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UK courts maintain jurisdiction on FRAND cases

Posted on 4 August 2022

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In a second decision this summer addressing the English Court's jurisdiction to determine Fair Reasonable and Non-Discriminatory ("FRAND") disputes, the Court of Appeal has upheld the first instance decision of HHJ Hacon permitting Nokia's claim for infringement of UK Standard Essential Patents ("SEPs") to proceed in the English Court, notwithstanding the existence of concurrent proceedings in the People's Republic of China.

Judgment was handed down on 11 July 2022, with Arnold LJ delivering the leading judgment for the Court of Appeal.

Nokia v Oppo - First Instance

At first instance, Nokia issued a claim before the English Patents Court seeking a declaration that three EP(UK) Patents were essential to the relevant standards and that they were valid and infringed by Oppo. They also sought a declaration that the terms of a global licence offered by them to Oppo were FRAND.

Oppo disputed the jurisdiction of the English Court to hear the dispute and sought an order i) to set aside service of the non-UK defendants; and/or, in the alternative, ii) for a stay of proceedings pending determination of parallel FRAND proceedings in the PRC. Oppo relied on changes in the legal and geopolitical landscape to distinguish the requests in their application from the position considered by the UK Supreme Court in the joined cases of Unwired Planet v Huawei and Huawei/ZTE v Conversant, as follows:

  1. First, the fact that the Supreme People's Court of the People's Republic of China ("the Chinese Supreme Court") had since ruled that it too had jurisdiction to settle global terms of a FRAND licence in Guangdong OPPO Mobile Telecommunications Corp Ltd v Sharp Corp.
  2. Second, the fact that the Recast Brussels Regulation no longer applied in the UK following its exit from the European Union.

In dismissing Oppo's application on jurisdiction, and denying a stay of the English proceedings, HHJ Hacon looked critically at the landscape for determining FRAND disputes, noting that the "current unevolved framework for the settlement of a global licence between owners of SEPs and implementers is plainly not satisfactory". In particular, he observed that "if SEP owners have unfettered freedom to select the jurisdiction in which to bring an action for infringement, it means that potentially they get to select the jurisdiction likely to settle FRAND terms most favourable to them." This, he considered, would likely lead to 'a race to the top', which would be an unattractive prospect for the telecommunications industry. Equally unattractive was the prospect of a 'race to the bottom' which would likely follow if implementers were afforded unfettered freedom to bring a claim in any jurisdiction for the settlement of FRAND terms, since they too would look to select the country most favourable to them.

On the question of forum, HHJ Hacon followed Conversant – the dispute was grounded in the validity and infringement of a UK patent, and accordingly England was the appropriate forum to hear the dispute.

In deciding against a stay, HHJ Hacon ruled that the circumstances were not of the rare and compelling nature required to justify the imposition of a stay, taking into account all the factors. The existence of another available forum was not sufficient in and of itself to persuade the English Court to stay the proceedings before the English Court.

Oppo appealed both findings.

Appeal

Giving the leading judgment, Lord Justice Arnold, like HHJ Hacon before him, provided insightful commentary on the way the English Courts view the determination of FRAND disputes. He addressed in his judgment the thorny issues which arise where the dispute before a single national court concerns, at its widest, questions relating to the terms of a global licence for a global portfolio of patents. In an approach familiar to those who follow his extra-judicial writing and commentary, Arnold LJ suggested that "...[T]he only sure way to avoid these problems is to use a supranational dispute resolution procedure, and the only supranational procedure currently available is arbitration" and that "national courts cannot solve the problems inherent in the present system of resolving SEP/FRAND disputes."

Nevertheless, in these proceedings Oppo had refused arbitration, favouring resolution through court proceedings, in the absence of a mediated or otherwise negotiated settlement. Nokia, although in principle agreeable to arbitration, considered that it was now too late for this particular dispute, given the substantial investment already made in litigation in national courts.

The issues on appeal were, again, twofold: whether England was the appropriate forum to hear the dispute; and whether there ought to be a stay of the English proceedings pending determination of those ongoing in the PRC.

As to the question of forum, Arnold LJ agreed that the case was properly characterised as one relating to questions of infringement and validity of UK SEPs: OPPO's reluctance to otherwise dispense with 3 technical patent trials listed in this case lending significant weight to that finding. Accordingly, in line with the decision of HHJ Hacon and Unwired Planet v Huawei and Huawei/ZTE v Conversant, the English Court was, indeed, an appropriate forum to hear the dispute.

Having characterised the claim as one relating to the validity and infringement of UK SEPs it was not necessary for the Court of Appeal to consider whether the PRC might be an appropriate forum. Nevertheless, the court took the opportunity to consider the point in any event and concluded that it was indeed an alternative forum, albeit in this instance not the appropriate one. Taking into account all the relevant factors, the arguments advanced by Oppo were not sufficient to oust the jurisdiction of the English Court.

Turning to the question of a stay of the UK proceedings, Arnold LJ acknowledged in questions of case management, the assessment carried out at first instance and the subsequent decision of that court is accorded a "particularly high level of deference." Oppo's arguments against HHJ Hacon's decision to refuse the stay were primarily based on the temporal dimension of the dispute in that in their assessment, the PRC courts would reach a decision first. Arnold LJ was not convinced either by the timings set out by Oppo, or that a decision from the Chinese court would be determinative of all of the issues between the parties such that it would and dispense with the need for the UK proceedings. Furthermore, he noted that questions around delay and the expeditious resolution of the dispute were in any event largely in Oppo's own control. Accordingly, no stay of proceedings was ordered and the first instance decision of HHJ Hacon was upheld.

Comment

In upholding HHJ Hacon's decision, this Court of Appeal has demonstrated that the English Court will continue to exercise a firm grip on FRAND proceedings in situations where the case is anchored around a UK SEP, and no indication is given of what would be required for the English Court to cede jurisdiction in these circumstances.

However, the English Courts are making it very clear that they do not see themselves, or any other national court, as the only decision maker for these sorts of disputes. Whether Arnold LJ's push towards determination by a supranational mechanism such as arbitration gains wider industry appeal remains to be seen.

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