shutterstock_733563445_pe3k
20 March 2023FeaturesPatentsMark Marfé

UK courts continue to lead the way on FRAND rates

The England and Wales High Court has, on March 16, handed down its second-ever global fair, reasonable and non-discriminatory (FRAND) licensing decision.

The judgment confirms the approach taken by the UK Supreme Court and in Birss J’s (as he then was) landmark first, instance judgment in Unwired Planet. This decision also provides further guidance as to how the parties negotiating such licences should conduct themselves.

The dispute between Lenovo, an implementer which specialises in designing, manufacturing, and marketing consumer electronic devices including mobile telephones, and InterDigital, which designs and develops a range of advanced technologies that are used in digital cellular and wireless products and networks, including 2G, 3G, 4G, arose over the licensing terms for use of telecoms patents owned by InterDigital. These had been declared essential (standard-essential patents, or SEPs) to the operation of the 3G, 4G and 5G standards set out by the European Telecommunications Standards Institute (ETSI).

An SEP is a patent that protects technology believed to be essential to implementing a technical standard. In other words, you cannot operate a standard compliant device without necessarily using the patented invention. The bodies through which businesses collaborate to develop standards—such as ETSI—require SEP rights holders to make SEPs available for others to use by way of a licence on FRAND terms

The purpose of the case before the High Court was to determine what terms would be FRAND for Lenovo to license InterDigital’s portfolio of SEPs for standardised 3G, 4G and 5G technologies.

InterDigital’s royalty ‘win’

Handing down the High Court’s judgment, Justice Mellor said Lenovo should pay InterDigital royalties of $138.7 million—and should pay in full for past sales. While the award is in InterDigital’s favour, it amounts to around 40% of the sum InterDigital originally claimed and is lower than that sought by the patentee.

The judge also determined that none of the licensing deal offers made by either party were FRAND. However, there was insufficient evidence that Lenovo was unwilling to take a licence. Likewise, he said InterDigital was not trying to keep Lenovo’s products off the market, but instead trying “to obtain recompense for the long period during which Lenovo [was] not paying any royalties.”

It is perhaps unsurprising the court found neither party’s offers were FRAND. After all, FRAND determinations are expensive and time-consuming so it is likely the parties would have agreed on a rate amongst themselves to avoid the need for litigation if their offers had not been so far apart.

This decision is important as it confirms the decision taken by the UK Supreme Court in the dispute between Unwired Planet and Huawei that UK courts are willing to set global FRAND royalty rates for standardised industries.

It also provides further clarity on many of the key issues that arise in FRAND disputes and how the parties negotiating these SEP licences should conduct themselves. It will be interesting to see the application of the judgment to licensing disputes relating to other standardised technologies such as video coding and WiFi6 which are increasingly the focus of licensing programmes.

SEP licence transparency useful for IoT

The validity of the SEP portfolio was not a relevant factor in determining the rate. Technical issues concerning the validity and essentiality of some of IDGs patents was determined at earlier technical trials.

There were interesting comments made by the judge as to the benefits of greater transparency in the telecoms sector over what SEP licences had been granted in the past. This will be welcomed by new market entrants in the internet of things space who need to use standardised technologies in their products

The determination that Lenovo was not intentionally holding out on taking a licence had a knock-on effect for the relief that InterDigital could seek. Previous case law has established that a licensee can change its mind and accept licence terms at a later point in time, and that is an acceptable commercial practice. As a result, the likelihood of a patentee being granted an unqualified injunction, as InterDigital was seeking, seems an even more remote possibility now.

It is worth noting that the UK is one of only two jurisdictions willing to set a global FRAND royalty rate, the other being China. To date, no other European country has done so.

It is anticipated that all eyes will be on the Unified Patent Court (UPC), which is set to open its doors on June 1, 2023, and whether UK jurisprudence will be persuasive in the UPC following a similar approach. While the prospect of centralised relief may appeal to SEP holders, equally, the opportunity for centrally revoking a strategically important patent will be attractive to implementors, providing commercial certainty across the European market.

The UPC also aims to be fast and reaching a decision in just over 12 months from a claim being filed. Such a timeline will be challenging where FRAND is in play without robust case management by the new court.

Finally, there is another pending FRAND determination due to be handed down imminently in a dispute involving Optis Cellular Technology and Apple, where it is expected that the High Court will follow a similar approach.

Mark Marfé is a partner at Pinsent Masons. He can be contacted at:  mark.marfe@pinsentmasons.com

Today’s top stories

InterDigital v Lenovo exposes flaws in SEP practices, says Fair Standards Alliance

SCOTUS takes on Arbitron v Hetronic

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Adrian Tapping at atapping@newtonmedia.co.uk


More on this story

Patents
17 March 2023   Ruling follows Supreme Court’s position in Unwired Planet | UK only one of two jurisdictions worldwide where courts will set FRAND rates | Unified Patent Court has potential to follow the UK's lead.
Patents
18 February 2021   Apple has urged the US judiciary to apply antitrust law to patent litigation, in a strongly-worded bid to overturn a ruling that a patent pool did not engage in antitrust activities when it refused access to standard-essential patents.