## Facts

- Huawei owned a patent declared essential to the LTE standard and had given a commitment to license it on FRAND terms to a standard-setting body.
- ZTE marketed LTE-compliant products in Germany that allegedly used the patent without a license.
- Huawei and ZTE entered licensing negotiations but did not reach agreement.
- Huawei sued ZTE in a German court seeking (1) a prohibitory injunction, (2) recall of infringing products from distribution channels, (3) rendering of accounts, and (4) damages.
- ZTE asserted it was a willing licensee and argued that Huawei’s pursuit of an injunction and recall, given the FRAND commitment and alleged dominance, constituted an abuse of dominance under Article 102 TFEU.
- The German court referred questions to the Court of Justice of the European Union (CJEU) on when SEP enforcement seeking injunctions/recall is abusive under Article 102 TFEU.

## Issues

1. Under Article 102 TFEU, when does a dominant holder of a FRAND-encumbered SEP abuse a dominant position by seeking a prohibitory injunction or product recall against a standard implementer using the SEP without a license?
2. What pre-suit and negotiation steps must the SEP holder and the implementer take to avoid (or establish) abuse of dominance in connection with injunction/recall requests?
3. Whether claims for damages and rendering of accounts for past use are treated the same as injunction/recall for Article 102 TFEU purposes.

## Decision

- The CJEU held that seeking an injunction or product recall based on a FRAND-encumbered SEP may be an abuse of dominance if the implementer is willing to take a FRAND license and the SEP holder has not followed specified negotiation steps.
- Before seeking an injunction/recall, the SEP holder must (1) give notice by identifying the SEP and the alleged infringement and (2) after the implementer indicates willingness to license, make a specific written FRAND offer stating the royalty and calculation method.
- If the implementer does not accept, it must respond diligently and in good faith, promptly making a specific FRAND-compliant counter-offer where appropriate.
- If the implementer continues using the SEP during negotiations, it must provide appropriate security for royalties (e.g., guarantee/escrow) and render accounts for past use; failure to do so supports the view that injunction/recall pursuit is not abusive.
- The CJEU stated that actions seeking damages for past use and accounts to calculate damages do not, by themselves, constitute an abuse of dominance.

## Legal Principles

- The exercise of IP rights by a dominant undertaking is generally lawful and constitutes an abuse only in exceptional circumstances; SEPs with FRAND commitments can present such circumstances because standard essentiality and FRAND undertakings create reliance interests and heightened exclusion risks.
- For a FRAND-encumbered SEP, injunctive relief and product recall against a willing licensee can be abusive under Article 102 TFEU unless the SEP holder first provides infringement notice and then a concrete written FRAND offer specifying royalties and calculation.
- A standard implementer seeking protection as a willing licensee must act promptly, in good faith, and in line with commercial practice; if it rejects the offer, it must provide a specific FRAND counter-offer.
- Continued implementation during negotiations requires the implementer to secure payment (appropriate security) and account for past use; otherwise the SEP holder’s resort to injunction/recall is less likely to be abusive.
- Monetary relief for past use (damages and accounting aimed at quantifying damages) is generally compatible with Article 102 TFEU because it does not carry the same market-excluding effect as injunctions/recalls.
- Dominance is not presumed solely from SEP ownership; the assessment is for the national court, though standard essentiality may confer significant market power.

## Conclusion

The CJEU established a reciprocal, step-based negotiation protocol under Article 102 TFEU for FRAND-encumbered SEP disputes: a dominant SEP holder must provide notice and a concrete FRAND offer before seeking injunctions or recall, while the implementer must respond in good faith with a timely FRAND counter-offer and provide security and accounting if it keeps using the technology; damages and accounting claims for past use are generally not abusive.


Huawei Techs. Co. v. ZTE Corp., Case C-170/13 (C.J.E.U. 2015)