Only a week after the judgment that a party who has been held to infringe a valid and essential patent must provide an irrevocable commitment to take whatever FRAND licence the court determines or accept an injunction, the UK Court sat again to hear Apple's request for permission to appeal.
The Court showed little hesitation in giving Apple permission to appeal its decision on three of the four grounds sought by Apple. The Court had already indicated in its judgment that it was minded to allow Apple to appeal, which is unsurprising given that this is a novel and important decision that could have implications for SEP licensing negotiations across the globe. Read our previous article to find out more on the original decision.
What did Apple say was wrong about the decision? Apple's four grounds of appeal are set out below.
Permission to appeal granted:
- Apple say that the Judge wrongly interpreted Clause 6.1 of
ETSI IPR Policy.
Clause 6.1 says that a SEP owner must provide ". an irrevocable undertaking in writing that it is prepared to grant irrevocable licences on fair, reasonable and non-discriminatory ("FRAND") terms and conditions .". The clause gives rise to a stipulation pour autrui under which the promisor provides a promise to the stipulator for the benefit of a third party. In this instance it was accepted that ETSI is the stipulator and that the SEP holder is the promisor but the dispute centred on whether the third party, being in this case Apple, was a beneficiary within the meaning of Clause 6.1. Apple's argument focussed on the proviso in Clause 6.1 which states that the undertaking "may be made subject to the condition that those who seek licences agree to reciprocate" [our emphasis]. Apple said that:
- due to the wording of the proviso to Clause 6.1, it considers that ETSI has defined a beneficiary as a party which is "seeking" a licence rather than a party which is "taking" or "committing" to a licence.
- requiring a party who has been held to infringe a valid and essential patent to commit to take a FRAND licence to be determined by the Court is inconsistent with the policy objectives of the ETSI IPR Policy which envisages that the SEP holder and implementer will negotiate towards a licence on FRAND terms. Apple says that the Court's decision amounts to giving the SEP holder the right to frustrate the negotiation by demanding a commitment to take a court-determined FRAND licence.
- Apple also say that the Judge was wrong to hold that Apple was
not within the class of beneficiaries of the stipulation pour
The Judge held that Apple was not within that class because it intended to operate without a licence from the time it had been found to be infringing a valid and essential patent until the trial at which the FRAND licence terms will be determined. The Judge made this decision on the basis that Apple had not taken a licence and had refused to commit to take whatever licence the Court later determined to be FRAND but had confirmed that it would continue to trade in its infringing products whilst the case progressed. Apple said that this was wrong because the Judge's decision had been for procedural purposes, made on the assumption that Apple had made a FRAND offer. In this sense, Apple say, they are a beneficiary because they are seeking a FRAND licence. Apple point out that the ETSI IPR Policy and the case law envisage that the implementer may use the standard (infringe) before a licence has been determined otherwise, presumably, on Apple's case the IPR Policy would stipulate that an implementer must secure a FRAND licence before operating the standard.
- Lastly, Apple say that the Judge would be wrong to grant an injunction at the forthcoming final order hearing on the infringed, valid patent without taking into due account Apple's pleaded case that Optis is in breach of competition law by virtue of its behaviour (§§324-330). Again, for procedural purposes the Judge made his decision on the assumption that Apple was right in its claim that Optis had abused its dominant position by seeking excessive FRAND royalties among other acts. Apple said that the Court had failed to take sufficient account of the fact that the granting of an injunction would facilitate breaches of competition law.
Permission to appeal refused:
- Apple said that the Judge was also wrong to grant a
FRAND injunction having rejected Optis' claim for an
unqualified permanent injunction (§353, until expiry of the
SEP found to be valid and infringed) for the following two reasons:
- Optis chose to pursue a claim for a permanent injunction and chose not to amend its claim to a FRAND injunction at a very late stage of the proceedings, in light of Apple's objection that to do so at that time would be procedurally unfair. The Judge, in Apple's view, wrongly concluded that Apple's objection was "insubstantial" (§358).
- The Judge ruled that the ability of Apple to make a decision to accept the court-determined licence after it has considered the licence could be used by implementers to carry out or support hold-out (§277) based in part on economists' evidence. This was despite him having found that the evidence could only confer a "very modest role" in relation to the consequences and appropriateness of a FRAND injunction (§359).
So, what next?
The form of Order hearing concerning the FRAND injunction is listed to be heard on 11 October. We will update you as soon as we hear more.
Read the original article on GowlingWLG.com