German Supreme Court allows "compulsory licence defence" in patent infringement claim (Competition newsletter, June 2009)

On 6 May 2009, the German Federal Supreme Court (FSC) reported in a press release that it had found that the owner of a patent which set an industry standard, and accordingly was essential for the manufacture of a product, held a dominant position and therefore could be obliged to license the patent to a third party. The full judgment is not yet available.

It appears that in this case the third party had, without a licence, used patented technology owned by Philips which was fundamental for manufacturing CD-R and CD-RW disks. Two lower courts had upheld Philips' claim that there had been an infringement of its patents.

The FSC dismissed the appeal against this finding. However, the press release states that the FSC found that a company using a patented industry standard without having been granted a licence can, in principle, defend itself on the basis of the so-called "compulsory licence defence".

The court found that Philips owned a basic patent, which any manufacturer of CD-R or CD-RW products must use, and that therefore Philips had a dominant position in the licensing of this technology. It was also undisputed that Philips operated a worldwide licensing programme. The court found that in this situation there could be an abuse should Philips refuse to license its technology and/or claim that its patent rights had been infringed by an unlicensed third party.

However, the press release indicates that the court also made clear that the technology owned by a dominant company is not available for free. The patent user must show that it had applied for a licence on the basis of a reasonable offer and had paid or tried to pay an appropriate fee. It would only be allowed to use the patent in the absence of a licensing agreement being in place if it was paying a reasonable fee or depositing such a sum. In the present case, this would suggest that the third party would be able to make use of the patent going forward if it pays or deposits an appropriate amount.

It appears that the court did not have to reach a conclusion as to the appropriate level of royalty in this case since the third party had not paid or deposited any sum of money and therefore could not rely on the compulsory licence defence.

Case law in Europe relating to compulsory licensing of intellectual property rights is still developing. This judgment, from Germany's highest court, is a significant addition to the existing precedents as it provides further clarification of the circumstances in which the national courts (at least in Germany) will order a compulsory licence of intellectual property rights as a matter of competition law.

 

Please click on the links below for the other articles in the June 2009 Competition newsletter 

 

Contacts

Nigel Parr
T: +44 (0)20 7638 1111
E: nigel.parr@ashurst.com

Matthew Hall
T: +32 (0)2 626 1900
E: matthew.hall@ashurst.com

Neil Cuninghame
T: +44 (0)20 7638 1111
E: neil.cuninghame@ashurst.com

 

This newsletter is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transactions.

 

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