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France – SEP cases begin by evidencing essentiality

First Instance Court of Paris, 17 April 2015, Core Wireless Licensing SARL v. LG Electronics Inc. and LG Electronics France

The First Instance Court of Paris holds that when asserting alleged Standard Essential Patents (SEPs), a patent holder cannot just state and presume the essentiality of said patents.

Core Wireless Licensing SARL (“Core”) purchased roughly 1200 patents declared essential with the ETSI for implementing the UMTS and LTE (3g and 4g) standards. Core and LG Electronics France (“LGE”) exchanged letters on some of said alleged SEPs, their implementation by LGE and the need for the latter to enter into a Fair Reasonable And Non Discriminatory (“FRAND”) license. After two years of discussions, Core decided to sue LGE.

Core decided not to request an injunction and not to request damages. Rather, Core requested the Court to state that LGE was in breach of its ETSI commitments.

Core chose to move for expedited proceedings on the merits, asking the Court to set a FRAND license royalty to be paid by LGE. In Core’s opinion, looking at a “sample” of five of it alleged SEPs was a proper way to assess that its whole portfolio was essential and that a FRAND license royalty should be set on said portfolio.

However, Core did not disclose a single document explaining what a proper royalty rate could be, requesting that the Court appoint an expert to assess a proper royalty.

Leaving aside the invalidity defence by LGE, the Court looks at the essentiality of the patents at stake.

The Court notes that the assignor of the patents to Core declared essentiality with the ETSI in 2001. Core (not ETSI affiliated) restated this essentiality by letter to LGE in 2013. The Court then points out that essentiality is not assessed by ETSI.

According to the Court, based on the explanations of LGE and despite the expert opinion filed by Core, the patents seem to offer alternate or variant ways of performing the processes described in the UMTS and LTE standards.

The Court thus holds that it is not clear that implementing the UMTS and LTE standards would imply implementing the patented processes.

Consequently, the Court decides that there is no evidence of essentiality of the patents and thus rejects all the claims of Core.

LGE counterclaimed that Core acted in bad faith since it went into a FRAND negotiation without ever disclosing royalty rates for LGE to consider. The Court finds that the negotiations between the two sides lasted over two years, which suggests that neither party acted in bad faith since none of the parties felt like putting a formal end to the discussions.

LGE was also alleging that Core would be abusing a dominant position under Art. 102 TFEU when asserting alleged SEPs instead of granting FRAND licenses over the same. The Court finds that requesting the judge to set a rate which could not be amicably negotiated cannot amount to an abuse of dominant position. This would require a showing of other circumstances, e.g. a clear intent by Core to deprive LGE from its ability to use such patents.