UPC Compass: The UPC's current stance on the FRAND dance

The UPC is increasingly becoming a central forum for European and global SEP litigation. With more FRAND decisions being issued, there is some guidance available on how strictly the court will assess implementer conduct and market-power arguments.

Two recent decisions are particularly important: the LD Düsseldorf decisions of 18 March 2026 (UPC_CFI_135/2024, UPC_CFI_477/2024) and the LD Mannheim decisions of 16 June 2026 (UPC_CFI_86/2025, UPC_CFI_490/2025).

Both decisions start from the CJEU’s Huawei v ZTE framework, but they move the analysis forward by focusing on two points of immediate litigation relevance: the evidentiary burden for a dominant market position and the consequences of conduct that obstructs a proper FRAND assessment.

Key implications

• Standard essentiality of the patent alone is not sufficient to demonstrate a dominant market position which is why this opening door to the FRAND defense must not be underestimated.
• Implementers should declare willingness to take a FRAND licence promptly after receiving an infringement notice, or risk losing the defence before the court reaches the substance of the offer.
• Negotiation conduct that prevents the opposing party from presenting its FRAND case, including reliance on restrictive NDA provisions, may itself support a finding of unwillingness.

The Huawei v ZTE Framework

As is well known, the Huawei v ZTE framework focuses on the following four steps as part of the FRAND dance:

• Step 1: Infringement Notice: The SEP holder must alert the alleged infringer by designating the patent and specifying the manner of infringement
• Step 2: Expression of Willingness to License: After receiving notice, the implementer must express its willingness to conclude a licensing agreement on FRAND terms
• Step 3: FRAND Offer by SEP Holder: Once willingness is expressed, the SEP holder must present a specific, written offer on FRAND terms, specifying the royalty and calculation method
• Step 4: Counteroffer and Security by Implementer: The implementer must respond diligently, without delaying tactics, based on objective factors and recognised commercial practices. If the offer is not accepted, the implementer must submit a specific counteroffer on FRAND terms, promptly and in writing. As soon as the counteroffer is rejected, the implementer must provide appropriate security, such as a bank guarantee or deposit.

Starting from the Huawei v ZTE framework, both decisions highlight that the FRAND defense and in particular the willingness to take and grant a license by the respective parties has to be analysed holistically. Nevertheless, in the actual analysis a step-by-step test is still conducted.

LD Düsseldorf

1. FRAND declaration

The LD Düsseldorf had to decide a case in which the patent owner did not make any FRAND declaration (like it is for example known from ETSI). The court explicitly confirmed that Art. 102 TFEU applies regardless of whether a FRAND declaration was given (para. 469) as Art. 102 AEUV is applicable if the patent holder has a dominant position. The dominant market position is an objective market condition unrelated to the patent holder’s voluntary commitments. The patent holder is therefore required to provide a license to the implementer because of its dominant market position and not because of its willingness to license potentially manifested in a FRAND declaration.

However, if the Huawei v ZTE framework applies without modification despite the absence of a FRAND declaration (paras. 470–471), was not answered by the court as the implementer was found being unwilling even if Huawei v ZTE was applicable.

2. “Early termination” of the FRAND defense

In its assessment of the Huawei v ZTE framework, the court basically ends its analysis early and in particular finds that it did not need to assess the FRAND compliance of the patent holders licensing offer.

In the decided case, the implementer failed already to issue its initial and unspecific general willingness to take a license on FRAND terms, not least because it did not react to the infringement notice until the patent infringement action was filed. In the decided case, the implementer/defendant did not even declare its willingness to take a license on FRAND terms in the course of the infringement proceedings, irrespective of whether this would still be sufficient in the context of Huawei v ZTE=.

Thus, the LD Düsseldorf for this reason concluded that the implementer/defendant is an unwilling licensee and dismissed the FRAND defense.

The decision of the LD Dusseldorf therefore re-illustrates how important and timely and diligent reaction of the implementer is if it received an infringement notice/licensing request from the patent owner.

LD Mannheim

1. Applicability of Huawei v ZTE framework

The Mannheim case addressed the question which is yet to be decided whether the Huawei v ZTE framework only applies to patents that are strictly standard essential, i.e. do not relate to optional parts of a standard or if – in fact – the framework also applies to optional parts if they create a so called de facto standard. Such de facto standard can exist – as argued by the defendant in the present case – if no meaningful use of a standard (here: HEVC) is possible otherwise.

Unfortunately, the LD Mannheim missed out an important opportunity to actually decide on this question which has been discussed a lot in the past. The reason for this is that even if Huawei v ZTE was applicable in such scenario – as argued by the defendant – this would not have provided any FRAND defense as the defendant didn’t meet the applicable threshold.

2. Dominant market position/relevant market

Irrespective of whether a patent relates to a de jure or de factor standard, the LD Mannheim emphasised that standard essentiality of a patent is only a minimum requirement to prove dominant market position. However, the implementer must in addition show that the standard creates market dominance in the downstream product market, which in turn gives the SEP holder dominance in the upstream licensing market. The key question is whether customers regard alternative technologies as effective substitutes or whether the standardised technology forms a separate product market.

An unresolved issue is how this analysis should apply where the downstream market is fragmented across several protected standards, none of which has a substantial individual market share. In that scenario, the question is whether implementers could claim FRAND access to each technology despite available alternatives, or whether the absence of dominance for any single standard defeats the defence.

The court did not need to resolve these issues. The implementer failed to plead a dominant market position, failed to establish the general applicability of Huawei v ZTE, and failed to present facts showing that the asserted patent was de facto standard-essential. The FRAND defence therefore failed on these threshold grounds.

Nonetheless, the LD Mannheim assumed standard essentiality and dominance to also comment on the remaining elements of the FRAND defence which relate to quite a specific and important aspect when it comes to NDAs.

3. Be careful with your NDA restrictions

The LD Mannheim reviewed the Huawei v ZTE steps in light of the parties’ actual negotiations, which were subject to an NDA. The NDA apparently barred either party from submitting certain negotiation materials to a court in support of a FRAND defence without the other party’s consent.

The SEP holder argued that this restriction prevented it from putting the negotiations before the court, and the implementer refused to waive the clause. Although the LD Mannheim indicated that such a restriction would likely be ineffective as contrary to ordre public, it accepted that the SEP holder should not have to risk breach-of-contract claims in another jurisdiction. Rather, the implementer’s refusal to waive the restriction led to a finding of unwillingness and independently defeated the FRAND defence.

Conclusion and Outlook

The key open question is whether the Court of Appeal will endorse the first-instance courts’ structured but increasingly pragmatic application of Huawei v ZTE, or instead impose a more literal and confined reading of the framework. To date, the Court of Appeal has addressed only ancillary and largely procedural FRAND issues, not the substance of the FRAND defence itself.

For now, the first-instance decisions show that the UPC is prepared to develop its own FRAND approach and to give practical guidance even where individual points are not outcome-determinative. The direction of travel is clear: parties must plead dominance carefully, react promptly to licensing notices, and avoid negotiation conduct – including restrictive NDA positions – that may undermine their asserted willingness to license.