On 23 October 2018, the English Court of Appeal issued a judgment in a licence dispute involving Standard Essential Patents ("SEPs") pitting Unwired Planet, a US-based patent assertion entity, against Huawei, a Chinese telecommunications company. This case results from an appeal against the judgments delivered by Justice Birss of the English High Court of Justice in April 2017 and June 2017 (see VBB on Competition Law, Volume 2017, Nos 5 and 6, available at www.vbb.com).
Unwired Planet sued Huawei for infringement of a number of UK patents which it had acquired from Ericsson as part of a portfolio comprising about 2,000 patents. The patents were considered as essential to the 2G, 3G and 4G wireless telecommunications standards developed under the auspices of the European Telecommunications Standards Institute ("ETSI"). As Ericsson had participated in the development of the standards under ETSI, any SEP patent acquired from it would be encumbered by Fair, Reasonable and Non-Discriminatory ("FRAND") commitments to ETSI.
On appeal, the Court of Appeal held as follows:
- The imposition of a global licence is not contrary to FRAND terms. The Court of Appeal dismissed the argument made by Huawei according to which the imposition of a global licence for the patents at issue was by definition not made on FRAND terms. The Court of Appeal considered that it would not be feasible for an SEP owner to negotiate licences on a country-by-country basis and that it would be extremely expensive for that SEP holder to enforce its rights by litigating in each individual country.
- The non-discriminatory part of FRAND does not mean that the rates for similarly positioned licensees should be identical for the entire industry. The Court of Appeal rejected Huawei's claim that the non-discriminatory part of FRAND meant that the rates for similarly positioned licensees should be the same across the industry. Huawei had taken issue with the fact that it would have to pay more than Samsung for the same portfolio of patents. In its judgment, the Court of Appeal considered that the non-discriminatory aspect of FRAND was not "hard-edged" and that differential pricing was not objectionable per se. In fact, the Court of Appeal pointed out that a 'hard-edged' non-discrimination rule would be excessively strict on the SEP holder and that obliging the SEP owner to accept a compensation which does not reflect the value of the licensed technology could potentially harm the technological development of standards. The Court also noted that the 'hard-edged' interpretation of the non-discrimination rule would be equivalent to a 'most favoured licensee' clause, which was considered and ultimately rejected by ETSI.
- The specific steps laid down by the Court of Justice of the European Union ("ECJ") in Huawei v. ZTE are not mandatory in this case. In its judgment, the Court of Appeal considered that the ECJ had not laid down specific mandatory conditions which had to be satisfied before proceedings seeking injunctive relief are started (see VBB on Competition, Volume 2015, No. 7, available at www.vbb.com). The ECJ had clarified the steps for parties to take in order to prevent an action for injunctive relief from being regarded as abusive (Case C-170/12, Huawei Technologies Co. Ltd v. ZTE Corp. and ZTE Deutschland GmbH). In the present case, even though Unwired Planet had not followed those steps, the Court of Appeal noted that the parties had been in contact before the proceedings were issued, that Huawei had sufficient notice that Unwired Planet owned particular SEPs, that Huawei knew or ought to have known that a licence was required and that Unwired Planet was willing to grant a licence. According to the Court of Appeal, this was sufficient to avoid the finding of an abuse of dominance. According to the Court of Appeal, as the present litigation started before the ECJ delivered its judgment in Huawei v. ZTE, it would have been unfair to have concluded that Unwired Planet abused its dominant position for not complying with steps set forth only later.
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