Failure cases of delaying tactics in FRAND licensing negotiations

In standard-essential patent (SEP) licensing processes, implementers may resort to 'delaying tactics'; however, such tactics must be exercised with caution. Once an infringement lawsuit has commenced, expressing willingness to accept a license at that stage may be too late—the patent holder retains the right to seek both an injunction and damages for infringement. This article presents, in case-study format, a failure example of such 'delaying tactics': I. Case Summary Philips is the proprietor of three SEPs registered in Europe. Philips has made a FRAND (Fair, Reasonable, and Non-Discriminatory) commitment regarding these patents to the European Telecommunications Standards Institute (ETSI). On October 13, 2014, Philips notified Vodafone (hereinafter 'Vic') that its products infringed Philips’ SEPs relating to the UMTS/3G and LTE/4G mobile communication standards, and stated its willingness to grant a FRAND license. In the letter, Philips invited Vic to enter into licensing negotiations; however, Vic did not respond to several such notifications. On July 28, 2015, Philips sent Vic a draft license agreement and a damages claim schedule, requesting Vic to indicate by August 25, 2015, whether it was willing to negotiate a license. Vic again failed to respond. On September 25, 2015, Philips sent Vic another damages claim schedule—still receiving no response. On October 19, 2015, Philips filed suit before the District Court of The Hague, asserting that Vic had infringed Philips’ three SEPs, and seeking injunctive relief, destruction and recall of infringing products, seizure of infringing profits, and corresponding damages. Vic challenged the validity of Philips’ patents, arguing lack of novelty and inventive step. It also contended that Philips had failed to fulfill its obligations as an SEP holder: Philips had not explained why its licensing offer complied with the FRAND principle, nor had it demonstrated any willingness to continue negotiations with Vic after initiating litigation. On August 25, 2016—after litigation had already commenced—Vic submitted a counter-offer to Philips, accompanied by its global sales accounts for 2016 and a deposit of €825,000 into an escrow account. At first instance, the District Court of The Hague upheld Vic’s defenses: it declared two of the patents invalid and held that Philips’ initial licensing offer failed to meet the FRAND requirement, dismissing Philips’ claims entirely. Philips appealed to the Court of Appeal of The Hague. During the Dutch proceedings, Philips also initiated parallel lawsuits against Vic in Germany and France. Notably, on March 2, 2018, the Mannheim Regional Court (Germany) dismissed Philips’ claims, finding its initial licensing offer non-FRAND. On appeal, Vic requested recognition and enforcement of the Mannheim Regional Court’s judgment and continued to argue that Philips’ initial offer violated FRAND obligations and constituted an abuse of dominant market position. On December 24, 2019, the Court of Appeal of The Hague reversed the lower court’s ruling on patent validity, rejected Vic’s FRAND defense, and dismissed Vic’s allegation that Philips had abused its dominant market position.

Quectel Communications sued by Philips for €48 million in damages

Introduction On February 6, Quectel Communications issued an announcement stating that it had recently received a procedural order from the Unified Patent Court (UPC), The Hague Division (District Court of The Hague), concerning a patent infringement dispute. Koninklijke Philips N.V. (hereinafter “Philips” or the “Plaintiff”) has filed suit before the court; Quectel and certain of its wholly owned subsidiaries are named as defendants. As of the date of this announcement, the case has been formally docketed by the court but has not yet proceeded to trial. According to the announcement, Philips (the Plaintiff) has brought an infringement action before the court concerning two standard-essential patents (SEPs). The Plaintiff alleges that Quectel and certain of its wholly owned subsidiaries (the Defendants) have, without obtaining a license, manufactured, sold, offered for sale, imported, and used cellular IoT module products implementing the two disputed patents in certain European countries—thereby constituting patent infringement. The Plaintiff’s claims include: 1. A permanent injunction (requesting the court to order the Defendants immediately to cease manufacturing, selling, offering for sale, importing, or using the disputed products in all countries where the patents are in force); 2. Recall and destruction of the infringing products; 3. Compensation for losses caused by the infringement or disgorgement of infringing profits (the specific amount to be determined by the court in subsequent proceedings); 4. Provision of necessary information required for the case; 5. Payment of litigation costs and penalties (the Plaintiff has valued the procedural worth of the two consolidated cases at €48 million). Quectel stated that it will actively defend itself in the litigation to safeguard the legitimate rights and interests of the company and all shareholders. Currently, the company’s production and operations remain normal, and none of its business activities have been materially affected. The Plaintiff has not specified a concrete amount of monetary damages in this complaint. As the case remains untried, the ultimate issuance—and precise scope—of any injunction remains uncertain. The impact of this litigation on the Company’s current or future financial results will depend upon the court’s final judgment, mediation agreement, or enforcement outcome.

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Philips Wins Dutch Court Battle with Shareholders Over Recall

Philips Wins Dutch Court Battle with Shareholders Over Recall

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