This article was first published in IAM Magazine, June 2017
Back in April in the High Court in London, Justice Colin Birss issued the UK’s first-ever FRAND/SEP-related decision in the Unwired Planet v Huawei case. The detailed reasoning that Birss provided in his judgment, as well as the FRAND rates that he set out and his willingness to grant the NPE an injunction, attracted attention from dealmakers across the world – and offered out the prospect of the UK becoming a more favoured forum in which FRAND/SEP disputes might be decided.
Now, Justice Birss has followed up his initial decision with another one that deals in more detail with the injunction that Unwired Planet is entitled to. Here Bristows partner Pat Treacy and associate Francion Brooks look at what the judge described as a ‘FRAND injunction’ and how it might be applied.
The English High Court has granted a ‘FRAND injunction’ against Huawei at the end of the Chinese company’s first instance litigation with Unwired Planet. This move follows the court’s earlier determination of the terms of a FRAND licence between the parties for Unwired Planet’s portfolio of standard-essential patents (SEPs). That was the first decision in the UK to properly grapple with the issues of FRAND (see our earlier post here).
The court’s latest judgment, handed down last week, deals with a number of consequential matters including remedies and appeals. Annexed to the judgment is the final form of the FRAND licence determined by the Court (see here) into which the parties will enter, subject to Huawei’s appeal in the case. The publication of this licence is a rare and useful insight into what is normally the confidential terms of licences for telecommunications patents.
The Court has granted a ‘FRAND injunction’ against Huawei in relation to two of Unwired Planet’s SEPs which were found to be valid and infringed. This is a novel remedy which, although based on the normal form of an injunction, is subject to a number of provisions which are necessary given the unusual complications that arise when dealing with patents subject to a FRAND undertaking.
As you would expect, the injunction will cease to have effect if Huawei enters into the FRAND licence determined by the court. In the absence of a licence, the injunction would normally last until 2028 when the last of Unwired Planet’s patents that have been found valid and infringed expires. As the FRAND licence determined by the court runs only until the end of 2020, this gives rise to some difficulty as it is probable that on its expiry Huawei will still be infringing those patents – in respect of which it has already been injuncted once. This could result in the position of the parties being unfairly distorted in any renegotiation which would need to take place at that time. Notably, the judge explained that he could not simply extend the term of the current FRAND licence as setting a royalty rate for many years in the future can be difficult. He acknowledged that one of the real problems with FRAND and SEPs is that all sorts of relevant circumstances change; old patents expire, new patents are granted (which may be essential to old standards), and standards themselves change.
Given those complexities, the injunction will expressly permit either party to return to court in future to address the position at the expiry of the FRAND licence. This is necessary as normally in English law a party is not entitled to come back to court after final relief has been granted (even if circumstances have changed). The judge explained that in this sort of case where a party does return to the court, he would be “unsympathetic” if that party had failed to start a process of FRAND negotiations well in advance of the expiry of the current FRAND licence, or if it had dragged its feet in the negotiation.
It is worth noting that in the period between the initial judgment on the substance and the judgment on consequential matters Huawei had offered undertakings as an alternative to an injunction. Those undertakings would also have circumvented the issues outlined above. The judge rejected the proposed undertakings on the basis that it was too little, too late. He criticised Huawei for maintaining a determined stance throughout the proceedings that it would not contemplate a worldwide licence.
The court has stayed the operation of the FRAND injunction pending Huawei’s appeal, provided that Huawei pays an appropriate royalty to Unwired Planet in the meantime. Further, no damages were awarded as, if Huawei enters into the FRAND licence determined by the court, damages for past acts will be covered in that agreement which runs from 2013.
Permission to appeal
The court has granted Huawei permission to appeal on three grounds.
First, the global licence point. This includes: (i) whether there can be more than one set of FRAND terms in a given circumstances; (ii) whether a UK licence was FRAND; (iii) whether the English court can determine FRAND rates for territories outside of the UK; and (iv) whether the English court can grant an injunction for the UK market if a global licence is not accepted.
Second, the hard-edged discrimination point. That is whether the English court was right to require a distortion of competition in order for the non-discrimination aspect of FRAND to apply.
Third, the Huawei v ZTE point. That relates to the judge’s application of the law surrounding injunctive relief and abuse of dominance.
Assuming that Huawei pursues its appeal on these issues, the saga between the parties will continue, hopefully resulting in further guidance for FRAND negotiations and disputes in the UK.
Statement from the patent owner
Following this latest decision, IAM also received a statement from Thomas Miller, head of licensing at PanOptis, the firm which took control of Unwired Planet’s patent portfolio last year following completion of a $30 million deal. The statement reads as follows:
PanOptis is pleased with today’s court order issuing out of Justice Birss’ landmark decision that a worldwide license is FRAND. Huawei has undertaken with the court to abide by a worldwide license and make royalty payments during the pendency of the appeal which obviates the need to enforce the injunction. For patent owners and product manufacturers alike, it is more efficient for both sides to come to a global licensing agreement. PanOptis’ goal is two-fold: to create an efficient marketplace for licensing and for SEP patent holders to receive a fair return. We believe that today’s ruling significantly furthers this goal.
With the acquisition of the Unwired Planet portfolios, PanOptis now holds more than 1400 declared standard essential patents and 5000 implementation patents, with a goal of bringing efficiency and fairness to patent licensing. We have actively resolved much of the existing litigation that had been initiated by Unwired Planet, including suits involving Samsung and LG. Our ambition is to create a marketplace where product manufacturers and innovators feel confident that high quality technology is available at a fair and reasonable price.