The Grand Panel of the IP High Court in Tokyo issued its decision in the Apple v Samsung Case on 16th May 2014. At the core of the dispute in Japan, was the issue of whether Samsung, the proprietor of UMTS Standard Essential Patent JP4642898 could fully enforce its patent against rival Apple, in view of Samsung’s pledge to licence the patent on FRAND terms. This is the first case in Japan where Amicus Briefs have been taken into consideration.
Ultimately, the court received 58 Amicus Briefs responding to the question “Should there be any restriction on the right to seek an injunction and damages based on a standard essential patent (SEP) in respect of which a FRAND declaration is made?”. The decision of the District Court, which Samsung had appealed, had refused Samsung’s request for an injunction and damages, because the court had held that Samsung did not honour its obligation to negotiate fairly and sincerely in connection with its earlier declaration to grant licenses on FRAND terms (Fair, Reasonable, and Non-Discriminatory).
The IP High Court overturned the decision of the District Court and awarded damages to Samsung for the sum of 10 million Yen (around £60,000). The High Court held that where an essential patent holder has given an undertaking to license on FRAND terms, it is an abuse of their monopoly to seek to obtain more damages than could have been obtained on those terms, unless there are special reasons such as the alleged infringer not having any intent to take a FRAND licence. However, where the damages sought by the essential patent holder are consistent with licence fees granted on FRAND terms, it is acceptable for them to pursue an award of damages.
The High Court maintained the District Court’s refusal to grant Samsung a preliminary injunction. The court argued that an essential patent holder who has stated a willingness to grant irrevocable licences in the patent on FRAND terms, could not then seek to use that patent to prevent parties disposing of patentened articles or using the patented process if those parties have also indicated a willingness to take a FRAND licence. An injunction in these circumstances would be an abuse of the patent right.
Apple’s argument that a licence between Apple and Samsung came into existence when Apple had notified Samsung of its readiness to enter into a licence based on FRAND terms was rejected. The Japanese court held that a FRAND declaration is merely a statement of willingness to enter into a licence, not a licence offer that can itself be accepted.
Additionally, Apple’s argument that rights in Samsung’s patent had been exhausted when Samsung licensed chip maker Intel to make baseband chips under the patent was also rejected.
The IP High Court’s decision confirms that a third parties’ willingness to enter into a licence agreement based on FRAND terms does not neutralise an essential patent holder’s right to claim damages, even if the patent holder does not appear to have behaved “entirely fairly and sincerely” in its negotiations. On the other hand, the decision also limits the damages that the patent holder can obtain from the court to those that are commensurate with licence fees calculated on FRAND terms.
This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking before any action in reliance on it.