In its landmark ruling, the Regional Court (LG) of Frankfurt (Case No. 2-06 426/24) clarified the requirements for an implementer to proactively sue a standard-essential patent (SEP) holder for the conclusion of a licence agreement. The case involved Samsung (acting as the Claimant) seeking to force ZTE (the Defendant) to accept a global licence for its SEP portfolio across various cellular standards such as 3G, 4G and 5G. Although the court ultimately dismissed the action, it fundamentally confirmed that such "claims for conclusion of a contract" (Abschlussklagen) are a viable legal pathway under German law.
The case at a glance
The dispute centred on Samsung's request for a court order requiring ZTE to accept a specific licence offer for its global SEP portfolio based on a pre-drafted contract. Samsung argued that its offer was FRAND (Fair, Reasonable and Non-Discriminatory) and positioned its proposed royalty rate as being at the upper end of the acceptable range. Ultimately, the court dismissed the claim as unfounded because, on the basis of its own judicial estimation, the royalty rate offered by Samsung did not actually reach the upper limit of the FRAND corridor.
Admissibility: opening the door to FRAND actions
The court performed an extensive analysis of the admissibility of a standalone claim for conclusion of a contract, rooting this right in sections 33, 33a German Act against Restraints of Competition (GWB) in conjunction with Articles 101 and 102 TFEU. It reasoned that the antitrust "removal claim" (Beseitigungsanspruch) is designed to eliminate a source of ongoing disturbance resulting from a prior violation, which in this context includes the refusal to grant a licence to a willing seeker. The court specifically noted that even the Federal Court of Justice (BGH) in its "FRAND Objection II" decision recognised that a willing licensee has a right to be granted a licence on FRAND terms. We will address below whether such a claim could be also made in the early adoption phase where, arguably, the standard cannot confer market dominance in view of its market penetration. Furthermore, the court rejected the notion that it lacked jurisdiction to mandate a global licence. It held that while the enforcement of a worldwide contract via section 894 German Code of Civil Procedure (ZPO) (where a court judgment replaces a party's declaration of intent) might face recognition hurdles in foreign jurisdictions, such considerations do not affect the admissibility of the claim in Germany.
The right to a contract: the "upper end" requirement
While the court acknowledged the general right to a contract, it imposed a strict substantive threshold stating that a claim for conclusion of a contract can only be successful if the claimant's offer lies at the upper end of the FRAND corridor or even above it. The legal reasoning behind this requirement deserves closer examination.
A fundamental principle: FRAND as a bandwidth, not a fixed price
The court recognised that an SEP holder is generally entitled to a "bandwidth" of reasonable solutions rather than a single fixed price. The FRAND corridor is not one precisely determined number, but a range of appropriate solutions. Within this corridor, the patent holder has legitimate discretion to structure the conditions and is entitled to demand the highest possible royalty that is (still) not unreasonable.
Compulsory contracting as an exception to contractual freedom
An antitrust law-based claim for conclusion of a contract represents a massive intrusion into contractual freedom. As a fundamental principle, every company – including a dominant undertaking – may decide for itself with whom it concludes contracts and on what terms. A compulsory contracting obligation is therefore justified only as an absolute exception. Because a court-ordered contract constitutes a form of compulsory contracting (Kontrahierungszwang), it can only be justified if the implementer offers a rate so favourable to the patentee that any further refusal by the dominant SEP holder is clearly abusive.
The weight of judicial intervention
When a court compels a contract on the basis of section 894 German Code of Civil Procedure (ZPO) (where the judgment replaces the defendant's declaration of intent), this constitutes a particularly serious intervention. Such an intervention is proportionate only when the offer is so advantageous to the patent holder that any doubt about its reasonableness is removed. If the implementer's offer is merely FRAND but sits at the lower end of the corridor, the patent holder may legitimately wait for better conditions without this being qualified as abuse.
Avoiding imbalance in negotiation power
Consequently, the court held that it must dismiss the claim if the implementer's offer is merely FRAND but sits at the lower end of the corridor as the patentee must be allowed to exercise their own discretion within that range. Were a court to grant a claim for conclusion of a contract even for offers at the lower end of the FRAND corridor, this would effectively shift the balance of negotiation power in favour of implementers. Patent holders would be forced to accept the first reasonable offer rather than negotiate within the FRAND framework.
The "upper end" requirement therefore ensures that the severe intrusion into contractual freedom occurs only when the patent holder's refusal is clearly abusive – protecting both the patent holder's right to reasonable compensation and the implementer's right to access licenses on fair terms.
Valuation: path dependency and the top-down method
In determining the appropriate rate, the court addressed the principle of path dependency, originally adopted by the German Düsseldorf Higher Regional Court in 2019 where Samsung argued that a previous agreement should serve as a binding benchmark. The court confirmed that comparison licences are the preferred method for calculation. However, it found the previous licence between the parties to be non-comparable because the circumstances had changed significantly, particularly regarding the evolution of mobile standards like 5G and the intended duration of the new contract. With no suitable comparison licences available, the court justified the use of the top-down approach.
It employed section 287 German Code of Civil Procedure (ZPO) to estimate the rate, noting that FRAND determination requires judicial evaluation based on economic plausibility rather than mathematical exactitude. The specific calculation was unfortunately redacted. The Regional Court of Munich I brought an ARB of 4-8% of the ASP (Average Selling Price) of USD 150 to USD 200 for an average mobile phone for cellular SEPs connectivity into play in its recent Nokia v Asus decision. It is noteworthy that the court also did, however, acknowledge that deviations from the conditions (rates) agreed with competitors are generally admissible within the boundaries of antitrust law. We will take a closer look at what boundaries antitrust law imposes below.
