A standard essential patent (“SEP”) is a patent deemed to be essential to a standard developed by a standardization body. When a patent is really essential to a standard, i.e. the patent actually covers aspects of the standard that are mandatory to the standard itself and for which no alternative exists, third parties cannot comply with that standard without infringing the SEP.

The SEP owner can notify the standardization body of the existence of the SEP, thereby committing to grant licenses to third parties at FRAND (fair, reasonable and nondiscriminatory) terms.

Unfortunately, no actual guidelines or regulations exist on how FRAND royalties should be calculated in practice. The terms proposed by a SEP owner are thus normally rejected by the third parties who are in need of using the SEP technology, and such third parties often contest the SEP status of a patent in the first place.

Such conflicts lead SEP owners to start legal actions against the third parties who, on the other hand, usually lament with the court (together with the obvious argument that the patent is invalid, inessential to the standard or both) that the SEP owner’s action constitutes an abuse of a dominant position.

A case falling within the above category has now been decided on by the Court of Justice of the EU (CJEU). In this case, Huawei is the SEP owner and the alleged infringer is ZTE.

In its milestone decision, the CJEU addresses the question whether an infringement action brought by a SEP owner, including a request for preliminary measures as well as a request for refund of damages, represents an abuse of a dominant position under EU competition rules.

With regard to actions including requests for preliminary injunctions and for recall of the infringing products, the CJEU has decided that these requests do not represent an abuse its dominant position as long as, before bringing that action, the SEP owner has alerted the alleged infringer of the infringement and presented to that infringer a specific, written and detailed offer for a licence on FRAND terms, and the alleged infringer has not diligently responded to that offer by submitting a written and specific counter-offer that corresponds to FRAND terms.

Furthermore, with regard to actions including requests for refund of damages, the CJEU has held that they do not represent an abuse of a dominant position. This is because such actions do not have a direct impact on standard-compliant products manufactured by competitors appearing or remaining on the market.

In view of this milestone decision, filing SEPs continues to be a very good way for protecting the research underlying the relevant technology, as allows to obtain an economic return on the basis of the FRAND licenses and to enforce the SEPs in the event that the infringers should not behave as suggested by the CJEU.

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