Huawei Technologies Co. Ltd v. ZTE Corp. – 2015 (CJEU)

“Standard-Essential Patents demand fairness — enforcement must follow FRAND, not force.”

Short Description

This landmark CJEU judgment clarified when a holder of a Standard-Essential Patent (SEP) can seek an injunction against an alleged infringer. Because SEPs are essential to industry standards (like 4G/5G communication technologies), their owners must license them on FRAND (Fair, Reasonable and Non-Discriminatory) terms.

The Court held that an SEP holder cannot immediately sue for injunctions without first fulfilling specific FRAND-related obligations. Likewise, the alleged infringer must also respond in good faith. The ruling established a balanced, step-by-step negotiation framework to prevent abuse of dominance in the context of SEPs.

Facts

Huawei held a Standard-Essential Patent for wireless communication technology included in the LTE (4G) standard. ZTE used LTE-compatible technology in its products, making it impossible to avoid Huawei’s SEP.

Huawei accused ZTE of using its patented technology without a proper licence, and negotiations between the parties failed. Huawei then filed a lawsuit in Germany seeking:

⦁ An injunction,

⦁ Damages, and

⦁ Product recall.

ZTE argued that Huawei’s attempt to obtain an injunction violated competition law, specifically Article 102 TFEU, since Huawei had a dominant position by virtue of owning an SEP essential for standard-compliant products. ZTE maintained it was willing to negotiate a FRAND licence, while Huawei had not fulfilled its obligations to make a genuine FRAND offer before suing.

This triggered the legal question:

When can an SEP holder lawfully seek an injunction without abusing dominance?

Findings / Reasoning

The CJEU introduced a clear negotiation protocol governing SEP disputes.

1. Obligations of the SEP Holder (Huawei)

The SEP holder must:

⦁ Notify the alleged infringer of the infringement before litigation.

⦁ Present a concrete FRAND licence offer, specifying royalty, terms, and calculation basis.

Only after doing this can the SEP holder claim that the infringer is acting unreasonably.

2. Obligations of the Alleged Infringer (ZTE)

The alleged infringer must:

⦁ Respond promptly and in good faith.

⦁ Show a willingness to negotiate FRAND terms.

⦁ Provide a counter-offer if rejecting the initial one.

⦁ Offer security/guarantees (like bank guarantees or escrow payments) while negotiations continue.

3. Abuse of Dominance

The Court held that an SEP holder may abuse its dominant position under Article 102 if:

⦁ It seeks injunctions without following the FRAND negotiation framework.

⦁ It uses the threat of injunctions as a coercive tool rather than a reasonable enforcement step.

4. Balance Between Patent Rights & Market Access

The Court tried to balance:

⦁ The exclusive rights of SEP holders, and

⦁ The need for open, competitive markets where companies should access industry standards on fair terms.

Therefore, injunctions remain available but not as a “first strike” weapon.

Suggestions / Observations

This decision has become a global reference for SEP licensing disputes. It emphasizes:

⦁ Transparency in royalty calculations.

⦁ Good-faith negotiation on both sides.

⦁ Avoiding “patent hold-up”, where SEP owners exploit their essential position to demand excessive royalties.

⦁ Preventing “patent hold-out”, where infringers delay licensing by pretending to negotiate endlessly.

For businesses dealing with wireless, telecom, IoT, and communication technologies, the case underscores the importance of maintaining clear records of FRAND offers, counter-offers, meeting logs, and willingness to negotiate.

Judgment & Date

The CJEU held that Huawei was entitled to seek an injunction only after fulfilling its FRAND obligations.

Similarly, ZTE must genuinely cooperate in the negotiation process.

Judgment Date : 16 July 2015