Europe's New Patent Court Issues First FRAND Ruling

The November 22, 2024, ruling by the Unified Patent Court's (UPC) Mannheim local division centered on Panasonic's European Patent EP 2 568 724, which is essential to the 4G (LTE) standard. The court found that Oppo and its German subsidiary infringed on this patent with their 4G-enabled devices, including the OPPO Find X5 Pro smartphone. This decision was part of a broader enforcement campaign by Panasonic, which initiated numerous lawsuits against both Oppo and Xiaomi in 2023 over patents essential to 3G and 4G standards. In its decision, the UPC panel, led by Presiding Judge Peter Tochtermann, granted Panasonic's request for an injunction, damages, and the recall of infringing products. This prohibits Oppo from selling certain 4G devices in UPC member states including Germany, France, Italy, and the Netherlands. The court also ordered Oppo to pay provisional damages of €250,000 and dismissed Oppo's counterclaim that the patent was invalid. The court's analysis of the FRAND defense closely followed the framework established by the Court of Justice of the European Union (CJEU) in the 2015 *Huawei v. ZTE* case. This framework outlines a series of steps for good-faith negotiations between a standard-essential patent (SEP) holder and a potential licensee. The UPC determined that Panasonic had complied with its obligations as a willing licensor, but that Oppo had not acted as a willing licensee, thereby forfeiting its right to use the FRAND defense against an injunction. Notably, the UPC's ruling focused on the conduct of both parties during negotiations rather than attempting to determine a specific FRAND royalty rate itself. The court found Oppo's counteroffer was not FRAND-compliant because it was a lump-sum offer based on third-party data, and Oppo had refused to share its own direct sales figures, delaying the negotiations. This behavioral assessment aligns more closely with the German national approach to FRAND disputes than the UK courts' practice of setting global FRAND rates. This landmark decision came as a surprise to many, as Panasonic and Oppo had reportedly reached a global settlement in principle just weeks before the ruling was issued. However, because the settlement was not yet finalized, the Mannheim court proceeded to hand down its judgment. The ruling provides the first substantive insight into how the newly established UPC will handle complex SEP and FRAND litigation, emphasizing a conduct-based approach and its jurisdiction over FRAND counterclaims. The UPC explicitly confirmed its jurisdiction over FRAND counterclaims, treating them as an essential defense against patent infringement allegations under EU competition law. The court, however, rejected a rigid, sequential application of the *Huawei v. ZTE* negotiation steps, opting instead for an overall evaluation of the circumstances to determine a party's willingness to engage in good-faith negotiations. This flexible interpretation signals a nuanced approach that could influence future SEP licensing strategies across Europe.