FRAND

Posted on 30 March 2021

2020 was again a busy year for FRAND (fair, reasonable and non-discriminatory) and SEPs (standard essential patents) cases in the UK courts, with multiple hearings often occurring in relation to the same parties.

Supreme Court: English courts can settle terms of worldwide FRAND licence

In August 2020, the Supreme Court issued its much anticipated decision in two appeals: Unwired Planet v Huawei and Huawei / ZTE v Conversant. The Supreme Court's decision, following several years of argument before the Courts, has cemented the attractiveness of the English courts as a forum for resolving disputes over SEPs.  In dismissing Huawei and ZTE's appeals, the Supreme Court determined that the English court can, without the parties' agreement, set the terms of a FRAND licence on a global basis for a portfolio of SEPs, even where it has only found infringement of UK patent rights. This means that the English courts have jurisdiction to:

  1. Grant an injunction against infringement of a UK SEP, unless the implementer of the patented invention enters into a global licence of a multi-national patent portfolio; and
  2. Determine the royalty rates and other terms of the licence.

If an implementer that needs to use the patented technology decides not to accept the terms of such a licence settled by the Court, it will therefore be injuncted in the UK. The Supreme Court did suggest that, in such a scenario, the implementer could seek to reserve the right to challenge important non-UK patents in the relevant foreign court, and to require that the licences include a mechanism to alter the royalty rates payable should that patent be found to be invalid or not essential to the particular standard. Whilst Huawei had not done so in this case, it appears to be an option in future cases either during negotiations with the SEP owner or in argument before the Court.

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Claim for damages for foreign sales struck out in FRAND action

In IPCom v HTC the Court struck out part of IPCom's damages claim in the enquiry as to damages for infringement of a UK patent. The patent expired in February 2020 and HTC had elected not to pursue its entitlement to a FRAND licence. Birss J struck out IPCom's damages claim for foreign sales, confirming therefore (subject to appeal for which the parties have both been given permission) that the assessment of damages does not follow the same 'global portfolio' approach to the determination of a FRAND licence under Unwired Planet (see above).

Birss J struck out IPCom's claim to the extent that it related to phones which had never been imported into the UK and which, therefore, never infringed the patent. In particular, Birss J refused to accept IPCom's point that all the lost royalties relating to sales of phones outside the UK were caused by the infringement of the UK patent, and that therefore the notional licence for the damages enquiry should be a global one.

However, Birss J did not strike out the damages claim in relation to non-infringing devices sold in the UK, namely 'workaround' phones (those sold as 3G phones, but which did not infringe the patent) and 2G only phones in the UK because, in Unwired Planet, he did approach the damages for UK patent infringement on a UK portfolio basis, rather than on the basis of the individual patents found valid and infringed. Whilst in this latest judgment he states that the approach should be that the Court should only award damages for infringement of the individual UK patents found valid and infringed, given what happened in Unwired Planet (which may have been based on a concession), he thought the point on non-infringing phones should go to trial. The Court of Appeal is listed to hear an appeal in the case in October 2021.

Court of Appeal considers Crown use defence in SEP dispute

In IPCom v Vodafone, the Court of Appeal overturned a finding that Vodafone had a Crown use defence against IPCom's successful claim for infringement of its SEP relating to 4G.

Crown use provides a defence to an infringement where the use of the patented invention is carried out by a Government department, or a third party on its behalf when authorised, for the services of the Crown without the consent of the patent owner. This can include, but is not limited to, the supply of anything for foreign defence purposes, the production or supply of medicines and the production or use of atomic energy. It can also be used for wider purposes during periods of emergency. The impact of the defence being made out is that compensation will be paid by the relevant Government department.

Vodafone claimed a Crown use defence on the basis that it provided priority access to its network for emergency responders through the Government's Mobile Telecommunications Privileged Access Scheme (MTPAS). However, the Court of Appeal held that Vodafone had no such defence as it was not "authorised in writing by a government department" to use IPCom's patent for Crown purposes. The Court of Appeal considered arguments as to what 'authorised in writing' meant and they did not agree with Vodafone's interpretation – namely that it extended to an authorisation to do a particular act even if it did not necessarily involve infringing the patent. Instead, Arnold LJ preferred the interpretation that it required either an express authorisation to work the patent or an authorisation to do a particular act in circumstances where that act necessarily infringes the patent.

Conversant v Huawei

In Conversant Wireless Licensing v Huawei which related to whether Conversant's SEPS were valid and essential:

  • The Patents Court refused Conversant's application for disclosure of Huawei's group companies' SEP licences with third parties following the Patent Court's decision that Huawei had infringed two claims of Conversant's patents which were held to be valid and essential. Whilst the application for disclosure was refused on the grounds of reasonableness and proportionality, the judge noted that third party licences in which companies in the defendant's groups were parties were capable of having evidential value, and could therefore potentially be disclosable in FRAND cases. That said, they would be secondary to the value of licences of the portfolio in issue, or a larger portfolio from which that portfolio was taken.
  • The trial concerning FRAND was adjourned in March 2020 due to COVID-19 despite the parties suggesting imaginative solutions to the issues that the pandemic had caused.
  • The Court of Appeal dismissed an appeal in October 2020 by Conversant from a decision of Arnold J and upheld a finding that one of its telecommunications patents was invalid as Conversant had added matter through amendments made in the prosecution and litigation of the patent.

Optis v Apple

In Optis v Apple which concerns validity and infringement of Optis' telecommunications SEP, and Optis' requirement for Apple to take a FRAND licence:

  • Apple's request for a strike out of the case on the basis that Optis had abused its dominant position in the market was refused on the basis that it would require a factual assessment by the Court and could not be dealt with on a summary basis.
  • The Patents Court refused Apple's request to refer questions relating to FRAND licences to the European Court of Justice because it would be premature to do so prior to trial and would delay proceedings. Apple had made the request early in order that such a reference could be made prior to the end of the Brexit transition period. However, Birss J felt that the national court could deal with such matters without a reference if necessary, as was demonstrated by the Supreme Court in Unwired Planet.
  • Following a finding in the first of a series of trials that an Optis patent was valid, essential and infringed, the Patents Court later ruled on the level of costs to be awarded in circumstances where the patent in issue has been awarded a Certificate of Contested Validity (CCV) in a previous case where its validity had been questioned. A CCV is an order made by the Court where a patent's validity has been tried and upheld. If a party has a CCV and the patent's validity is subsequently challenged, the patent owner is entitled to claim for its legal costs to be assessed on the 'solicitor and own client basis' if validity is again upheld. This is generally more generous than the standard or indemnity assessments which parties are usually awarded.
  • The case is listed to be heard by the Court of Appeal in October 2021.

Philips v Asustek

In Koninklijke Philips v Asustek & Others an application by the ASUS defendants for them to be removed from trial was refused despite them agreeing to an injunction preventing them from infringing the patents in issue in the UK. It was refused on the basis that the quantum of damages for their past infringements still had to be assessed and the parties disputed the level of sales and royalty rates.

Philips v Tinno Mobile

In Koninklijke Philips v Tinno Mobile, Tinno made an application to stay patent infringement proceedings pending a decision in the French Courts where an earlier action had been started to determine whether a FRAND licence should be granted in respect of the patent in issue. The Court rejected the argument that the actions were related, taking into account a French judgment from a jurisdictional challenge in the French courts by Philips that held that the English and French proceedings did not concern the same subject matter.

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