Unwired Planet v Huawei: more clarity for SEPs in UK

A patent awards an inventor temporary exclusivity for its invention, and until the concept of standard-essential patents (SEPs) arose, there was little doubt of this. Patent systems therefore developed such that if a patent owner wishes to exclude others then it will be entitled to do so through the courts.

In some jurisdictions, this entitlement has been so fundamental that little leeway has been given to their courts to decide otherwise should a patent be found to be infringed—notably in Germany. In other countries such as the US and the UK, some degree of flexibility exists.

Indeed, in the US, following the eBay v MercExchange case (2006), it is now considered somewhat uncertain whether an injunction will be awarded at all in various circumstances.

However, irrespective of jurisdiction, there has been acceptance for some time that SEPs should be treated differently, due to the nature of technical standardisation, which aims to ensure that devices can interoperate irrespective of manufacturer. This requires collaboration and often the use of advanced technologies invented and patented by contributors to a standard. A risk therefore exists that these patents might be used to prevent others using a standard or to ask for unreasonable licence fees.

Many of these standards are created through standard development organisations, which seek to limit this risk by asking contributors to their standards to state their willingness to license their SEPs on fair, reasonable and non-discriminatory (FRAND) terms.

This is to ensure fair access to users of the standardised technology and a fair return for owners of patented technology used to comply with a standard. In essence, access should not be prohibited unless a FRAND licence offer has been made by the SEP owner.

Conceptually this is quite straightforward. However, in reality it runs counter to how courts have dealt with patents in the past. This has raised various questions, some related to the negotiation process, others to what constitutes a FRAND licence and when, would, or even should, an injunction be granted.

Relevant decisions

The best-known case on this is the CJEU’s decision in 2015, Huawei v ZTE. This case, a referral from a German court, considered whether it would be an abuse of a dominant position (ie, competition law) for a SEP owner to seek an injunction.

Prior to this case, the German courts relied on competition law to determine whether they could award an injunction. This was principally because they felt that they had no other mechanism to deny an injunction for SEPs subject to a FRAND undertaking. Accordingly, their case law on SEP injunctions developed along these lines, most notably in the Orange Book Standard decision (2009)—and hence the eventual referral to the CJEU.

In its decision, the CJEU made clear that a patent was a fundamental right and so an injunction could be sought. However, that did not mean doing so might not constitute an abuse of a dominant position. The issue of dominance was not considered by the court, but abuse was.

In this regard, it set out various steps that a SEP owner should take to avoid possible abuse, such as providing notice to the alleged infringer of the infringement and the nature of it, and making a FRAND offer. In turn, it also put obligations on the alleged infringer to avoid an injunction, such as acting in good faith, not using delaying tactics and providing a FRAND counter-offer if rejecting the SEP owner’s offer.

The case did not say what a FRAND offer might be. It was also silent about what would happen if neither the SEP owner nor the alleged infringer followed all the steps.

At the same time, US case law was developing in a different direction by considering the FRAND undertaking as enforceable in its own right, so competition law was not really an issue. This led US courts to focus on what constitutes a FRAND rate as an issue of damages rather than whether to grant an injunction.

Unwired Planet decision

While the English courts have considered numerous SEP cases in the past 15 years, all were settled prior to a decision on when, or if, a court could grant a SEP injunction. Nevertheless, indications from judges had led to the understanding that a court could, and would, injunct a SEP infringer if a FRAND offer was rejected.

Less clear was how procedurally to reach this decision. For example, what if neither the SEP owner’s nor the alleged infringer’s offer was found to be FRAND? The CJEU decision also left this question open.

In early 2017 this question was answered by the English High Court in a case brought by Unwired Planet (UP) claiming infringement of its SEPs by Huawei, Google and Samsung (UP settled with the latter two prior to trial).