Nokia and Daimler deal leaves questions open on tech patent licensing

Out-Law News | 09 Jun 2021 | 1:19 pm | 4 min. read

Businesses are likely to have to wait longer than previously anticipated for guidance on whether implementers of standard-essential patents (SEPs) can force the patent holders to seek licensing agreements from their suppliers rather than with the implementers themselves, according to an expert in patent law.

Sarah Taylor of Pinsent Masons, the law firm behind Out-Law, said the recent global licence agreement reached between telecommunications and IT company Nokia and automotive company Daimler included a deal to withdraw all pending litigation between them. This means the eagerly anticipated ruling from the Court of Justice of the EU (CJEU) on the supply chain licensing issue will not happen, in the short term at least.

SEPs are patents related to technologies that are incorporated in technical standards, such as cellular technology. These standards facilitate interoperability between devices and systems made and used by multiple companies. Standards are developed by businesses working together under the auspices of standard setting organisations (SSOs), such as the European Telecommunications Standards Institute (ETSI). It is a pre-condition that businesses benefiting from that framework of collaboration under SSOs make the patents they subsequently obtain relating to standardised technologies available to others by way of a licence on fair, reasonable and non-discriminatory (FRAND) terms.

However, SEP owners and technology implementers often disagree on what constitutes FRAND licensing terms and this can sometimes this can lead to litigation.

In November 2020, the Regional Court of Düsseldorf referred 10 questions to the CJEU, seeking clarity on points of EU law so as to correctly determine the outcome of what was at the time one of a number of disputes concerning SEP licensing for ‘connected cars’ between Nokia and Daimler. The disputes arose because Nokia alleged, broadly speaking, that the connectivity modules in the Daimler vehicles infringed its SEP portfolio. Nokia offered allegedly FRAND licences to Daimler, but Daimler argued that its suppliers should be the ones to take a licence. The suppliers have always indicated their willingness to do so. The Düsseldorf court was primarily seeking to determine whether SEP owners are obliged to license their SEPs to suppliers first before seeking any licensing agreement from the main manufacturer. 

Taylor said that the reference made to the CJEU was of great interest to SEP holders and implementers across Europe and more widely. She said that the fact the CJEU will no longer rule on the questions the Düsseldorf court had posed as a consequence of the Nokia and Daimler settlement is of significance to manufacturers and suppliers in the automotive sector, and other industries which involve component supply chains. This is because suppliers may presumably continue to supply their products to an implementer, such as Daimler, in their role as a so-called “extended workbench” of the implementer. However, some suppliers may not qualify as an extended workbench, because, for example, they developed the products independently, and uncertainty as to whether they infringe any SEPs by supplying component products would remain.  This issue has been raised by Continental, one of Daimler’s suppliers, which is continuing to seek its own licence. 

Taylor said that answers to other questions referred to the CJEU by the Düsseldorf court, such as what constitutes a FRAND licensing offer and a ‘willing’ licensee, had also been eagerly anticipated across industries. Existing national case law on those questions will continue to apply in the absence of a ruling with pan-EU effect, she said.

As part of their settlement, Daimler has also withdrawn a complaint about Nokia’s patent fees that it had submitted to the European Commission. That complaint was made in conjunction with several other car parts makers, including Continental, which has confirmed that it will be continuing with its complaint.

Though the litigation between Nokia and Daimler has been settled, Taylor said there are a number of other SEP licensing disputes pending before the courts in Germany and elsewhere in Europe.

Taylor also highlighted upcoming FRAND trials set to take place in the High Court in London later this year, which concern disputes between Apple and Optis, and Mitsubishi and Oppo. Issues the court is expected to consider in those cases include the concept of a ‘willing’ licensee and the practical application of the UK Supreme Court’s ruling in an earlier SEP licensing dispute between Unwired Planet and Huawei.

Taylor said: “The automotive industry is not the only sector to rely on standardised communications technologies, which are increasingly being used in a diverse range of sectors and products or services, including healthcare, white goods and agricultural machinery. It is therefore unlikely that this will be the last we hear of these issues.”

“It now seems unlikely that the CJEU will address this issue, at least in the immediate future, until a similar SEP dispute arises. This does not help technology companies, component suppliers or, more broadly, Internet of Things (IoT) businesses who wish to use SEPs. Continental, which has indicated that it is going to continue to seek clarity on such issues, has called upon the European Commission to provide a legal framework for such licences. Many businesses will therefore be hoping that the Commission rises to this challenge,” she said.

Post-Brexit, the UK courts are not able to make referrals to the CJEU and may therefore reach decisions on such issues if they arise in the UK earlier than elsewhere, Taylor said. She said, however, that it is not unlikely that further CJEU references will be made by the German, or other national courts in the future given the importance of these issues and the increasing reliance on standardised technologies in everyday products and services. 

However, it remains to be seen if such a decision will be applicable for licensing across all sectors that use standardised technologies.

Mark Marfé of Pinsent Masons said: “Previous judgments, including the UK Supreme Court’s decision in the Unwired Planet case, looked at what was the norm in the industry in question when determining what constituted a FRAND licence. What is typical in the automotive industry may not be typical in the IoT sector more generally. IoT has many applications and involves companies of all sizes making it a much more complex ecosystem from a licensing perspective than the automotive sector. It is laudable that the Commission has noted the growing importance of IoT and has already proposed ways to create greater transparency when it comes to SEP licensing.”

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