2018 saw a number of cases before the UK courts relating to standard essential patents (SEPs) and FRAND (fair, reasonable and non-discriminatory) licensing, including Unwired Planet v Huawei, Conversant v Huawei/ZTE, Philips v HTC/AsusTek and TQ Delta v Zyxel. This ongoing portfolio of cases demonstrates that the UK is a key player in the resolution of FRAND/SEP disputes.
Court of Appeal upholds global FRAND licence in Unwired Planet v Huawei dispute
The key development, of course, was the Court of Appeal’s October decision in Unwired Planet v Huawei, upholding the Patents Court’s ground-breaking 2017 decision that the Court could set the terms of a global FRAND licence of standard essential patents (SEPs), even though it was based on a finding of infringement of patents whose scope was limited to the UK.
Following his decision at trial, Mr Justice Birss had also decided to grant a ‘FRAND injunction’ if Huawei did not agree to enter into a global licence on the determined terms. Whilst that injunction was stayed pending appeal, Huawei subsequently confirmed that it would enter into whatever licence is finally determined as FRAND in the proceedings. The Court of Appeal refused permission to Huawei to appeal this latest decision to the Supreme Court, but Huawei indicated it would apply for permission from the Supreme Court.
If the Court of Appeal’s decision stands, it will set the framework for the resolution of such disputes and no doubt encourage SEP owners to bring further proceedings in the UK.
Can a global licence be FRAND?
On the important question of whether, following a finding of infringement of UK patents, Huawei should be required to take a global licence, or a UK licence only, the Court of Appeal agreed with Birss J that, depending on all the relevant circumstances, a global licence between a SEP owner and an implementer may be FRAND.
On the facts, Birss J had decided that, given the size and scope of Unwired Planet’s portfolio and the multinational basis of Huawei’s business, a willing licensor and licensee acting rationally and reasonably would agree a worldwide licence. Indeed, he said, country by country licensing would be “madness” and something “no rational business would do if it could be avoided”. The Court of Appeal agreed.
However, the Court of Appeal disagreed with his assessment that there will only ever be one set of FRAND terms for a particular set of circumstances. Instead, given the complexity of patent licences and the commercial priorities of the participating undertakings, it was “unreal” to suggest that two parties, acting fairly and reasonably, would necessarily arrive at precisely the same licence terms as another two parties in the same circumstances - on the contrary, “the reality is that a number of sets of terms may all be fair and reasonable in a given set of circumstances”.
How should the Court approach the requirement of ‘non-discrimination’ in the ETSI undertaking?
The Court of Appeal agreed with Birss J that the non-discrimination obligation does not mean that a licensee can demand a lower rate where one has been given to a different but ‘similarly situated’ licensee in relation to the same SEPs. Instead, it was either a general obligation integrated into the setting of the benchmark rate (which was a measure of the intrinsic value of the portfolio but did not depend on the licensee), or alternatively the asserted discrimination must distort competition to be a breach of the ETSI undertaking.
The CJEU’s framework in Huawei v ZTE and proportionality
Finally, the Court of Appeal rejected Huawei’s appeal against the finding that Unwired Planet had not abused its dominant position in seeking an injunction. The Huawei v ZTE protocol was not a mandatory behavioural framework, other than that the SEP owner must give notice to, or have prior consultation with, the implementer (what amounts to sufficient notice will depend on the circumstances). If the SEP owner complies with the CJEU’s Huawei v ZTE protocol, it will be protected against a finding of a breach of dominant position if it seeks to bring proceedings for an injunction. However, if it does not comply, assessment of whether its conduct is abusive will depend upon all the circumstances.
Patents Court confirms it has jurisdiction in dispute over global FRAND licence
In another important FRAND case before the English courts, Conversant v Huawei & ZTE, jurisdictional issues were the focus of the case. Conversant issued proceedings in July 2017 (shortly after the High Court’s Unwired Planet decision). Whilst the claim is for infringement of the UK designations of four of its European patents, Conversant is 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 Huawei had not raised 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 rejected Huawei / ZTE’s arguments based on jurisdiction and the appropriate forum for the resolution of the dispute and this decision was upheld by the Court of Appeal in January 2019. As with Unwired Planet v Huawei, confirmation that the Court has jurisdiction to determine the terms of a global SEP licence, even where the dispute concerns UK patents only, will of course encourage further SEP portfolio owners to bring claims here.
Court considers disclosure in SEP licensing case
Meanwhile, in TQ Delta LLC v Zyxel Communications UK Ltd the High Court has considered a series of applications relating to disclosure. Disclosure, in particular of comparable licences and related documents, is usually highly significant in standards cases. In particular, the Court considered a request for disclosure of documents relating to negotiations leading up to a comparable licence, such as offers, which could put the final terms of the licence into context. The Court concluded that such documents were relevant, but also took into account the proportionality of the exercise, concluding that the requests for disclosure should be based on specific categories of documents.
This approach highlights a change generally to the approach to disclosure operating under a mandatory pilot in the Business & Property Courts (which includes the Patents Court) from 1 January 2019, with the parties expected to adopt a more targeted approach to the disclosure process.