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23 October 2018Patents

Global licence can be FRAND, English Court of Appeal confirms

The English Court of Appeal today ruled that the owner of a standard-essential patent (SEP) is able to meet fair, reasonable, and non-discriminatory (FRAND) obligations through the offer of a worldwide licence.

Confirming the English High Court’s decision in Unwired Planet v Huawei, Lord Justice Kitchin, on behalf of the English Court of Appeal, said that if an implementer refuses such an offer, the court is able to issue an injunction to prevent continued patent infringement in the UK.

The dispute dates back to 2014, when Unwired Planet accused Huawei, Samsung, and Google of infringing patents claimed to be essential to telecommunications standards, such as 3G. The companies rejected Unwired Planet’s licensing offers as they allegedly did not meet FRAND standards.

Google and Samsung settled, but last year, Unwired Planet’s suit against Chinese telecoms company Huawei reached the English High Court.

The subsequent decision in the case, delivered by Mr Justice Birss in April 2017, was the first one in which the English High Court had made a FRAND determination and set a royalty rate—which Birss said should be a single rate.

The English High Court held that a worldwide licence would not be contrary to competition law and that “willing and reasonable parties” would agree to such a licence, meaning that Unwired Planet was entitled to insist on it.

Birss then handed down what he called a “FRAND injunction”, which he said would cease to have effect if Huawei entered into a FRAND licensing agreement with Unwired Planet.

The injunction was stayed pending the result of Huawei’s appeal.

Today, the English Court of Appeal affirmed Birss’s decision.

Kitchin said that the appeal raised “important points of principle” relating to SEP obligations, and noted that the negotiation of licences on FRAND terms is “far from straightforward”.

He said that a UK SEP has “limited territorial scope”, so UK courts will typically only determine disputes which relate to the validity or infringement of a UK patent or the UK part of a European patent.

However, “the position in relation to a FRAND undertaking is rather different”, Kitchin explained, as the standards of the technology protected by patents have international effect.

Kitchin said it would be “wholly impractical”, and not fair or reasonable, for SEP owners to have to negotiate patent licences country by country. He agreed with Birss’s analysis that such an expectation would be “madness”.

Kitchin also agreed with Birss’s assessment of competition, and confirmed that the non-discrimination limb of FRAND does not compel SEP owners to grant licences on the most favourable terms that the owner has granted so far.

However, Kitchin differed from Birss on the question of whether there can be only a single FRAND rate for any given set of circumstances.

Given the complexities of patent licences and the commercial priorities of the parties involved, “the reality is that a number of sets of terms may all be fair and reasonable in a given set of circumstances”, he said.

Kitchin agreed with Huawei that it is “unreal” to say that two parties, acting fairly and reasonably, will arrive at the exact same set of licence terms as two other parties, also acting fairy and reasonably, in the same circumstances.

Overall, though, Kitchin dismissed Huawei’s appeal and confirmed Birss’s decision that a global licence is capable of being FRAND.

Gary Moss, head of litigation at EIP, which acted as co-counsel for Unwired Planet, said that the decision “provides global patent holders and licensees with a more efficient framework to help resolve SEP licensing issues”.

Arty Rajendra, head of IP disputes, UK, at Osborne Clarke, which also acted as co-counsel for Unwired Planet in the dispute, said that the judgment “sets out a blueprint for how SEPs should be licensed to implementers and confirms that a global licence is FRAND”.

She added: “This judgment takes a pragmatic approach. It will help to enable efficient licensing discussions for both licensees and global patent holders.”

Speaking to WIPR, a spokesperson for Huawei said: "The Court of Appeal acknowledges that the judgment raises a number of important points of principle.  Accordingly, Huawei is seeking permission to appeal the decision to the UK Supreme Court."

The Court of Appeal has already refused Huawei permission to appeal.

The Huawei spokesperson also said: "Huawei remains committed to provide its cutting-edge products and services to our customers without interruption. Irrespective of the ultimate outcome of the case, Huawei does not believe that the court’s decision will adversely affect its business operations either in the UK or in other countries.”

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17 September 2020   The UK Supreme Court’s judgment in Unwired Planet will have huge ramifications for SEP licensing. Yohan Liyanage of Linklaters unpacks the decision and explains what it will mean for patent owners and implementers alike.
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