The EU’s Unified Patent Court (UPC) has played an increasingly important role in multijurisdictional patent disputes since its launch last June. While the court’s approach to various substantive and procedural issues has come into focus as its first batch of cases reach merits decisions, its handling of issues specific to disputes over fair, reasonable, and nondiscriminatory (FRAND) licensing is still evolving. However, clarity could soon come for one such issue, as the UPC’s Mannheim Local Division has held the court’s first-ever FRAND hearing.

That Mannheim case is part of a broader set of lawsuits filed by Panasonic against Oppo in multiple different venues, as reported by IAM—including five other UPC suits (two more in Mannheim and three in the Munich Local Division), plus four more actions filed in German national courts, at least one Chinese lawsuit, and a rate-setting case filed in the UK High Court. A FRAND determination trial is scheduled in the UK action later this month, while the patent owner has reportedly argued that under the circumstances the defendant’s request that the UPC set a FRAND rate be denied.

In the event that the UPC makes a FRAND determination, the parties also dispute the proper scope of such a license—the patent owner arguing that one should be global, and the defendant asserting that the license should cover “Europe, the UK, the US, Japan and similar markets” (as summarized by IAM) while leaving it to the Chinese court to set FRAND terms covering China and other “less-developed consumer markets”. Moreover, Panasonic has reportedly sought injunctions in its UPC actions, while Oppo has asserted a FRAND defense (which, as a general matter, involves the argument that a SEP owner may not seek injunctive relief due to its conduct during licensing negotiations).

Key questions remain about how the UPC will approach these issues, including whether the court has the jurisdiction to set the terms of FRAND licenses in the first place, the scope of such licenses if so, the availability of injunctive relief in SEP disputes, and the conduct required of a patent owner and implementer to be deemed willing. While SEP matters are far from the only topic the court has had to clarify in its first year, 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 issues, since SEP licensing was not as significant of an issue in when the UPCA 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 from participating EU member states, though the caselaw of national courts does not bind the UPC. National law, in turn, 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.

Given both the extent of the FRAND issues yet to be decided and the varied patchwork of law that may inform the UPC’s handling of them, it is not surprising that the UPC’s first hearing—over which Judge Peter Tochtermann presided—covered a wide range of relevant topics, according to IAM. Among the issues discussed was the proper application of Huawei v. ZTE, the seminal 2015 decision from the Court of Justice of the European Union (CJEU) that laid out guidelines for SEP licensing negotiations between patent owners and implementers. In part, Huawei established a series of steps that parties should follow during such negotiations, under which the SEP owner must provide a notice of infringement to the implementer, the implementer must express a willingness to take a FRAND license, the SEP owner has to make a FRAND offer, and the implementer must accept or make a FRAND counteroffer, the decision also holding that SEP owners seeking an injunction must comply with those steps in order to avoid a finding of abuse of dominance.

IAM reports that the UPC’s FRAND hearing addressed the manner in which these steps must be applied, which has lately been a focus of some debate after the European Commission (EC) took the relatively unusual step of weighing in on that issue earlier this year. In an April amicus brief filed in an ongoing national court appeal before the Munich Higher Regional Court (in litigation waged by VoiceAge EVS GmbH & Co. KG, a Fortress Investment Group LLC plaintiff), released in redacted form in August, the EC faulted the less rigid approach taken by German regional courts since the Federal Court of Justice’s May 2020 decision in Sisvel v. Haier, under which courts have allowed parties that failed to comply with certain steps of the Huawei test to later satisfy their obligations under the missed steps after an injunction has already been requested. Allowing parties to satisfy the steps out of order would undermine the balance of interests established by Huawei, the EC argues, “because the SEP owner would be incentivized to file an injunction immediately and, conversely, the patent user would be incentivized to invoke the abuse of a dominant position without first entering into negotiations” (per a machine translation from the original German). Rather, the EC asserted that the steps must be followed in strict sequence, recommending that the German court refer the case to the CJEU for further clarity. The appropriate order of the steps, in light of this dispute, was discussed at the UPC hearing, per IAM.

In addition to the proper approach to willingness and the consideration of prior offers’ FRAND-ness, the hearing also reportedly addressed the key threshold question of whether the UPC has the jurisdiction to set FRAND terms at all—a question that has been posed by the very judge presiding over the court’s first FRAND hearing. In June, Judge Tochtermann expressed “concerns” in a related case (filed by Panasonic against Xiaomi) over the defendant’s request for a FRAND determination in a June 2024 decision addressing a SEP-related procedural matter. Judge Tochtermann remarked in that ruling that it should not fall to the court to provide “comprehensive legal advice”, especially since there are multiple sets of terms that are possible—“all of which could be FRAND-compliant”. However, Judge Tochtermann took a somewhat different position at the Oppo FRAND hearing, where IAM reports that he “expressed the preliminary view that it is within the powers of the UPC to set FRAND rates” but stated that “the circumstances in which it should do so have yet to be determined”.

A decision based on the FRAND hearing will be released on December 6, according to statements by the judges, though the scope of the issues to be addressed in that decision is not yet clear.

Meanwhile, the UPC’s second FRAND hearing was scheduled to take place two days after the Oppo hearing, in the Panasonic v. Xiaomi litigation. However, that hearing was canceled in the wake of a notable FRAND decision in the UK, where the parties had agreed to resolve their dispute over the terms of a FRAND license. On October 3, the UK Court of Appeal held that a willing licensor in the patent owner’s position would have agreed to an interim license with the defendant until a UK court sets a global FRAND rate between the parties, found that the patent owner had behaved as an unwilling licensor by seeking injunctions in the UPC litigation and in parallel cases in Germany, and set the terms of an interim license. The defendant having accepted the terms of that license, the UPC has stayed the case.

For more on FRAND litigation in the UPC, UK and US, as well as other recent developments with the UPC, see RPX’s third-quarter review. RPX members also have exclusive access to a webinar produced in parallel with that report that takes a closer look at the UPC, including a primer on the court and the Unitary Patent, the UPC’s caseload and NPE filings, and a look at what is attracting patent plaintiffs and litigation funders to the court, plus a deep dive on outcomes and remaining uncertainties on some key issues.