The Current System is "Madness" - WIPO Conference part 2
At the WIPO Seminar on SEPs and Dispute Resolution (“Seminar”)[1], Justice Mellor said that the current system for making FRAND determinations is “madness." Filing lawsuits in multiple countries is not a good, or reasonable, way to assess a global FRAND rate or achieve a global FRAND license. All of the judges who spoke at the Seminar seemed to agree with Justice Mellor that the current system is failing.
That, however, is where the agreement ended. As usual, Judge Schoen thought his court (and the German influenced UPC) were the only courts that should be making SEP patent decisions. This included making disrespectful comments about how the UK and Chinese Courts approach FRAND decision-making, and also expressing what seems to be his general animosity towards implementers who do not take licenses at whatever rates a SEP holder demands. Justice Mellor and Judge Wu’s comments were more measured in tone, but both were quite critical of the way the German Courts approach the core issues.
Judge Schoen vs. the U.K.
Judge Schoen has made numerous condescending and discourteous comments about the U.K. courts this year. Judge Schoen claimed in an interview that his court (and the German influenced UPC) is the “gold standard” which UK judges are trying to emulate: “The UK judges are ultimately trying to reach the gold standard with their case law, and the gold standard is the case law of the UPC and the German courts.” He also has claimed that judges in the UK want to be employed at the Unified Patent Court but, because of Brexit, cannot. Because they are unable to join the “gold standard” UPC, Judge Schoen apparently believes that UK judges are making decisions simply to keep the UK courts busy: “The UK judges position themselves a little differently to us so as to be attractive.”[2] He has even claimed that the UK courts are not genuine in their approach to SEP determinations but are only being different from the way his court does things as “a way to stay in business.”[3]
The WIPO Seminar was no different. Judge Schoen once again offered his opinion that the UK Court has opened itself up as a place for implementers to forum shop, which he intimated was wrong. He also argued that there was something wrong with Samsung (a Korean company) filing FRAND actions in the U.K. and in China.
He did not, however, acknowledge the pot/kettle, goose/gander issue with respect to foreign SEP holders filing suits in his own German court or in the UPC. But that is par for the course for Judge Schoen. He frequently takes a very one-sided view when it comes to SEP litigation. Of course, if it is wrong for Samsung to file SEP litigation in the UK and China when its home base is in Korea, it must be equally wrongful for ZTE (a Chinese company) to file a lawsuit in Judge Schoen’s German court against Samsung (a Korean company). But despite taking the UK courts to task for allowing themselves to be used for this type of “forum shopping,” Judge Schoen failed to recognize or acknowledge his own court’s leading role in the current forum shopping “madness.”[4]
Justice Mellor was much more measured in his comments, focusing on the failure of process and reasoning in the way German courts approach FRAND committed SEPs. Justice Mellor pointed out that the UK courts have found that the FRAND rate was lower than what the SEP owner was seeking in “every case.”
Justice Mellor noted that “Judge Schoen implies that the only reason a case lands in court is because the implementer is unwilling” and that is why the Schoen court is so fast to issue injunctions. But “in all cases before us, implementers were right in rejecting” the SEP owner’s offer because it was not FRAND. That is why, in all SEP cases, a determination of the FRAND rate should be made first. Without a FRAND determination, there is nothing on which to base a finding of willingness or unwillingness.
Justice Mellor also pointed out that the rates set in Judge Schoen’s guidelines are not substantiated by any evidence and there is not enough detail in the guidelines for anyone to understand how those rates were determined. Finally, Justice Mellor noted that there is a significant risk that people will treat the rates set out in the guidelines as a “baseline,” rather than viewing them as one court’s conjecture about what rates should be.
Judge Schoen vs. China
Without any disclosed evidence or any explanation of what the “findings” are, the Schoen guidelines state that: “findings have emerged that justify a rebuttable presumption that companies from the People’s Republic of China possess artificially inflated patent portfolios . . . [which] justifies a rebuttable presumption that a 15% discount should be applied to the patent portfolios of Chinese companies.” Judge Schoen’s preference for the “western world” (his words) was on full view at the Seminar as he attempted to justify this presumption in the guidelines.
At the Seminar, Judge Schoen stated that “Chinese portfolios are weaker than western companies portfolios” because Chinese companies get government support for patenting. Judge Schoen claimed that Chinese portfolio values should be reduced, particularly if using a top down approach, because of this. Judge Schoen did not, however, provide any evidence or explanation as to why government support for patenting would necessarily result in weaker SEP portfolios or why this presumption was true across the board. And, he provided no explanation at all as to how his court selected 15% as the presumptive discount.
Judge Wu was quick to respond stating that the reason why so many patents are granted in China these days is because China is driving so much innovation. He noted that Chinese companies are out ahead in innovations in the automotive space, particularly for E.V. vehicles, in battery technology and in A.I., among other areas. He explained that there are a lot of patents because there is a lot of innovation in China.
