Frand
Willingness
to license.
Frand
Willingness
to license.
from
Is a one-time declaration that you are willing to license sufficient, or do you have to prove it? How long can you take to respond to a license offer? And what happens if you only deposit one percent of what you consider appropriate as security?
What is it all about?
A technology company uses a patent that is indispensable for a mobile communications standard, but does not pay license fees for years. Instead of negotiating seriously, it delays talks, provides ridiculously low security and constantly changes its position. The patent holder sues for injunctive relief. Can the technology company defend itself against this by arguing that the patent holder is abusing its market power?
What does FRAND mean?
Many modern technologies, such as in smartphones, tablets or network devices, only work because the industry has agreed on common technical standards. Anyone who owns a patent that is indispensable for such a standard (a “standard-essential patent” or SEP) has a special position of power, because every manufacturer who wants to use the standard needs a license.
In order to prevent abuse of this position of power, patent holders undertake to grant licenses to the standardization organization on fair, reasonable and non-discriminatory terms. These are referred to as FRAND conditions (Fair, Reasonable and Non-Discriminatory). In return, companies wishing to use the patent must actively participate in license negotiations.
The case
The patent holder owns a European patent that relates to a method for encoding audio signals and has been declared essential for the EVS standard (Enhanced Voice Services). The smartphone manufacturer had offered and sold mobile devices in Germany that support this standard. Despite years of negotiations, a license agreement was not concluded.
The patent holder initially filed an action in October 2019 for information, accounting and a declaration of liability for damages. In February 2021, she extended the action to include claims for injunctive relief, recall and destruction. The Regional Court of Munich I essentially ruled in favor of the smartphone manufacturer. The Munich Higher Regional Court confirmed this decision. The smartphone manufacturer appealed to the Federal Court of Justice.
The negotiation history, a pattern of delay
In its ruling, the Federal Court of Justice Judgment of 27.01.2026 – Ref. KZR 10/25 (FRAND objection III) the course of the negotiations in detail. The following picture emerged:
The patent holder submitted an initial license agreement offer to the smartphone manufacturer back in October 2019. The smartphone manufacturer took almost five months to respond. Far too long in the opinion of the court. The smartphone manufacturer only responded to two further offers in May 2020 after more than three months.
The handling of a confidentiality agreement was particularly conspicuous. Such an agreement is a prerequisite for the patent holder to be able to provide the user with information about existing license agreements with other companies. Such information can be essential for assessing whether the terms offered are fair. The patent proprietor proposed such an agreement together with its initial offer. The smartphone manufacturer only responded after eight months.
In addition, the smartphone manufacturer repeatedly changed its position on the type of license payment. First, it showed interest in a blanket license, but then rejected a corresponding offer and stated that it preferred ongoing payments in order to subsequently submit blanket offers again itself.
Security deposit too low
A central point of the ruling concerns the provision of security. According to the case law of the European Court of Justice (ECJ), a patent user who does not accept a license offer and whose counter-offer is rejected must provide adequate security. This demonstrates that he is serious about licensing and that the patent proprietor does not have to bear the risk of the user’s possible inability to pay.
In May 2020, the smartphone manufacturer deposited an amount of 10,000 euros with the Mannheim District Court. This remained the case for years, although the smartphone manufacturer itself described a lump-sum payment of up to 1 million US dollars as appropriate in subsequent counter-offers. The security thus amounted to just over one percent of the amount that the smartphone manufacturer itself considered to be fair. It was only after the oral hearing in the appeal proceedings, in December 2024, more than four years later, that the smartphone manufacturer increased the security by 1 million US dollars. Too late, the Federal Court of Justice found.
The decision of the Federal Court of Justice
The Federal Court of Justice rejected the smartphone manufacturer’s appeal and confirmed the order to cease and desist, recall, destroy, provide information, render accounts and pay damages.
Ongoing license readiness is mandatory
The Federal Court of Justice clarified that the patent user’s willingness to license is not a one-off act, but a permanent obligation. It is not enough to declare your willingness once and then sit back. The user must actively and constructively participate throughout the entire negotiation process.
The user’s continued willingness to license is an indispensable prerequisite for a successful license negotiation and thus also for the accusation of abuse of market power against the patent holder in the event of failure.
This obligation continues to apply even if the patent proprietor has already submitted a license offer.
No rigid examination sequence
In 2015, the European Court of Justice outlined certain negotiation steps in the Huawei/ZTE decision , namely notice of infringement, declaration of willingness to license, offer, counteroffer, security deposit. The smartphone manufacturer argued that the court first had to examine whether the patent holder’s offer was FRAND-compliant in every respect before it could assess its conduct.
The Federal Court of Justice rejected this. The ECJ’s steps are not a rigid checklist, but guidelines for fair negotiations. Abusive conduct on the part of the patent holder does not already lie in an offer that is not perfect in every respect, but only in the refusal to grant a fair license at all. Conversely, the user must also seriously consider the offer, formulate objections and submit a counter-offer.
No disproportionality of the injunctive relief
The smartphone manufacturer also argued that the injunctive relief was disproportionate. The Federal Court of Justice also denied this. Anyone who uses a standard-essential patent but shows through their conduct that they do not wish to take a license cannot invoke undue hardship. Moreover, the smartphone manufacturer had already succeeded in developing a technical workaround and selling devices without the EVS standard since February 2022. Serious economic disadvantages caused by the injunction were therefore not apparent.
No referral to the ECJ
Despite an opinion from the European Commission, which partly took a different view, the Federal Court of Justice saw no reason for a new referral to the ECJ. The legal situation had been sufficiently clarified by previous case law and the courts of other EU member states also followed the same interpretation.
What does this mean in practice?
Companies that use standard-essential patents must take license negotiations seriously from the outset. In concrete terms, this means that offers must be responded to promptly – the Federal Court of Justice has already ruled that a response time of three to five months is too long. Counter-offers must be substantiated and must not merely serve to gain time. The security deposit must be in reasonable proportion to the license fees that are deemed appropriate. And the position on key issues such as the type of license payment must not constantly change.
A purely formal declaration of willingness to license, which is not followed by serious efforts to negotiate, is not sufficient. In this context, the Federal Court of Justice clearly spoke of “mere lip service”.
The ruling significantly strengthens the position of SEP holders. In particular, courts no longer have to comprehensively examine whether a license offer is FRAND-compliant in every respect before assessing the user’s conduct. An essentially complete contractual offer with a comprehensible presentation of the license fee calculation is sufficient. The focus thus shifts to the question of whether the user has negotiated seriously.
At the same time, the Federal Court of Justice emphasized that the demand for a worldwide portfolio license is fundamentally unobjectionable under antitrust law and that the security deposit must cover this portfolio license fee.
Conclusion
The Federal Court of Justice consistently continues its line of case law on FRAND licenses and substantiates it in important points. The decision provides companies on both sides with clear guidelines.
Patent holders must present and explain fair offers, but they are not obliged to present the perfect contract before the user even has to respond.
Patent users must actively negotiate on a permanent basis, respond promptly and provide adequate security, otherwise they lose the law to invoke the FRAND objection.
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