Munich Regional Court reinterprets FRAND rules in Samsung vs ZTE

In the pan-European dispute between ZTE and Samsung, the 7th Civil Chamber of Munich Regional Court has set out new approaches to FRAND proceedings. These deviate from the Higher Regional Court's position on one key point, finding that the interim licence recently granted by the UK High Court is not decisive.

In a legal note following a “FRAND first” hearing, the Munich Regional Court’s 7th Civil Chamber laid out its approach to several questions not yet fully clarified by case law. The focus was on the significance of security deposits from patent users and the relevance of interim licences.

According to a spokesperson for Munich Regional Court, it remains unclear to what extent other chambers, particularly the 21st Civil Chamber which also handles patent law, will agree with the 7th Chamber’s assessments.

Security not mandatory

In November last year, Munich Higher Regional Court took the stance in HMD vs VoiceAge that “continuing willingness to take a licence” is met only if an implementer provides reasonable security, for example through a bank guarantee.

The Regional Court expressed doubts whether these principles would stand up in appeal proceedings at the Federal Court of Justice. The 7th Chamber takes a different view on what constitutes willingness.

Munich Regional Court

According to the note, a licensee demonstrates willingness by quickly providing quantity information, having substantial own licensing relating to standards, being prepared to pay undisputed sums after sufficient negotiations, offering arbitration and providing security.

However, contrary to the second-instance court’s opinion, Munich Regional Court does not consider security deposits mandatory for patent users to prove their willingness to take a licence.

At the same time, patent owners cannot be expected to rely solely on security deposits. The note states that patent proprietors do not have missing income available for investments. Therefore, patent users must pay undisputed sums immediately.

FRAND at the high end

Munich Regional Court found that patent owners do not violate antitrust law if their offer is FRAND — even if licence demands are at the high end of the FRAND scale. Patent users are not entitled to particularly low offers and must first accept the offer. Even security deposits do not protect them from this requirement. “It must not be the case that the licensor receives no money,” the court stated.

Additionally, the 7th Civil Chamber called the top-down approach to assessing FRAND licences problematic. The Chamber favours determining value through comparative licences, stating that existing licence agreements are primary sources for determining portfolio value.

Foreign rulings not binding

The 7th Chamber also addressed the influence of foreign judgments, specifically examining the recent UK High Court decision granting Samsung an interim licence. “Foreign judgements have no binding effect on our proceedings,” the Munich judges stated.

According to the 7th Chamber, it is unclear why the parties should prefer to file suit in the UK rather than other national courts or the UPC. Neither Samsung nor ZTE has its headquarters in the UK and the county is not particularly important as either a sales market or production location.

However, if ZTE were to accept the interim licence, this would impact the German proceedings as it would “entitle it to use the patent”. But if a party obtains a rate-setting abroad, it must also accept immediate payment of the proposed amount to the other party.

ETSI involvement

According to JUVE Patent information, ZTE sought permission to appeal the High Court ruling regarding the interim licence but was refused.

Meanwhile, Samsung has invoked clause 8.2 of the ETSI IPR Policy against ZTE. The Korean company complained to ETSI that ZTE has failed to make available a FRAND licence. Under this clause, the General Assembly of ETSI can either ask the responsible Technical Committee to modify the standard in a way which will cause the SEPs in dispute to become non-essential. Another possibility is to make the standard in question non-normative, which will cause the IPRs to be no longer standard-essential.

This follows a similar move by Lenovo earlier in the year in its dispute with Ericsson. The global dispute between those companies ended a few weeks later.