Unwired Planet v Huawei – Court of Appeal decision
5 November 2018
Court of Appeal gives verdict on long running Unwired Planet v Huawei dispute
For several years litigation has been rumbling on between Unwired Planet and Huawei regarding Standard Essential Patents (SEPs) held by Unwired Planet. For the uninitiated, SEPs are patents that must be used to comply with an industry standard, and are common in the telecommunications sector. Because SEP holders have the possibility of blocking access to whole fields of technology, they have an obligation to offer licences on Fair, Reasonable And Non-Discriminatory, so-called “FRAND” terms. Whilst infringement and validity of the SEPs was considered in a series of technical trials, issues relating to the FRAND terms were dealt with in a separate non-technical trial at the High Court. This article discusses the outcome of an appeal from that High Court judgement.
To recap, in the 2017 judgment from the High Court, in addition to granting an injunction against Huawei (which was stayed pending appeal), guidance was provided to SEP holders and potential licensees regarding licencing terms and behaviour that the Court considered to be FRAND, see our report here. However, Huawei, unhappy with that decision, appealed on three grounds, namely:
- the imposition of a global licence on terms set by a national court, on a national finding, is unjust and not FRAND;
- the ‘non-discriminatory’ limb of FRAND requires similarly situated companies to be offered the same rates, but the FRAND licence determined by the High Court was not as favourable as the terms on which Samsung had previously settled; and
- Unwired Planet sued Huawei without notice of which SEPs were said to be infringed, or why, and without having made any licensing offer. Hence, Huawei considered that Unwired Planet abused its dominant position in view of the strict framework outlined by the Court of Justice of the European Union (CJEU) in the Huawei v ZTE
In a lengthy judgement, the Court of Appeal dismissed all three grounds.
On the first point, in essence, the Court of Appeal agreed with Mr Justice Birss’ High Court decision that the UK Courts are entitled to determine a global licence. The Court of Appeal did, however, conclude differently from the High Court in respect of whether there could only ever be one set of FRAND terms. In this regard, it was held that a number of terms could all be FRAND and an undertaking to licence on FRAND terms could be fulfilled by the SEP holder offering any of such terms. However, this does not mean that the ruling that a particular FRAND licence is a global one, as decided in the present case, is wrong.
Regarding the second point, Huawei’s argument that the non-discriminatory limb of FRAND is a separately enforceable obligation was dismissed, arguing that the purpose of a FRAND undertaking is not to remove discretion to provide lower royalty rates and, in any case, such discretion is not ‘without the potential for redress through the application of competition law’.
Finally, on the third point, the Court of Appeal agreed with the High Court decision that Unwired Planet were in a dominant position (contrary to Unwired Planet’s assertions), but, regarding abuse of that position, held that, in its opinion, the terms of conduct laid out in Huawei v ZTE were not mandatory conditions to the extent that non-compliance would ‘render the proceedings a breach of Article 102 TFEU’ and in the present case, there was no abuse. The Court of Appeal agreed it is mandatory to notify the alleged infringer prior to commencing proceedings, and considered Huawei duly notified in the present case. Regarding the specific terms of conduct in Huawei v ZTE, these were said by the Court of Appeal to provide ‘a safe harbour: if the SEP owner complies with the prescribed steps, the commencement of the action will not, in and of itself, amount to an abuse’. Accordingly, it would be prudent for SEP holders and potential licensees to follow such a framework to avoid falling foul of their obligations.
The decision provides further clarification to SEP holders and licensees. The Court of Appeal has, seemingly, reiterated a pragmatic approach for assessing licencing negotiations under FRAND obligations associated with SEPs, affirming the UK as an attractive destination for determining global FRAND licences and resolving disputes in respect of SEPs.
As for Unwired Planet v Huawei, the judgement of the High Court can take effect, unless it is stayed further, pending any successful appeal to the Supreme Court. Watch this space!
Electronics, Computing & Physics Group
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© Withers & Rogers LLP, November 2018