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Unwired Planet provides guidance on SEP licensing

Bloomsbury IP/IT Law Briefing

James Nurton
Bloomsbury Professional

The Court of Appeal’s judgment in Unwired Planet International Ltd & Anor v Huawei Technologies Co Ltd & Anor [2018] EWCA Civ 2344 provided further insight into how the UK courts will interpret cases involving standard essential patents (SEPs) and fair, reasonable and non-discriminatory (FRAND) terms. Dismissing Hauwei’s appeal against Mr Justice Birss’s April 2017 judgment, the court was reluctant to interfere with the judge’s ‘long, detailed and careful’ reasoning, which had led him to determine FRAND rates for a global licence between the two parties.

Huawei had appealed three aspects of the first instance judgment. It argued: (1) Birss J’s finding that, in order to be FRAND, the licence must be global was wrong and unjust; (2) Huawei should have been offered the same rates as Samsung, which had settled with Unwired Planet during the litigation; and (3) Unwired Planet had not given Huawei notice or made a licensing offer, as required by the CJEU in Case C-170/13 Huawei v ZTE [2015] Bus LR 1261.

The court (Lord Kitchin, Lord Justice Floyd and Lady Justice Asplin) upheld the judge on every point except one, which was not material to the outcome.

The one point they reversed concerned the judge’s finding that there can only be one set of FRAND terms for any given set of circumstances:

‘In our judgment it is unreal to suggest that two parties, acting fairly and reasonably, will necessarily arrive at precisely the same set of licence terms as two other parties, also acting fairly and reasonably and faced with the same set of circumstances. To the contrary, the reality is that a number of sets of terms may all be fair and reasonable in a given set of circumstances.’

Birss J, however, was entitled to find that, taking into account all the circumstances, only a global licence (rather than a licence to just the UK patents) would be FRAND. The court said that:

‘the judge found that a licensor and a licensee acting willingly and reasonably would have regarded country by country licensing as madness; and further, that no rational business would have done this if it could be avoided. This language is not capable of accommodating a finding that a national licence could also be FRAND’.

The second argument required the court to address non-discrimination. Like the first instance judge, it found that differential pricing is not per se objectionable and an ‘effects-based’ approach is appropriate:

‘a non-discrimination rule has the potential to harm the technological development of standards if it has the effect of compelling the SEP owner to accept a level of compensation for the use of its invention which does not reflect the value of the licensed technology. …. The undertaking should be construed in a way which strikes a proper balance between a fair return to the SEP owner and universal access to the technology without threat of injunction. We consider that a hard-edged approach is excessively strict, and fails to achieve that balance, whereas the general approach achieves the objective of the undertaking by making the technology accessible to all licensees at a fair price.’

The third point concerned abuse of a dominant position under Article 102 TFEU. Birss J had found that Unwired Planet was in a dominant position, but that it had not abused that dominant position. Both parties challenged the findings that were adverse to them, but the court upheld the ruling in both respects. It said the first instance judge was entitled to find that Unwired Planet had a dominant position in the market, having taken account of all the evidence and ‘reached an evaluative conclusion’: ‘He made no error of principle and the conclusion he reached was properly open to him.’

The question of whether Unwired Planet had abused that dominant position was important in considering when it is appropriate for a court to grant an injunction for infringement of a SEP. The court had to consider whether the CJEU judgment in Huawei v ZTE provided a ‘behavioural framework’ for SEP owners (Huawei’s argument) or merely a ‘series of procedural steps’ amounting to a safe harbour (Unwired Planet’s position). Like the judge, it concluded that the CJEU ‘was not laying down mandatory conditions … such that non-compliance will render the proceedings a breach of Article 102 TFEU’. It supported that conclusion with a number of arguments, and also referred to three decisions in Germany.

The court’s decision means that Huawei must take a licence to Unwired Planet’s patents on the terms and at the rates set out by Birss J, or face an injunction on the sale of its products in the UK. Huawei has indicated in court filings that it will agree to whatever licence is deemed to be FRAND in these proceedings.

The court did not grant Huawei permission to appeal to the Supreme Court, but the company said it will seek permission directly. Unwired Planet was awarded 90% of the costs of its appeal.