Top EU Court Puts Onus on Patent Holders in Licensing Spats

China's Huawei Technologies and companies with key patents may find it more difficult to take legal action against rivals for patent infringement after Europe's top court put the onus on them to offer fair licensing deals.

Patent lawsuits have exploded in recent years as companies such as Apple, Samsung Electronics, Google unit Motorola and Microsoft have gone to court to protect their technology.

The ruling from the Luxembourg-based Court of Justice of the European Union (ECJ) on Thursday came in a case involving the world's No. 4 handset maker and its Chinese rival ZTE.

Huawei sued ZTE in a German court for infringing its patents after both companies failed to agree on the right level of royalties to be paid for a 4G mobile network patent and also on ZTE's request for a cross-licensing deal.

The German court subsequently sought the ECJ's advice, asking whether Huawei's failure to conclude a deal amounted to an abuse of its dominant position.

The ECJ said companies with key technology patents must offer to conclude licensing deals with rivals before taking any legal action or they could be accused of abusing their dominance.

"The bringing of an action for a prohibitory injunction against an alleged infringer by the proprietor of a standard-essential patent which holds a dominant position may constitute an abuse of that dominant position in certain circumstances," judges said.

The Luxembourg-based Court of Justice of the European Union (ECJ) said patent holders should make a specific, written offer to conclude a license with third parties on fair and reasonable terms before asking for an injunction against rivals.

The ruling could put the brakes on companies thinking of taking legal action, said James Killick, a partner at White & Case.

"It could make it more difficult for holders of standard essential patents to get injunctions. Potentially this can be stricter than the (European) Commission's decisions just because it says patent holders must make a specific, written offer," he said.

The EU executive in its cases against Samsung and Motorola last year set out the framework for when patent holders can use litigation against infringing rivals.

© Thomson Reuters 2015