Out-Law News 1 min. read

Standard-essential patent owners trying to 'circumvent' EU ruling that curbs use of injunctions, says EU commissioner


Companies are trying to "circumvent" an EU court ruling that restricts the ability of standard-essential patent (SEP) owners to seek court orders to prevent others using those patents, according to the EU's competition commissioner.

In July, the Court of Justice of the EU (CJEU) ruled that SEP owners could be held to be abusing a dominant market position, in breach of competition laws, by seeking an injunction against an alleged infringer of their SEPs if those alleged infringers are willing to enter into a licensing agreement for use of the patents on fair, reasonable and non-discriminatory (FRAND) terms. The judgment came in a case involving technology businesses Huawei and ZTE.

A SEP is a 'patent essential to a standard': it is impossible for competitors to make products that comply with that standard without using the patented technology. To join standard-setting initiatives, businesses generally offer undertakings to standard-setting organisations that they will licence use of the SEPs that emerge from their work on the new standards to third parties on FRAND terms.

However, sometimes disputes break out between SEP owners and companies looking to use their patented technology about whether licensing terms are FRAND. In some cases, SEP owners apply to courts for injunctions to prohibit companies that do not sign up to their licensing terms from selling products that incorporate their SEPs.

In a speech in Florence last week, though, Margrethe Vestager said that whilst the CJEU's judgment had put a curb on SEP owners' ability to seek those injunctions, she was aware of attempts to get round the ruling.

"The judgment confirms that it is only natural that if, in order to have your technology accepted as part of a standard, you commit to license that technology - in return for reasonable remuneration of course - then you should not be able to seek an injunction to exclude products from the market if there is a willing licensee on the other side," Vestager said. "In my view, this obligation applies to whoever exercises the patent right in question."

"We are already seeing attempts to circumvent the principle established in our decisions and confirmed by the Court. The most apparent example is when injunctions are being sought against companies active at other levels of the distribution chain, for example telecoms operators selling phones rather than the phone manufacturer," she said.

Patent litigation specialist Deborah Bould of Pinsent Masons, the law firm behind Out-Law.com, said: "It is helpful that Margrethe Vestager has flagged two important ongoing issues, namely the sale of SEPs to companies who do not respect the FRAND commitments made by the original owner, and enforcement of SEPs by pursuing injunctions higher in the supply chain, e.g. against retailers and network operators selling smartphones. It is good to know that the Commission takes a dim view of this conduct."

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