ECJ: Abuse of dominance by bringing an action for a prohibitory injunction

According to European Law a proprietor of a patent is usually allowed to bring an action for infringement seeking a prohibitory injunction or the recall of products as well as actions seeking the rendering of accounts and award of damages. Such are considered part of the rights of the proprietor. However, an abuse of a dominant position through exercising these rights is possible.

Huawei Technologies Corporation Ltd („Huawei“) is a company active in the telecommunications sector and is the proprietor of a European patent, which is a standard-essential patent (“SEP”). It is indispensable for competitors to manufacture products only according to the established standard in that patent. Thus, proprietors of such patents are obliged to grant licenses to third parties under so-called “FRAND-Terms” (Fair, Reasonable, Non-Discriminatory).

Huawei filed a lawsuit against ZTE Corporation and ZTE Deutschland GmbH (“ZTE”) for a patent infringement before the Regional Court of Düsseldorf. ZTE distributes products in Germany that are produced according to the standard of the SEP of Huawei. However, ZTE did not pay any royalties to Huawei. Hence, the Regional Court of Düsseldorf requested the European Court of Justice (“ECJ”) to clarify, when an action for patent infringements can constitute an abuse of a dominant position.

The ECJ held on 16.07.2015 in its Case C-170/13 Huawei Technologies Co. Ltd vs ZTE Corporation, ZTE Deutschland GmbH, first, that actions seeking a prohibitory injunction and recall of products are to be treated separately from actions seeking the rendering of account and award of damages.

The ECJ explained in regards to actions seeking a prohibitory injunction and the recall of products, that the proprietor of a patent does abuse its dominant position, if it (i) does not alert the other party about the specific infringement and (ii) does not offer the other party a licensing agreement on FRAND terms, whereby (iii) the alleged infringer has to respond rightfully to the offer. In case there is no response from the alleged infringer, it is believed to be a delaying tactic in order to continue using the relevant patent without paying due royalties.

In regards to actions seeking the rendering of accounts and award of damages, the ECJ stated that such do not, in general, constitute an abuse of a dominant position for having no direct impact on competition. It is for the Regional Court of Düsseldorf to decide whether the conditions set above are fulfilled and assess if Huawei has abused its dominant position and therefore committed a competition law infringement.

Authors:

Dr. Christina Hummer
Ori Kahn