Dutch court addresses FRAND defense to patent infringement

In a judgment of 17 March 2010, the District Court of The Hague addressed whether the infringer of a patent right can rightfully claim that a patent cannot be enforced because the infringer meets the terms of a FRAND license.

Philips is the proprietor of European patent 0 397 238, relating, inter alia, to an information recording system and European patent 1 066 628, relating to a record carrier and apparatus for scanning the record carrier. The former patent is essential to the CD-R standard and the latter patent is essential to the DVD+R standard. SK Kassetten (“SK”) had sold and offered for sale CD-R and DVD+R discs in the Netherlands until at least December of 2009. SK purchased these discs from its subsidiary Global Digital Disc GmbH & Co KG and from producers in Taiwan, China, and India.

Because SK did not have a license for either of the patents, Philips requested the District Court of The Hague for an injunction against SK. SK argued that it did not infringe the patents and that Philips could not enforce its patent rights because SK, in its own view, was entitled to a FRAND license. However, the court decided that SK infringed the patents and that the patents were enforceable. According to the court, Philips’ patent rights would only be unenforceable if a license actually existed, either as a result of an agreement between Philips and SK or as a compulsory license granted a by a court. The court held that the mere claim by SK that it was entitled to a FRAND license because it complied with the requirements of such a license was not in accordance with the system for compulsory licenses as intended by the Dutch legislator. Compulsory licenses can only take effect after the coming into existence of the license or after being handed down by a court.

Moreover, the court noted that SK’s reasoning would lead to legal uncertainty because disagreement can arise between parties on whether or not the terms are met. Finally, the court held that SK should have requested a FRAND license from Philips before bringing its infringing products to the market. In case Philips would have refused the license, SK should have brought the case before a court in order to obtain a compulsory license instead of entering the market with infringing products.

The decision clearly differs from the Orange Book judgment of the German Federal Supreme Court (BGH, 6 May 2009, KZR 39/06) (see Newsletter 3/2009 p. 4). However, the district court noted that the result would be equally unfavorable to SK if the German Federal Supreme Court’s criteria would be applied because SK admitted that it did not pay any royalties or secure a payment for the royalties due, as required by the Orange Book judgment.

Koninklijke Philips Electronics N.V. v. SK Kassetten GmbH & Co. KG. District Court of The Hague, March 17th 2010, cases HA ZA 08-2522 and HA ZA 08-2524. [Wim Helwegen]