union (CJEU).
As Presiding Judge Klepsch announced, the court has opted for the latter, referring several questions to the CJEU and staying the infringement suit for the time being.
I. The Referral
The referral procedure under Art. 267 TFEU applies where a court in an EU member state requires an interpretation of EU law in its decision. Courts of last instance then must refer to the CJEU for such an interpretation, whereas lower instance courts may choose to do so at their discretion.
The battle between Nokia and other SEP owners against Daimler has seen multiple decisions already by the Regional Courts of Mannheim and Munich. These courts decided against a referral. The Regional Court Düsseldorf may now turn the tide.
The questions referred to the CJEU concern the following topics (for a translation of the full wording of the questions, click here):
1. Is there an obligation to primarily grant licenses to suppliers?
A central aspect of the dispute between Nokia and Daimler is licensing in complex supply chains. In the mobile communications industry, licenses traditionally are negotiated at the level of the end-product manufacturer, covering suppliers via have-made rights or similar means. In the automotive industry, however, licenses traditionally are granted to suppliers, leading to exhaustion of licensed rights downstream along the supply chain.
Nokia argues that an SEP owner can choose freely at which level to grant a license, in this case opting for the end-product manufacturer. Daimler argues that EU common market rules and the ETSI FRAND declaration require that Nokia grant a license to any willing licensee, including its suppliers.
The Regional Court Düsseldorf now refers this question to the CJEU, asking whether it constitutes an abuse of a dominant position pursuant to Art. 102 TFEU to refuse a license to a supplier. Also, the court asks whether the scope of such a supplier license would have to be such that the supplied company would in turn require no license. Finally, if the refusal to grant a license to a supplier does not constitute an abuse, the court asks whether there are any restrictions on the SEP owner’s decision to initiate injunction proceedings at a specific level of the supply chain.
2. Further specification of the CJEU’s “Huawei/ZTE” requirements
The court takes this opportunity to also refer more general questions surrounding the FRAND defence to Luxembourg. These cover several issues that are treated differently among German courts and on which the recent decision by the Federal Court of Justice (FCJ) in Sisvel v. Haier has brought no final clarity.
First, the Düsseldorf court wants to know whether both the SEP owner and the implementer can still fulfil their obligations under the Huawei/ZTE scheme if they have failed to do so in time, i.e. before injunction proceedings were initiated.
Second, the court asks what should be asked of an implementer to consider them a willing licensee. This question seeks clarification on the second step of the Huawei/ZTE scheme, which has become a higher hurdle for implementers after the courts in Mannheim and Munich adopted a strict interpretation of the FCJ’s Sisvel v. Haier decision, putting implementers to a general test of conduct. Specifically, the Regional Court Düsseldorf asks the CJEU whether a several months long silence by the implementer, or certain licensing terms in the implementer’s counter-offer (without a review of the SEP owner’s offer) can be interpreted as a lack of the willingness to take a FRAND license.
II. Implications for SEP owners and implementers
It remains to be seen how other courts will react to the Düsseldorf decision. It is possible that parallel proceedings against Daimler will be stayed until a decision is handed down by the CJEU, which could take years.
However, this does not necessarily mean that a stay is likely in other SEP-related litigation as well. In principle, there is no obligation for lower-instance courts to stay infringement proceedings (or enforcement proceedings), as a stay is generally in the discretion of the court. Moreover, the majority of the referred questions relate to specifics of the automotive industry and do not necessarily apply to other sectors, such as telecommunications.
Thus, while the Düsseldorf decision has broken the series of first-instance decisions which established stricter obligations for implementers, SEP enforcement in Germany remains effective. Courts will be particularly unlikely to stay injunction proceedings where the question of licensing in the supply chain is not an issue.
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