Patents that are essential for the use of an international standard, such as UMTS, can be licensed by the patent holder under FRAND conditions. However, anyone who sells products without obtaining the necessary patent licenses is committing patent infringement. The IP High Court of Tokyo now had to decide whether and to what extent damages can be claimed for infringement of an SEP.
In 2007, the patent holder (Samsung Electronics) had declared to the standardization organization ETSI that it was prepared to grant any interested party an irrevocable license to the patent in dispute on fair, reasonable and non-discriminatory terms (FRAND declaration). As certain Apple products were covered by the patent and Apple was unable to prove that these products were licensed, the patent holder demanded compensation.
Apple argued that a claim for damages for the infringement of a patent for which a FRAND declaration had been made was an abuse of patent law.
The Japanese IP High Court partially confirms this view on appeal. The claim for damages cannot normally be higher than the FRAND License. The court justifies this as follows:
Once a FRAND declaration has been made, the companies concerned rely on the fact that they will receive an appropriate license. This is one reason why the technology spreads worldwide and why the patent holder receives license income that he would otherwise not be able to obtain. It is justifiable to protect the expectation of a License. In other words, a claim for damages that is higher than the FRAND license is inconsistent with the patent holder’s willingness to take a license. It is therefore not normally justified to award the patent proprietor damages in excess of the amount of a FRAND license.
Higher damages could only be considered in special circumstances. The patent holder would have to prove this. As an example, the Japanese Court of Appeal cites the case where the patent infringer has no serious interest in a License.
On the other hand, the court holds that the patent holder must in any case be allowed to receive compensation for the infringement of an SEP in the amount of a FRAND License in return for having disclosed his invention in the context of a Patent Application.
The Japanese IP High Court calculates the amount of the FRAND License in the present case as follows: In a first step, the patent infringing sales are multiplied by the “contribution factor”. This factor corresponds to the conformity of the product with the UMTS standard. In a second step, the previously calculated amount is multiplied by the cap royalty rate, which prevents the License for several Patents from becoming unreasonably high. Finally, in the third step, the amount from the second step is divided by the number of standard-essential UMTS Patents.
With this ruling, the court has struck a good balance between the interests of the patent holder and those of the affected industry. The right to compensation for SEP remains intact, but only within reasonable limits. The license calculation method is noteworthy. In principle, it is not limited to application to standard-essential Patents, but could in itself also be applied in other comparable cases where a product is protected by several patents.