Dueling UPC SEP Rulings Reveal a Mannheim-Munich Split over Transparency Issues

May 18, 2024

The launch of the Unified Patent Court (UPC) last June marked a new era in European patent litigation, enabling patent owners to enforce their patents in a single European Union (EU) venue with jurisdiction spanning 17 member states. As the UPC approaches its first anniversary, the court has played an increasingly prominent role in multijurisdictional patent disputes—including litigation over standard essential patents (SEPs) and disputes over their licensing on fair, reasonable, and nondiscriminatory (FRAND) terms. Now, as some of the court’s first FRAND litigation moves forward, the court has begun to address some unanswered questions on SEP issues—in the process, revealing an apparent split between two of the court’s most popular local divisions in Germany, those in Mannheim and Munich, over the proper approach to licensing transparency.

FRAND issues are not the only topic for which the UPC’s approach has yet to be fully fleshed out. However, there are larger gaps on this subject than for others because the treaty that led to the court’s creation—the UPC Agreement (UPCA)—does not specifically address FRAND matters, since SEP licensing was not as significant of an issue in when the UCPA was ratified in 2013.

The question of how the court might fill these gaps is not a straightforward one. As a general matter, the UPC must draw on a complex set of laws, from multiple sources, to fill gaps and answer questions left unresolved by the UPCA (and by the UPC’s since-enacted Rules of Procedure). In particular, EU law has primacy over the UPC, though as a practical matter it is the UPCA that governs patent enforcement before the court. Any gaps are to be filled by national law in participating EU member states. That national law must itself be construed in conformity with the EU’s IPR Enforcement Directive, which requires EU member states to establish a minimum set of measures, procedures, and remedies for effective IP rights (IPR) enforcement across the EU.

Amid this somewhat tangled legal landscape, stakeholders have looked to national courts for clues on how the UPC will fill in the gaps, while patent owners have appeared to prefer filing their cases at the UPC Local Divisions located in countries viewed as favorable. This is especially the case for those in Germany, which have accounted for the bulk of infringement cases thus far according to official UPC data: Per updated statistics released by the court on May 2, of the 123 infringement cases brought since the court’s launch, 46 (or 37%) have been brought in the Munich Local Division, 25 cases (20%) have been filed in Düsseldorf, and 16 (13%) in Mannheim (with other Local Divisions in the single digits apart from Paris, which has seen ten infringement cases).

Among the UPC’s German caseload has been the cases here at issue, comprising the court’s first SEP suits: a total of 12 cases filed by Panasonic in August 2023, including three filed against each of Oppo and Xiaomi in the Mannheim Local Division (Mannheim LD) and the same number of cases against those two defendants in the Munich Local Division (Munich LD). As has been the case in a variety of other operating company disputes, those UPC actions were accompanied by litigation brought by the patent owner in national courts—here, in the UK High Court and in Germany’s Munich and Mannheim Regional Courts.

Panasonic’s UPC SEP cases have served as an early indicator for how the court—or at least, its German divisions—may handle certain SEP matters going forward. For instance, in a set of procedural rulings issued in early February, the Mannheim LD exercised its discretion to hear infringement, validity, and FRAND claims together. This contrasts with the UK, a popular SEP venue because its courts have asserted of the power to impose global FRAND licenses, but where technical (infringement) trials have historically been held before separate trials addressing FRAND issues. High Court Justice Richard Meade argued last year, in an unrelated case, that the resulting delays and expense in deciding infringement first, where “[w]hat is really in issue is FRAND terms”, can cause “unfairness” to the patent owner. To the extent that the delayed consideration of FRAND issues penalizes the patent owner, then, the Mannheim LD’s scheduling of those issues in parallel could be viewed as more favorable to, or at least neutral for, that patent owner. (It is also worth noting that Justice Meade departed from the aforementioned trial sequencing custom in the parallel UK case between Panasonic and Xiaomi, scheduling a FRAND trial before the first technical trial in light of the defendant’s concerns that the German court or the UPC would issue an injunction first.)

In April, the UPC issued its first decisions that dealt with SEP-specific substantive issues—in particular, the requirements for the production of relevant license agreements as related to determining a FRAND rate. On April 3, the Munich LD adopted a relatively expansive approach in its rulings on a set of parallel requests by defendant Oppo to compel the production of relevant license agreements (as reviewed via a machine-translated version of the original German rulings).

The defendant’s motion sought to compel Panasonic to produce all license agreements covering patents declared essential to the 3G and/or 4G standards with respect to mobile devices, including license agreements covering patents owned or controlled by Panasonic, as well as related agreements that may affect the consideration to be paid under the former agreements; two license agreements between Panasonic and companies “X” and “Y” to which the patent owner referred in negotiations with Oppo; licenses with two other named companies, “M” and/or “Q”, that concern 3G and/or 4G SEPs; an overview of all transactions in which Panasonic divested 3G and/or 4G SEPs, including relevant agreements; and any agreements that Panasonic enters during litigation. Oppo also asked to introduce two of its own licenses with third parties covering 3G or 4G SEPs. Panasonic, for its part, sought to produce two of its own patent license agreements.

