To what extent antitrust law and the rules of standard-setting organisations may limit the patentee’s right to be granted an injunction based on standard-essential patents has been and continues to be one of the hot topics of patent law debate. The ruling of the German Federal Supreme Court “Orange Book Standard” answers a previously controversial question, thus clarifying the role of the defendant in antitrust cases. But many questions remain, writes Tobias Hahn and Klaus Haft.

With its recent judgement “Orange-Book-Standard” (docket no. KZR 39/06, available in German only here ), the German Federal Supreme Court has now for the first time affirmatively answered the previously controversial question whether the defendant can directly, i.e. in infringement proceedings, bring forward as a defence against the injunction claim that he is entitled to a licence on non-discriminatory and reasonable  terms under the antitrust rules on the abuse of a market-dominating position (Sections 19, 20 German Act on Restraints of Competition, similarly Art. 82 EG; a licence declaration and its potential legal consequences had not been subject of the decision) when the patentee is refusing such licence. Specifically, the Defendant is no obliged to first sue the patentee for such licence. The market-dominating position of the patentee in this respect was founded on the argument that the licencing of a standard-essential patent constitutes an upstream market of its own that is naturally dominated by the patentee, who is thereby also controlling access to the downstream product/service market.

While thus holding the antitrust defence as principally admissible, the Federal Supreme Court further stipulated two preconditions that the defendant must meet in order to raise the defence successfully: Firstly, the defendant must make a binding and unconditional licence offer that cannot be rejected by the patentee without violating its antitrust obligations. According to the ruling, such licence offer must comprise “usual” conditions, without further specification of this term. Regarding the royalties to be paid, however, the Federal Supreme Court does not require the defendant to specify them in detail. Instead it allows for a clause that puts the royalty determination into the equitable discretion of the patentee which can then be made subject to judicial review. According to the reasons of the decision this shall discharge the defendant from the risk that his offer is considered insufficient by the infringement court.

Secondly, however, the Federal Supreme Court demands from the defendant to already behave as if the licence had been granted. He must therefore already file regular royalty reports and, more important, must secure the licence fees resulting from these reports by way of escrowing a “sufficient amount”. Thus, as a result, the defendant may in the future still carry the risk of determining a sufficient amount, not on the level of the licence offer and the royalty rate but on the level of determining the right amount to be put into escrow.

The decision itself will certainly lead to further legal discussion, especially as far as its specific practical impact is concerned (What licence terms are “usual”? How is the amount to be put in escrow determined? What happens if the patent is later found not to be infringed or invalid etc? What is the legal impact of licencing declarations etc?). At the same time, however, the decision has brought welcome clarity to the role and influence of antitrust law in German infringement proceedings based on standard-essential patents: It must be considered by the German infringement court and can under the above mentioned preconditions limit the injunction claim of the patentee.