Judge Wu also reminded Judge Schoen that one of the “pillars” of FRAND is non-discrimination. Judge Wu noted that, if adjustments are needed, they should be done fairly and equally based on the facts of a particular case. And of course, Judge Wu is correct. Non-discrimination is a pillar of FRAND. Why should a Chinese company, but not a “western company,” have to overcome a presumption that their portfolio is weak? It is fair and reasonable to require the same standard of proof from SEP holders regarding the strength of their portfolios, regardless of whether they are “western” or non-“western” companies.
Judge Wu also said to Judge Schoen: “Our courts respect yours. This should be mutual.”
Judge Schoen vs China and the UK: Anti-Suit Injunctions
Judge Schoen gave a long and baffling explanation as to why his court has issued anti-suit injunctions against the UK and against China. Judge Schoen said that the problem with interim license decisions is that a litigant can get a written decision from his own court in 11 months but it takes more than a year for rate setting. An interim license says we can do a case in more than one year.“ It is unclear why Judge Schoen believes this (relatively small) timing difference necessitates the very extreme measure of an anti-interim license/anti-suit injunction, particularly when he already has admitted that his court will not determine a FRAND rate and the result of his court’s decision-making will not be a FRAND license.
More tellingly, Judge Schoen also said that he believes that the purpose of the interim license “scheme” is to stop “our cases” and to stop “us giving injunctions.” He also said: “we did an anti-interim license injunction against China to fix this.” So there in a nutshell is the real reason for Germany’s anti-suit injunctions: Judge Schoen’s court wants to be able to issue injunctions against implementers without interference from another court’s grant of a FRAND license. In other words, Judge Schoen admits his court is impeding other courts’ decision-making in order to stop implementers from obtaining FRAND licenses to FRAND committed SEP portfolios. How perverse is that?
Judge Schoen vs Implementers
The Schoen court’s favoritism towards SEP holders at the expense of implementers also was on display at the Seminar. Judge Schoen discussed his court’s increasingly onerous requirements for implementers to be found willing at the Seminar. For example, Judge Schoen explained that paying security will not necessarily result in a finding that an implementer is willing. He did not explain why an implementer needs to do something more than paying security or what that something more should be.
Judge Schoen also said that an implementer could ask for a FRAND determination as a defense. But, his court would never grant a FRAND license. He said: “FRAND first in Germany means that as a defendant, you can request an early hearing.” But, this will be extremely limited in scope: “We don’t talk numbers [at the hearing] because negotiations should continue. If a defendant feels an offer is unfair, they can agree to binding arbitration to show willingness. Otherwise we feel it is too late [to be found to be willing].”
Judge Schoen never explained why he is so opposed to implementers going to other courts that are willing to make FRAND determinations, but supports requiring implementers to engage in confidential, non-reviewable arbitration if they want to avoid an injunction.
Judge Schoen vs the United States
There was one last remark of Judge Schoen’s that I wanted to note here. In his bio for the Seminar, Judge Schoen claimed that the “Munich I Regional Court is the busiest court for patent infringement cases in the western world.”[5] Judge Schoen’s statement displays his hubris and his fundamental failure to engage in any objective fact finding before making broad pronouncements. The single busiest court for patent infringement cases in the “western world" has changed several times over the past five years, but are all in the United States.[6]
And, being the world's busiest court for patent infringement litigation is nothing to brag about. Being the busiest court has, historically, had more to do with forum shopping by patent holders looking for courts that they perceive to advantage them than with any capability or merit of that court.
Conclusion
As a first step to address the “madness” that is the current system of SEP licensing and SEP litigation, we need courts that have mechanisms for broad-based discovery since transparency is such a problem and courts that engage with that collected evidence transparently, fairly and impartially. What we do not need are courts that rely on their own flawed surmises and subjective beliefs.
[1] You can see Part 1 here: The Top FRAND Courts Have Very Different Approaches to Global FRAND Licensing
[4] I sometimes wonder whether Judge Schoen has so little self-reflection that he does not recognize the irony of his comments or so much hubris that he believes that his way is the only right way and so no other court in the world should have the right to make any decisions that would impact his court’s grant of an injunction. Or does his behavior stem from something else entirely?
[6] The busiest court for patent infringement litigation in the "western world" over the past five or so years has variously been the Eastern District of Texas, the District of Delaware and the Western District of Texas. Compare the number of filings in those U.S. courts, Patexia Insight 229: Patent Litigation Trends Shifting in the Most Active U.S. Courts | Patexia, to the number of filings in Judge Schoen's court, The Patent Litigation Review 2027 - Germany: impact of the UPC and national patent courts’ coexistence in 2026 - IAM.
