27 April 2017

Unwired Planet v Huawei [2017] EWHC 711- UK High Court hands down landmark decision concerning FRAND licensing for patents essential to ETSI standards

On 5 April 2017, the UK High Court handed down a much anticipated judgment in the Unwired Planet v Huawei FRAND proceedings. The full judgment is not available, as it contains information that is confidential to the parties, however, a public version has been made available and may be accessed here.

The decision considers the interplay between EU competition law and the meaning of fair, reasonable and non-discriminatory (FRAND) licensing in the context of global mobile telephone patents essential to the European Telecommunications Standards Institute’s (“ETSI”) standards. Importantly, the judgment marks the first outside of the German courts to consider the application of the decision of the European Court of Justice in Case C‑170/13 Huawei Technologies Co. Ltd v ZTE Corp, which established principles that a patentee and an implementer should follow in the context of a standard essential patent (“SEP”) dispute.

This judgment will be welcomed by those licensing patents relevant to SEPs, as Mr Justice Birss’ decision (which numbers a striking 166 pages) not only considers whether licence offers are FRAND, but also goes about setting a worldwide FRAND rate.

Following unsuccessful attempts to license consensually a portfolio of patents acquired from Ericsson in 2013, Unwired Planet commenced patent infringement proceedings against Huawei, Samsung and Google in March 2014. Huawei, Samsung and Google counterclaimed against Unwired Planet, challenging the validity and infringement of the patents, and alleging that Unwired Planet’s conduct was not FRAND and was in breach of EU competition law.

The claims against Google and Samsung were settled in May 2015 and July 2016, respectively. However, the claims against Huawei proceeded to trial over the course of seven weeks from November to December 2016. Unwired Planet requested an order stating that the offers it made to Huawei during the course of the proceedings were FRAND, and in the event that Huawei refused to accept a FRAND offer, then it was appropriate for the Court to grant an injunction restraining Huawei from offering infringing products for sale in the UK.

At trial, Huawei argued that Unwired Planet should not be entitled to an injunction. In so doing, Huawei contended that: (i) it was not FRAND for Unwired Planet to require Huawei to enter into a global licence; (ii) that the rates Unwired Planet was seeking were not FRAND; (iii) that, by initiating proceedings against Huawei without making a FRAND offer, Unwired Planet was in breach of the principles laid out in the CJEU’s judgment in Huawei v ZTE; and (iv) that, contrary to Article 102 TFEU, Unwired Planet had abused its dominant position in the market.

In summary, Mr Justice Birss’ found: (a) that it was FRAND for a patent holder to insist on a global licence (and, conversely, that it was not FRAND for a prospective licensee to insist on licensing on a country-by-country basis) where the patent portfolio being licensed was global; (b) that none of the offers made by either party were FRAND (although he then went on to determine the FRAND rate for Unwired Planet’s portfolio); (c) that all of Huawei’s competition law counterclaims should be dismissed (including its argument that Unwired Planet was in breach of the Huawei v ZTE principles, since, in his view, a failure by a patentee to comply with those principles would not mean that an abuse has taken place); and (d) since Huawei had refused to enter into a licence on terms that the Court had determined to be FRAND, and Unwired Planet was not in breach of competition law, that it was appropriate to grant a final injunction against Huawei to restrain infringement of Unwired Planet’s patents in the UK.

Importantly, Mr Justice Birss’ decision confirms that the English Court has jurisdiction to set the terms of a worldwide licence in relation to patents which are essential to ETSI standards. Although the impact of this decision will likely be limited to the specific factors relevant to the circumstances of this case, the decision provides useful guidance for the Courts when assessing FRAND royalty rates.

A further hearing has been scheduled for May 2017, at which the parties will make additional submissions and the final injunction will be considered.