Our perspective
From a mere logical standpoint, this decision is highly commendable for its clarity regarding the "upper end" of the FRAND corridor. It correctly recognises that forcing a contract on a party is a severe measure that should only occur when the offer is beyond reproach. However, from a negotiation theory perspective and the goal of a balanced exchange of interests, this approach not only carries risks but to a certain extent disregards what the CJEU had in mind with its Huawei v ZTE FRAND negotiation framework. If an implementer's offer at the lower end is automatically deemed insufficient for a claim for conclusion of a contract, it might empower SEP holders to insist unilaterally on higher rates, potentially undermining the bilateral negotiation framework established in Huawei v ZTE.
The judgment confirms that a potential claim for conclusion of a contract based on section 33 I German Act against Restraints of Competition (GWB) requires the patentee to be subject to compulsory contracting. Such compulsory contracting is only to be considered when it constitutes the "only appropriate means" to remove the unreasonable disturbance and the conclusion of such a contract does not itself violate any statutory prohibitions. Compulsory contracting as a legal consequence under antitrust law presupposes a position of "market dominance" as only in that case can it constitute the only appropriate means to remove the unreasonable disturbance. This follows from the fundamental principle that antitrust law only prohibits the abuse of a dominant position, regardless of the basis on which that dominance rests. Since there is no market dominance during the early adoption phase due to the lack of market penetration, a claim for conclusion of a contract against the patentee is not justified.
The court also had to navigate a special cross-licensing situation where both parties are active manufacturers holding essential patents. However, there is a massive disparity between the sales and revenue figures of the claimant, Samsung, on one hand and the defendant, ZTE, on the other. This disparity underscores the strategy of leveraging cross-licensing to secure a more favourable FRAND deal when significant disparities exist in terms of sales volume, revenue and, of course, the (presumed) total number of patents held. Public sources show that ZTE and Samsung are closely matched in (declared) 5G SEPs. As such, a disparity in the SEP number count should not have had a significant impact here. The court also acknowledged that deviations from the conditions agreed with competitors" are generally admissible. It confirms that, as a matter of principle, a position of market dominance does not result in an obligation for the patentee to grant licences under exactly the same terms to every implementer. This aligns with established antitrust law: a dominant company is not compelled to grant all parties identical conditions. Even a dominant undertaking is not prohibited from responding differently to varying market conditions. Possible deviations, however, are limited by the prohibition on discrimination.
With respect to price discrimination, the MEO decision of the CJEU (CJEU, judgement of 19 April 2018, C-525/16, MEO) clarifies the criteria for determining when an instance of discrimination can be considered unjust. The Court of Justice made clear in MEO that discrimination within the meaning of Article 102(c) TFEU is not established by a mere difference in prices or contractual terms. Unequal treatment only becomes abusive where it is capable of placing certain trading partners at a competitive disadvantage. Importantly, the court did not treat such a disadvantage as a formal concept but linked it to the economic effects of the differential treatment, emphasising that the relevant question is whether it is liable to affect the competitive position of the disadvantaged undertaking on its downstream market. In that context, the court referred, in particular, to situations in which differentiated pricing might impair an undertaking's ability to compete effectively. Such impairment could be seen, for instance, in reducing the margins available to it downstream. However, the court did not directly apply the margin squeeze doctrine as such; margin effects serve as an indicator of potential competitive harm, not as an independent test.
At the same time, MEO delimits clear boundaries for dominant undertakings. Where price differentiation is capable of producing such adverse competitive effects, the undertaking must be able to rely on objective justifications explaining the divergence. Differences in cost structures, volumes, duration or transactional context may justify unequal conditions whereas differentiation lacking such justification risks crossing the antitrust threshold. Transposed to the SEP and FRAND context, this confirms that FRAND does not require identical royalty rates for all implementers, even where the SEP holder is dominant. However, deviations from licences granted to others must remain within economic limits: they become problematic where they are liable to undermine implementers' downstream competitiveness, in particular by constraining their pricing or margins vis‑à‑vis competitors. In that sense, MEO clarifies that the non‑discrimination limb of FRAND is not a rule of formal equality, but one of competitive neutrality assessed through economic effects, with margin impact being a key, though not exclusive, reference point.
The court's treatment of international jurisdiction also provides a vital perspective on the ongoing tensions between the UK High Court and the UPC as seen in cases like Amazon v Interdigital. By correctly noting that even if a global determination might face recognition hurdles it does not affect general admissibility of such claims and that a foreign ordre public is irrelevant to the determination of global FRAND rates in Germany. That, vice versa, must apply with respect to foreign rate setting, particularly in the UK, as well where both the UPC and the Munich I courts recently expressed doubts on the jurisdiction of UK courts with respect to EPs under the UPC's and German courts' jurisdiction. Consequently, the Frankfurt court highlights a path where the solution to global forum shopping is simply the mutual non-recognition of foreign rate settings. Nevertheless, one must consider whether a court determining global rates should be required to apply foreign substantive law to foreign patents. While the Frankfurt court prioritised procedural efficiency through German estimation standards, a more balanced approach might involve a deeper analysis of whether foreign legal regimes would yield different valuations for their respective local rights.
Conclusion
In conclusion, the Frankfurt court's decision contributes further to legal clarity concerning FRAND law: (1) the court confirms the general admissibility of claims for conclusion of a contract as a consequence of compulsory contracting under section 33 I German Act against Restraints of Competition (GWB), subject to the strict requirement of market dominance.; (2) the court specifies that a claim can only be successful if the claimant's offer is at the upper end or even above the FRAND corridor; (3) the court validates the adequate rate employing the top-down approach recognising that comparison licences are to be preferred but finding previous rates not to comparable to the case at hand, which is why it therefore used section 287 German Code of Civil Procedure (ZPO) to estimate the appropriate rate.
Link to human made English translation
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