FRAND or Foe: UK Supreme Court Confirms English Court's Jurisdiction to Set global FRAND Rates
On 26 August 2020, the UK Supreme Court issued a landmark IP decision when it heard together the appeals from both Unwired Planet v Huawei and Conversant v Huawei and ZTE.

 

On 26 August 2020, the UK Supreme Court (UKSC) issued a landmark IP decision when it heard together the appeals from both Unwired Planet v Huawei and Conversant v Huawei and ZTE.  In these appeal cases, the UKSC considered how a standard essential patent (SEP) should be licenced to equipment manufacturers (Implementors) accessing telecommunications standards. SEP owners must grant patent licences on fair, reasonable and non-discriminatory (FRAND) terms to comply with the European Telecommunications Standards Institute (ETSI) Intellectual Property Right Policy (Policy). ETSI sets global standards for ICT-enabled systems. 

While decisions of the UK courts are not binding in Ireland, they are persuasive and can influence the approach of Irish businesses.

Unwired Planet v Huawei

In the UK High Court (UKHC) Mr Justice Birss, held that Huawei infringed two patents owned by Unwired Planet. Unwired Planet had given an undertaking to ETSI to grant Implementors licences on FRAND terms. Mr Justice Birrs granted an injunction against Huawei unless it entered into a licence on the following FRAND terms:

  • the FRAND licence obtained by Huawei would need to be to the wider SEP portfolio and not just the UK patents infringed; and
  • Huawei would have to pay global royalties in respect of the entire SEP portfolio under the licence.

Huawei refused to enter a licence on the above terms and appealed the decision which the Court of Appeal dismissed. The UKSC upheld this decision of the UKHC and Court of Appeal, noting that UK courts can determine the validity and infringement of national patents but the ETSI policy empowers a national court to determine FRAND terms. The UKSC noted it was determining industry practice, not the validity or infringement of foreign patents. 

The requirement to obtain a licence to the wider portfolio rather than to territorial patents reflects the uncertain nature of telecommunication patents, which are often subject to invalidity proceedings. Accordingly, the UKSC determined that access to the standard of technology itself should be licensed to ensure the technology can be fully exploited by licensees.

The UKSC considered if the proper construction of the non-discriminatory element of FRAND meant it was 'hard edged', i.e. requiring the SEP-holder to extend licences on comparable terms to similar Implementors, or 'general', i.e. allowing SEP-holder to licence according to the market circumstances existing at the time. The UKSC decided it was a general obligation, but that there should be a single royalty price list available to all.

Huawei claimed that Unwired Planet began litigation before following the steps in the CJEU decision in Huawei v ZTE aimed to prevent anti-competitive behaviour in relation to SEPs (click here for our summary of the CJEU's decision) and therefore were not entitled to the injunction.  The earlier courts noted that following these steps provided a safe harbour from competition law abuse to a patentee but that a departure from the steps was not in itself abusive. The UKSC rejected the claim, noting that the nature and notice required depended on the facts which were that Unwired Planet were willing to grant SEP licences on FRAND terms, whereas Huawei was only prepared to take a licence on its terms.

Another issue considered was the claim by Huawei that an award of damages based on the UK royalties should have been awarded instead of an injunction.  The UKSC rejected this claim noting this was an inadequate substitute for an injunction. The court noted that confining the patent holder to this monetary remedy would incentivise infringement and mean patent holders would have to litigate on a country-by-country and patent-by-patent basis to recover royalties. 

Conversant v Huawei and ZTE

In the Conversant case, Huawei and ZTE unsuccessfully claimed, in the UKHC, that the jurisdiction of the English court was not appropriate as the UK was a small market and that China, the country in which most sales are made, would be more appropriate forum for the case to be heard. Huawei and ZTE appealed this to the Court of Appeal who noted this matter related to UK patents and an injunction connected to those patents, as such the UK courts were the appropriate forum to hear the case. The UKSC upheld this decision.

Key Impacts 

The decisions in these cases are relevant to companies who wish to sell interoperable communication devices. such as mobile phones and tablets on a worldwide basis and for those wishing to take advantage of 5G, such as connected devices as part of the Internet of Things. These technologies are usually protected by SEPs and, as such, manufacturers will need to enter FRAND licences. Companies who sell products using SEPs in the UK may now seek to enter into global deals with the relevant patent holders to avoid the risk of being subject to injunctions. There is also the possibility that companies with a low sales levels in the UK market will simply not continue to do business in the UK to avoid the risk of litigation before the UK courts. 

Contributed by Colin Russell and Anna Ní Uiginn

 

 

Key Contacts

David Cullen Partner

Leo Moore Partner

Cormac Stewart Senior Associate

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