Transferred SEPs: Higher Regional Court of Düsseldorf rules on binding effect of FRAND declaration and existing licence agreements

In the ruling of the Düsseldorf Higher Regional Court (2 U 31/16), the limitations of the scope of protection of an SEP arising from a FRAND declaration, as well as existing licence agreements in the case of transfers of rights of the SEP, are examined in more detail.

Subject of the proceedings

As an SEP owner, Unwired Planet claimed for information and damages from a granted European SEP with effect in Germany from Huawei (SEP user). The SEP was transferred earlier from Ericsson to Unwired Planet for reasons of better licence generation.

However, Ericsson had already started to conclude its own (old) licence agreements before the transfer. The key procedure points to be considered were therefore:

impact of an SEP transfer on the FRAND declaration;
binding effect of existing old licence agreements for the new SEP owner; and
submission obligations of the new SEP owner.

Details

Impact of an SEP transfer on the FRAND declaration

For the SEP, Ericson had filed a FRAND declaration, and since such a declaration limits the effect of the SEP, it automatically follows the SEP in the event of a transfer and is transferred to the new SEP owner. In this case, Unwired Planet itself had also issued a corresponding FRAND declaration.

Binding effect of existing old licence agreements for the new SEP owner

Due to the transfer of the effect of an existing FRAND declaration from the first SEP owner to the new SEP owner, the Higher Regional Court of Düsseldorf decided that the existing old licence agreements remain important for the assessment of whether a licence offer meets the FRAND criteria. For the court, the very first licence agreement is decisive here, since no examination for discrimination can be made at that point in time. Rather, only the criteria ‘fair’ and ‘reasonable’ must be met.

From the point of view of the Düsseldorf judges, this must be interpreted as a commitment to a licensing concept which may only be deviated from at a later point in time in limited and justified cases. This concept also continues to exist not only ‘on the merits’ but also concerning ‘amount and content’ for the transfer of the SEP, so that the new SEP owner is also bound by this concept.

In the event of transferring an SEP to a new owner, the existence of a licensing concept established by old licence agreements, in addition to a FRAND declaration, also constitutes a restriction on the new owner’s use of the SEP.

Presentation obligations of the new SEP owner

From the Higher Regional Court of Düsseldorf’s perspective, the content and conditions of existing old licence agreements are therefore decisive for the assessment of the amount of a FRAND licence. Thus, the new SEP owner must ensure that he has access to such old licence agreements if he is interested in exploiting the SEP, including judicial enforcement. Confidentiality obligations in such old licence agreements cannot release the new SEP owner from this obligation under the Düsseldorf Higher Regional Court per se.

Conclusion

As the owner of an SEP, special attention should be paid to the very first licence agreement. Its conditions must meet the criteria of ‘fair’ and ‘reasonable’ and sets the standard values for the licence rate and reference value for all future licence agreements.

As the purchaser of an SEP, the restriction of the SEP’s effect by the automatic transfer of the FRAND declaration and by the licensing concept already established from old licence agreements must be considered. When drafting the transfer agreement, it should also be ensured that the new SEP owner has a right to access and a right of presentation for old licence agreements in legal disputes in order to enable the SEP to be exploited.