The Munich LD began by determining that it was appropriate to allow the submission of evidence on FRAND issues even though the later disposition of various related issues could make the defendant’s FRAND defense irrelevant. Turning then to the substance of Oppo’s motion, the Munich LD notably granted Oppo’s request for 4G license agreements from Panasonic for patents that it currently or previously owned, though it declined to order Panasonic to produce evidence of 4G patent divestments. The court also denied the request as to those 4G license agreements that would impact the consideration to be paid for the others as “not sufficiently specific”, also declining to apply limiting language from Panasonic that would only consider settlement agreements. Additionally, the Munich LD decided not to order Panasonic to produce the agreements with “M” and/or “Q”, noting that the patent owner denied that it had such a contract with the former, and that because both companies are suppliers of one of the defendant entities, the defendants should instead contact those companies directly. Nor did the court order the production of agreements pertaining to 3G patents, since only 4G patents were at issue with respect to infringement; or the production of license agreements not yet concluded. The court also granted Panasonic’s request to submit its own two license agreements without further analysis.

On April 30, the Mannheim LD issued an order (also reviewed here based on a machine translation) addressing a similar request from Panasonic to introduce two of its own license agreements, albeit with far more analysis of the procedural basis for its ruling. Here, the court concluded that even if the request did not fit within the bounds of the closest applicable UPC procedural rules, EU antitrust law as relevantly laid out in the EU Court of Justice’s Huawei v. ZTE decision takes precedence over UPC rules—and also overrides any objections, if any, from third parties to the agreements at issue. The court granted Panasonic’s request to submit the licenses in relevant part and with appropriate redactions, essentially the same result as the Munich LD.

However, in another order, issued on May 16 (again reviewed here in machine-translated form), the Mannheim LD reached a different result with respect to a motion to compel from Oppo that sought the same information as detailed above. In contrast to the Munich LD, the Mannheim LD declined to order the production of 3G or 4G license agreements, based on an overarching interpretation of EU antitrust law. Here, the court explained that such a request must be evaluated against the backdrop of Huawei v. ZTE’s holding that a SEP owner must provide a written license offer on FRAND terms that specifies the manner in which it is calculated—an obligation that exists if the implementer has expressed its intent to take a FRAND license.

According to the Mannheim LD, this aspect of Huawei establishes that an order requiring the production of all 3G and 4G licenses involving Panasonic “could be inappropriate if the alleged infringer were to be judged to be unwilling to license from the outset”. On the other hand, the court explained, the SEP owner’s duty of transparency under Huawei requires the patent owner to specifically justify why it believes an offer to be FRAND, which can be satisfied by pointing to an already-established licensing program. The court found that the two agreements already submitted by Panasonic—those with the companies “X” and “Y”, which were among those sought by the defendants—served to make such a showing, as Panasonic had relied on those two agreements during pretrial negotiations and had not indicated that any other agreements were comparable.

Since Oppo’s willingness had not yet been addressed in this case, and given the interests of the third parties to the agreements at issue, the Mannheim LD found it was not necessary to order the production of all 3G and 4G licenses by Panasonic. The court found that this conclusion was further justified under Huawei as being consistent with “recognized commercial practices”, wherein the parties to a “result-oriented” negotiation would “limit themselves to a manageable number” of agreements to avoid bogging down the proceedings. The ruling was further justified by the fact that there had been no showing that Panasonic had any other more closely comparable agreements, the court continued, explaining that consequences would only be required if it were later determined that the patent owner improperly withheld such comparable licenses.

For these reasons, the Mannheim LD underscored, the Munich LD’s “different decision . . . cannot be joined”.

The Mannheim LD applied these same considerations in denying Oppo’s request for 3G and 4G licenses over Panasonic-owned patents as well as for license agreements concluded during these proceedings. Moreover, the court denied its request for certain Panasonic agreements with Oppo’s suppliers, holding that Oppo must give its suppliers “priority”. The court additionally denied Oppo’s request for an overview of transactions in which Panasonic had sold 3G or 4G SEPs, in part because the record already includes a list of out-licensed patents that can be compared with the asset lists from Panasonic’s offer here.

It is not clear whether appeals of any of these decisions are underway, given the relatively limited public access that the UPC provides to court dockets. Nonetheless, whether in this dispute or another, it seems likely that the Court of Appeal will have to resolve this apparent split on SEP transparency at some point in the future—particularly as the UPC seeks to establish itself as a viable SEP venue in the face of an EU regulatory proposal that, according to at least one UPC judge, could cause patent plaintiffs to avoid the EU altogether. See RPX’s latest quarterly report for details on that proposal and those criticisms.

For further coverage on the UPC, including notable recent rulings on the topic of preliminary injunctions and NPE litigation, see “UPC Overturns First Preliminary Injunction as Another NPE Takes the Plunge” (March 2024).

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