EU Court Reins In Legal Battles Over Mobile-Phone Patents

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The European Union’s top court set limits on the ability of mobile-phone makers owning key industry patents to use court injunctions to thwart competitors seeking to use the technology in their own equipment.

Huawei Technologies Co. and other mobile-phone makers that own a so-called standard-essential patent can go to court seeking to bar rivals from using it -- or to ban their products -- only if they have met strict conditions, the EU Court of Justice in Luxembourg ruled Thursday.

Owners of such key patents that previously committed “to grant third parties a license on fair, reasonable and non-discriminatory terms” can only seek an injunction if first they present to the alleged infringer “a specific written offer for a license,” the court said.

The European Commission, the EU’s antitrust watchdog, has also sought to rein in patent abuses as Motorola Mobility, Microsoft Corp., Apple Inc. and Samsung Electronics Co. trade victories in courts across the world on intellectual property. Industry-standard technology helps ensure products such as mobile-phone antennas and global-positioning system software can operate together when made by different manufacturers.

“This is the most important decision of the year in the field of patent enforcement and intellectual property,” said Axel Walz, a Munich-based lawyer specializing in IP and competition law with law firm King & Wood Mallesons.

“It provides clear, useful guidelines for how the patent user and holder should behave” in disputes related to standard-essential patents, said Walz. “But the devil is in the details.”

German Case

Thursday’s case, which is based on a request for guidance by a German tribunal, is the first at the bloc’s highest court to deal with the scope of standard-essential patents and the rights of companies owning them.

Huawei, based in Shenzhen, China, and rival ZTE Corp. are fighting in Germany over Huawei’s claim that ZTE infringed a patent used in an industry standard for 4G technology. The EU court’s final ruling is binding and the German tribunal must decide on the dispute in line with Thursday’s decision.

“Today’s ruling will bring more clarity to the industry and will help reduce unnecessary and costly patent litigation, which always comes at the expense of customers,” Shen Jianfeng, ZTE’s chief IPR officer, said in an e-mail.

Huawei didn’t immediately respond to an e-mailed request for comment.

Key Patents

The EU held off fining Motorola Mobility when it concluded an antitrust probe last year and found the company had misused a key industry patent for smartphones. Motorola Mobility had wrongly forced Apple to give up its rights to challenge the validity of key patents or question whether its products infringed the patents, the commission said in its 2014 decision.

Motorola Mobility escaped a fine because of the lack of EU case law on the legality of taking legal actions over such patents and national courts having “so far reached diverging conclusions” on the issue, the commission said at the time.

“By creating antitrust exposure for IP holders merely for asking a court to determine whether an injunction would be appropriate in the circumstances, this ruling creates significant legal uncertainty, to the advantage of IP infringers,” said Miguel Rato, a lawyer at Shearman & Sterling LLP in Brussels.

The case is: C-170/13, Huawei Technologies Co. Ltd v. ZTE Corp., ZTE Deutschland GmbH.

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