Munich Regional Court: Specification of the requirements for the mutual willingness to license on the part of the patent proprietor and patent user
In its judgement of 17 February 2023, Regional Court of Munich I specified its FRAND case law in a legal dispute between GE Video Compression LLC and TCL Deutschland GmbH (File No. 21 O 4140/21).
In the legal dispute before Munich Regional Court I, GE Video Compression LLC asserted claims arising from a HEVC SEP. In this judgement, Munich Regional Court specified its requirements for the mutual willingness of the patent proprietor and patent user to grant/take a license in the FRAND negotiations and rejected TCL’s FRAND objection for lack of willingness to take a license.
Munich Regional Court I based its decision on Federal Court of Justice’s decisions FRAND-Einwand I and FRAND-Einwand II. The patent user has to continuously demand the conclusion of a FRAND license agreement and be willing to cooperate in the conclusion of this agreement. Without this willingness, the patent user’s FRAND objection would come to nothing. The patent proprietor must also be willing to grant a license in the negotiations. The behaviour of the patent user and the patent proprietor are mutually dependent. The benchmark of the assessment was what a reasonable party interested in the successful conclusion of the negotiations in a manner that was in the interests of both parties would do at a particular stage of the negotiations to promote this objective. The parties’ negotiating steps build on each other. If there was no willingness to take a license on the part of the patent user, it could be left open whether the patent proprietor’s offer (in substance) complied with FRAND conditions. The license seeker would only not have to respond to an offer by the patent proprietor if it was so contrary to FRAND that it was unacceptable in an objective assessment.
On this basis, Regional Court rejected Defendant’s FRAND objection.
Regional Court first examined whether Plaintiff’s offer was so contrary to FRAND that it was absolutely unacceptable and answered in the negative. In doing so, Regional Court examined the patent proprietor’s willingness to grant a license. As a rule, there was no willingness to grant a license if the patent proprietor insisted on discriminatory or arbitrary conditions and was not prepared to abandon these conditions even at the end of the negotiations. If a patent pool made a license offer for an SEP, the patent proprietor has to accept this offer against itself. The patent user has to present and prove that the offer is contrary to FRAND. In any case, he must present plausible evidence that an offer is discriminatory and why. In individual cases, the patent proprietor could be required to provide additional information on the offers due to his secondary burden of proof (sekundäre Darlegungslast).
On this basis, Regional Court found no concrete evidence that Plaintiff was unwilling to take a license.
In its judgement, Regional Court reasoned, inter alia, that Plaintiff did not have to plead comparative license agreements if the patent user had justified the discrimination on the basis of the “effective license burden”. In addition, it was decisive that there was no discrimination if Defendants concluded a license agreement on the same terms as those granted by Plaintiff to its competitors. However, Defendants had not sufficiently responded to this proposal. A willing licensee would have been obliged to do so.
Regional Court also showed that no discrimination could result from the settlement license agreements because they had been concluded “pre-litigation”. Such agreements are to be distinguished from license agreements that are only concluded after legal proceedings have been initiated.
However, Regional Court recognised Defendant’s unwillingness to take a license. It reasoned that the lack of willingness to take a license resulted in particular from the hesitant negotiations. In doing so, it distinguished between the conduct before the action was filed and the conduct after the action was filed.
In the period leading up to the filing of the action, Defendants had been unwilling to take a license, as they had not responded sufficiently to the pool’s attempts to contact them.
Even after the action was filed, they had not promoted the license negotiations to the necessary extent and had not compensated for the failures of the previous five years. This would contradict the declared willingness to take a license.
The overall conduct of Defendants showed their lack of interest in reaching a conclusion of the license agreement with the pool and Plaintiff quickly. In particular, Defendants did not present objections to Plaintiff’s offers and reasons against the fulfilment of FRAND conditions in a timely manner. Defendants pursued the goal of enforcing their own (financial) license conditions against Plaintiff and used delaying tactics. This is evident from the constant request for further information without any constructive use being made of the information provided. Even after the action had been filed, Defendants’ conduct did not show that they were concerned with a timely and reasonable conclusion of the license agreement, but that the unwillingness to grant a license had persisted. Defendants participated in the license negotiations too late and too little to compensate for the previous delays and omissions. Defendants’ counter-offers showed that they were not interested in concluding a contract on FRAND terms. They demanded conditions that were structurally and legally impossible for the pool, as the pool would otherwise be in breach of its statutes. The counter-offers were aimed at content that could not be accepted by the pool and that Defendants could not claim. A reasonable license seeker would not have tried so long and hard to enforce these conditions. Defendants should also have provided the pool with information about their sales figures. In addition, Defendants’ delayed reaction – inter alia in the counter-offer – showed that they had not been willing to take a license.
In addition, Plaintiff had made a bilateral offer to Defendants as an alternative to the pool offer. Defendants did not respond to this.
In its decision, Munich Regional Court also reasoned that the objection that Plaintiff or the pool breached its duty to promote was not valid. It was sufficient that Plaintiff or the pool had made license agreements available in a data room and had continuously updated and supplemented them. These contracts gave Defendants a first impression of the licensing situation. A willing licensee would formulate initial interests and key points of a license agreement on this basis and possibly request further information on the terms and conditions of its main competitors. In any case, a willing licensee would not request the submission of all patents and all license agreements without dealing with them in substance.
The Regional Court also reasoned that Defendant’s handling of the blackenings proved its unwillingness to take a license. On the one hand, the blackenings had not been unreasonable because, according to Defendants’ submissions, the passages provided did not contain any information relevant to the assessment of the license fee. In addition, Defendants had waited too long before filing an application for production.
The constant request for further information also proves the lack of willingness to take a license. Defendants should have dealt with the information provided and the information should have been reflected in new negotiating positions. Defendants had not complied with this. It follows from this that Defendants’ interest in clarification was only pretextual.
Further objections by Defendants did not change this either, as these objections had been raised too late.
Finally, Munich Regional Court ruled that defendants’ requests for production were unfounded. Since Defendants were unwilling to take a license, it was not necessary for Plaintiff to disclose further information and submit relevant documents. The submission was not relevant to the decision. It was not apparent that Defendants would abandon their dilatory behaviour as a result of the submission. Moreover, there was no claim to submission under antitrust law. In principle, Defendants were only entitled to the submission of contracts that affected the same market. They did not explain which contracts they needed in addition to those already submitted.