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Patents Court confirms it has jurisdiction in dispute over global FRAND licence

Posted on 10 May 2018 by David Rose & Nina O'Sullivan

Patents Court confirms it has jurisdiction in dispute over global FRAND licence

The Court of Appeal will shortly hear argument in the dispute between Unwired Planet and Huawei, following Birss J's ground-breaking decision in April last year to determine the terms of a global licence in relation to Unwired Planet's standard essential patent (SEP) portfolio.  Given the nature of Unwired Planet's portfolio and the multinational licensee status of Huawei, Birss J concluded that a global licence could be fair, reasonable and non-discriminatory (FRAND). 

Following this decision, it was widely predicted that the English court would become a popular venue for the resolution of SEP disputes, given its willingness to settle the terms of such a licence.  This has been demonstrated by the dispute between Conversant and Huawei / ZTE, where Conversant issued proceedings in July 2017 for infringement of the UK designations of four of its European patents, seeking a determination of FRAND terms for its global SEP portfolio. Huawei and ZTE argued that the Court did not have jurisdiction to determine a global FRAND licence as the dispute concerns UK patents only, a point that was not raised by Huawei in the dispute with Unwired Planet (albeit it did rely on jurisdictional arguments in support of its submission that the licence in that case was not FRAND). 

The Court has recently rejected Huawei / ZTE's arguments based on jurisdiction and the appropriate forum for the resolution of the dispute. Confirmation that the Court has jurisdiction to determine the terms of a global SEP licence, even where the dispute concerns UK patents only, will no doubt encourage further SEP portfolio owners to bring claims here.  However, all eyes will now be on the forthcoming Court of Appeal hearing in Unwired Planet v Huawei, with the Court set to hear argument over a six day period beginning on 17 May.

Jurisdiction challenge

Huawei / ZTE argued that the English court had no jurisdiction as the claim is, in substance and effect, one of infringement of foreign patents, which will involve questions of validity of those patents.  However, the Court concluded that determining the terms of a global FRAND licence would not amount to determining questions of validity in relation to foreign patents. The Defendants could bring, and indeed had brought, proceedings in China to challenge the validity of the Chinese patents. Furthermore, the licence could include a mechanism for dealing with patents which were found invalid after the licence had been concluded.

Appropriate forum – England or China?    

As an alternative argument, the Defendants contended that in any event England was not the most appropriate forum for the resolution of the dispute. That was China, given the 'China-centric' nature of their businesses.

The core of their argument was that the China patents were 'overwhelmingly important' for past and future royalty claims in relation to the Conversant portfolio and that it was most appropriate to assess the validity, essentiality and infringement of those patents in China. In effect, the UK infringement claims were a 'convenient hook upon which to hang the enforcement of a global FRAND licence'. As part of this argument, the Defendants submitted that a Chinese court could also decide upon issues of essentiality and infringement of non-Chinese patents (i.e., the UK patents) and set the terms of a global FRAND licence.  However, having heard evidence, the Court concluded that the Chinese courts did not have this jurisdiction, except potentially where the parties conferred it by agreement. Accordingly, it concluded that the English court was the most appropriate forum.

Service of proceedings on Huawei China and ZTE China

In determining whether to grant permission to serve proceedings on Huawei China and ZTE China, the Court reviewed the conduct of the parties during the negotiations as relevant factors in this decision.  In particular, the Judge noted that despite repeated requests, Huawei and ZTE had not confirmed that they were willing to take a licence on FRAND terms determined by the English court, or that their willingness to take a licence was unconditional.  Additionally, the discussions had been lengthy, with no meaningful progress, including no payment of any licence fees during the negotiations.