On 14 October 2011, the president of the District Court of The Hague denied the injunction sought by Samsung in relation to the alleged infringement by Apple of a number of its patents. The Court held that invoking the patents, essential under the UMTS standard, would constitute an abuse of rights. Under the circumstances of the case, which were not fully disclosed, the Court concluded that Samsung effectively refused to conclude a license on FRAND terms and thereby sought to evade its obligations arising from its participation in a Standard Setting Organisation (ETSI/3GPP) and its own FRAND undertakings.
Background
Samsung invoked four patents concerning 3G (UMTS) technology
against Apple in preliminary relief proceedings. It was not in
dispute that these patents are essential under the UMTS
standard and therefore also practiced in Apple's iPhone and
iPad.
Samsung participated in the development of the UMTS standard within
the standard setting organisation ETSI. In relation thereto Samsung
had issued a general undertaking that it was prepared to grant
license to its essential patents on Fair, Reasonable and
Non-Discriminatory (FRAND) terms. After the standard was concluded,
Samsung declared the patents that it deemed essential for the
standard, and gave specific FRAND undertakings for these patents
(including the patents in suit). Samsung now tried to
invoke against Apple. Earlier, Apple expressed an
interest to conclude a licence with Samsung in April
2011.
The Dispute
According to Apple, the patents of Samsung would not be
enforceable as a result of the FRAND undertakings. Under French
law, Apple argued, the FRAND undertakings amount to a license offer
which can be accepted by complying with the standard.
Apple took the position that it concluded a license agreement
by adopting the UMTS standard (and only the terms of
the royalty still had to be established). Apple further argued that
Samsung would be estopped from enforcing its patents in view of its
FRAND undertakings (as Apple argued, after which an essential
patent cannot be enforced), its participation in the standard
setting process and its ex post facto notifications of the
Patents (a "patent ambush"). As a last resort Apple
argued that in the circumstances of this case Samsung is abusing
its rights and on that ground, Samsung's patents would not be
enforceable against Apple.
Decision
The Judge found that a FRAND undertaking obliges a party to
negotiate but rejected the position that (under French law) a FRAND
undertaking was an offer which is accepted as soon as the standard
is applied.
The Judge further held that there was no estoppel with respect to
Samsung's patent rights. The mere issuing of a FRAND
undertaking does not deprive the owner of an essential
patent of his right to an injunction, even if, as in this
case, the specific FRAND undertakings in respect of the Patents
were issued after the standard setting process was
completed. He then considered that Samsungs' demands
in respect of the FRAND License were unreasonable to the point that
Samsung was effectively refusing to grant a license.
Apple substantiated its position that its own FRAND
proposal was reasonable and according to the Judge Samsung did not
sufficiently dispute this.
The Judge therefore held that under the circumstances of this case
enforcing the patents amounts to an abuse of rights and he denied
the injunction. The Judge suggested that Samsung was effectively
evading its FRAND obligations and concluded:
"The road to a FRAND License starts with a request for a
license by Apple, followed by a FRAND offer from Samsung. If the
parties cannot agree, Samsung may apply for an
injunction."
Comments
The Judge comes to the conclusion that a patent holder who issued a FRAND-undertaking may only enforce its patent rights after it has made a "reasonable" license offer. Because information on the negotiations and rates were not disclosed in the public version of the judgment, it is difficult to assess what test will be applied in order to determine when an offer is indeed "FRAND". For now it appears that an injunction will only be denied if the infringer has expressed a bona fide intention to conclude a license, but where the patentee's offer is so unreasonable that it constitutes a refusal to license. Any other test or further Court assessment of the reasonableness of an offer is likely to cause significant legal uncertainty.
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