An International Guide to
Patent Case Management for Judges

13.4.6 Licensing disputes: compulsory licenses, essential patents

13.4.6.1 Licenses for a patent essential to a standard

The holders of patents essential to a technical standard that enable the interoperability of products meeting the standard must undertake to grant licenses under fair, reasonable and non-discriminatory (FRAND) conditions to anyone wishing to market products complying with the technical standard in question.

That principle, taken from competition law owing to the dominant market position conferred by holding an essential patented feature, is applicable, in Europe, to all standardization bodies. In telecommunications, the most important standardization institute is the European Telecommunications Standards Institute (ETSI), an association governed by French law and whose members develop the most widely used telecommunications standards in the world. The ETSI statutes, rules of procedure and IP rules, and the commitment made by holders of patents essential to a technical standard for each ETSI standard (FRAND commitment) are expressly subject to French law.

It has now been established, in French, British, American and Chinese jurisdictions, that the FRAND commitment includes a “third-party beneficiary” clause³⁴³ subject to the provisions of the former Article 1121 of the Civil Code, under which a provision may be made in favor of a third party where this is a condition of a provision made for oneself or of a gift made to another. The party who made such a provision may no longer revoke it if the third party has declared their intention to benefit from it.

Based on that provision, French case law has consistently recognized that the third-party beneficiary clause is valid if the beneficiary may be determined on the date on which it comes into force³⁴⁴ and that it creates, in favor of the third-party beneficiary, a direct and independent right against the promisor.³⁴⁵

The third-party beneficiary clause generally grants the beneficiary a simple entitlement, but it may also involve a real right and entail, for example, the transfer of ownership.³⁴⁶

As regards patents, it seems that the third-party beneficiary clause grants the beneficiary a right of use and the related obligation to pay consideration for such use. While, in principle, a contract cannot impose on a beneficiary an obligation entered into by other parties,³⁴⁷ French case law nonetheless accepts that the third-party beneficiary clause does not exclude, in the event of acceptance by the beneficiary, the possibility that the beneficiary will be bound by certain obligations.³⁴⁸

The right of use and the related obligation to pay consideration correspond almost exactly to a license, which lacks only the identification of the related patent(s) in order to match completely.³⁴⁹ The license must be obtained in writing (Article L. 613-8 in fine of the IPC) and must clearly identify the patents to which it relates (which ties in with the obligation identified by the CJEU in the first stage of the FRAND negotiations in the Huawei v. ZTE judgment³⁵⁰ for the patent holder to clearly identify the patents concerned).

For a patent-licensing contract with the status of a services contract,³⁵¹ such contracts exist regardless of whether a price has been agreed; Article 1716 of the Civil Code allows, in such cases, for the price to be determined by expert assessment, with the parties being, in any event, subject to the general principle of contractual negotiation in good faith³⁵² that obliges them to disclose relevant information and avoid tactics that could harm the negotiation process. A party who makes use of the patent while using such tactics may be found liable for infringement, while the patentee may be held liable in tort under French ordinary law.

This regime is to be compared with that of compulsory licenses, which constitute limitations on the exclusive right conferred by the patent and are described in detail in Section 13.3.2.5.4.

13.4.6.2 Breach of a licensing agreement (determination of competent jurisdiction)

13.4.6.2.1 Internal jurisdiction

Disputes concerning patent licenses only fall under the jurisdiction of specialist judges of the Paris Judicial Court when it is necessary to examine the existence or non-compliance with a right attached to a patent.³⁵³ Disputes on the determination of a license fee for a patent or a portfolio of patents essential to a standard, insofar as they require the examination of a right attached to a patent, fall under the jurisdiction of the Paris Judicial Court.

13.4.6.2.2 International jurisdiction

In a judgment of April 23, 2009, the CJEU³⁵⁴ ruled that a license agreement for an IP right (IPR) is not a contract for the provision of services within the meaning of the regulation on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, and that to determine the jurisdiction competent to hear a payment claim under such an agreement, it was for the judge to determine, in accordance with their own conflict-of-law rules, the law applicable to the legal relationship in question and establish, in accordance with that law, the place of performance of the contractual obligation in dispute.³⁵⁵

French jurisdictions apply the connecting factor to the law of the country with which the agreement in question has the closest links.³⁵⁶ Judges must thus take into consideration the language in which the agreement was drafted, the place in which it was concluded, the parties' place of business, the law to which it is expressly subject and so on.³⁵⁷

Article L. 613-8 of the IPC establishes that the rights conferred by a patent application or patent may be invoked against a licensee who breaches any of the terms of their license.