FRAND Defence - Decision of the CJEU

The Court of Justice of the European Union (ECJ) confirmed in its judgement of July 16, 2015 that the owner of a standard-essential patent (SEP) subject to a fair, reasonable, and non-discriminatory (FRAND) commitment may seek an injunction against an alleged infringer that fails to negotiate towards a license in good faith without infringing Article 102 of the Treaty on the Functioning of the EU (TFEU). The ECJ notes the need to "strike a balance between maintaining free competition ... and safeguard[ing] that proprietor's intellectual-property rights and its right to effective judicial protection." In an effort to strike that balance, the Court describes the conditions in which the owner of a SEP subject to a FRAND commitment may pursue an injunction without the risk of violating Article 102 TFEU:

  • It is not abusive for the owner of a SEP subject to a FRAND commitment to seek an injunction if he has, first, alerted the alleged infringer by designating the patent in question and specifying the way in which it has been infringed, and second, the alleged infringer has failed to signal his willingness to conclude a license under FRAND terms. 

  • Where the alleged infringer has expressed his willingness to conclude a license on FRAND terms, the SEP owner may pursue an injunction if he has, first, provided a written offer, specifying the royalty and the way in which it is to be calculated, and, second, the alleged infringer has failed to respond to the written offer in good faith.   

Accordingly, Article 102 TFEU limits a SEP owner's ability to seek an injunction where the alleged infringer acts in good faith to negotiate a license after receiving a written offer. Good faith is to be determined according to objective factors which may include whether the alleged infringer has promptly provided the SEP owner with a specific FRAND counter-offer; has not employed delay tactics and has otherwise acted "in accordance with recognized commercial practices." The patentee is however not prohibited from filing an action for infringement against the infringer seeking the rendering of accounts in relation to past acts of use of that patent or an award of damages in respect of those acts of use. This is, while negotiating with the accused infringer, the patent owner can file an infringement action asserting claims for accounting and for a finding of liability for (past) damages. Such lawsuit could later be extended by bringing claims for injunctive relief if the negotiations fail because of non-diligent behavior of the infringer.

Where the alleged infringer makes a counter offer but the parties cannot reach agreement, he must demonstrate continued good faith from the time its counter-offer is rejected by providing the SEP owner with appropriate security (bank guarantee or deposit) for ongoing use of the patent according to recognized commercial practices.

An alleged infringer does not, however, demonstrate bad faith by merely challenging infringement or validity while negotiating the terms of a license. 

Where the alleged infringer does not evidence good faith by reference to objective criteria, Article 102 TFEU does not bar the SEP owner from pursuing an injunction after it has provided notice and a written offer to license on FRAND terms. The Court also held that the owner of a SEP subject to a FRAND commitment may seek damages or a rendering of accounts without restriction.