The two decisions of the Paris Judicial Court in XIAOMI v. PHILIPS confirm that the Paris Judicial Court has jurisdiction to set a FRAND license global rate, ETSI being based in Nice (7 December 2021, [RG 20/12558] and [RG 20/12558]). We set out below the background to those decisions, before turning to the decisions themselves and commenting on them.
Contexte de l’affaire XIOMI
The background should first be briefly recalled. What is at stake here is the nature of the FRAND undertaking, on which many theories have been advanced. Whereas the Court of Justice has held that the FRAND undertaking must be examined in the light of competition law (the competition-law approach), others consider it to be a contractual undertaking given by the patentee to a body (the European Telecommunications Standards Institute, or “ETSI”) for the benefit of a third party (the licence seeker) — in other words, a stipulation pour autrui (the French civil-law equivalent of a third-party beneficiary clause). On that view, the jurisdiction of the French court could be mandatory, since ETSI is based in Nice (the contractual approach) (see here).
The question had already been raised in the TCL case. On 6 February 2020, the Paris Judicial Court accepted jurisdiction over disputes concerning FRAND licences involving ETSI, holding that the undertaking given by proprietors of standard-essential patents to grant FRAND licences constituted a “stipulation pour autrui” .
Surprisingly, that contractual characterisation appears also to have been recognised by the English and German courts, which have not, however, drawn the consequences from it. In Unwired Planet, the UK Supreme Court relied on the undertaking given to ETSI while applying a competition-law approach (voir ici). Likewise, the Bundesgerichtshof (the German Federal Court of Justice), inaffaire Einwand II, departed from the position of the Court of Justice by focusing more on the undertaking given by the patentee than on competition law.
The XIAOMI case itself
Against that background, the dispute between XIAOMI and PHILIPS looked pivotal: would the French court confirm the position taken in February 2020 in TCL?
On 30 November 2020, XIAOMI served proceedings on PHILIPS, principally to compel it to comply with its obligations to ETSI to grant a FRAND licence rate, and to ask the court to set that rate itself. ETSI was also served, so as to compel PHILIPS to comply with its obligations under ETSI’s rules of procedure. In April 2021, PHILIPS and ETSI challenged the jurisdiction of the French court: the former because no claim was directed against ETSI, and the latter because it considered that it had no standing to be sued.
Le juge a rejeté ces deux arguments.
First, it held that the Paris Judicial Court had jurisdiction as a matter of French internal allocation, since its jurisdiction is established wherever the existence or infringement of a patent right is necessary to the resolution of the dispute.
Second, it held that the Paris Judicial Court had international jurisdiction, applying the CJEU’s interpretation of Article 8(1) of the Brussels I bis Regulation. It was recalled, in substance, that the question is whether there is a sufficient connection between the claims: a connection so close that hearing them together avoids, in particular, the risk of irreconcilable outcomes were they determined separately (CJEU, Painer and Sapir and Others). In such a case the court need not verify whether the claim was brought for the sole purpose of removing one of the defendants from the jurisdiction of its own forum (CJEU, Freeport). Conversely, connexity must be rejected where the claimant and the defendant have colluded to create or artificially maintain the conditions for the application of Article 8(1) (CJEU, Cartel Damage Claims (CDC) Hydrogen Peroxide SA v. Akzo Nobel NV and Others).
In XIAOMI, the court accepted jurisdiction because: the factual and legal situation was identical, the claims against PHILIPS and ETSI both being founded on the application of ETSI’s rules; the risk of irreconcilable decisions between a French court and a foreign court was likewise established; no collusion between XIAOMI and ETSI was alleged, ETSI having itself challenged jurisdiction as regards PHILIPS; and no court had previously been seised of an application to set a FRAND royalty rate.
Comments on the XIAOMI case
The XIAOMI decisions, which are particularly well reasoned, are to be approved on several counts.
There is little doubt that French contract law would offer a valuable angle in resolving FRAND disputes. One can imagine circumventing the protocol laid down by Huawei v. ZTE, given that the obligation to negotiate a contract in good faith does not entail compliance with that protocol, and that the absence of a final agreement does not necessarily entail a breach
En outre, the decisions would also gain in legitimacy — particularly in a global landscape full of anti-suit injunctions — by clarifying on what basis a court may unilaterally set a global rate. Since the FRAND undertaking is a form of “stipulation pour autrui”, that gives a genuine foundation to the choice of forum (French contract law) and legitimises the setting of a global rate by a court (the Paris Judicial Court). It is true, on the other hand, that ETSI itself and its rules doubtless call for serious reform if they are to become genuinely effective.
It should also be recalled that the French courts likewise refuse anti-suit injunctions (“ASIs”), through anti-anti-suit injunctions (“AASIs”). In October 2019, after Lenovo had applied for an ASI in the United States in September 2019, IPCom brought proceedings before the Paris court seeking an AASI against Lenovo. In November 2019 the court found for IPCom, holding that ASIs are contrary to French public policy save where they seek to enforce arbitration or jurisdiction clauses. The Paris judges further held that the ASI sought by Lenovo would amount to an infringement of IPCom’s property rights. In March 2020 the Paris Court of Appeal upheld that judgment.
The XIAOMI decision confirms the case law of the Paris Judicial Court, which has exclusive jurisdiction in patent matters, in favour of standard-essential patent proprietors. It remains to be seen whether rights holders will begin to give increasingly serious thought to France as a decidedly congenial place from which to enforce standard-essential patents.