Unwired Planet International Ltd v Huawei Technologies Co Ltd & Ors

A transfer of standard-essential patents does not infringe Art 101 TFEU merely because the transferee gives a fresh FRAND undertaking rather than assuming the transferor’s historical portfolio-based obligation. The transferee must be bound to license the transferred patents on FRAND terms.

A portfolio transfer may nevertheless raise an arguable competition-law issue where its structure, revenue-sharing arrangements and the transferee’s status as a non-practising entity may create incentives that distort competition. Contractual royalty provisions must be assessed in their commercial context. A party may lose its right to a stay under s 9 of the Arbitration Act 1996 by joining proceedings without reserving its arbitration rights.

Unwired Planet brought patent infringement proceedings concerning telecommunications standard-essential patents acquired from Ericsson. The defendants alleged that Ericsson’s transfer arrangements breached Art 101 TFEU, that provisions of the Master Sale Agreement restricted competition, and that the patents remained covered by a licence granted by Ericsson to Samsung.

Ericsson applied to strike out or obtain summary judgment on the competition-law allegations. It also applied under s 9 of the Arbitration Act 1996 to stay Samsung’s claim for damages or an indemnity under the Ericsson licence. The issues were whether the allegations had a real prospect of success and whether Ericsson had taken a procedural step affirming the court as the forum for disputes within the arbitration clause.

1. Competition allegations. The allegation that the transfer failed to impose a FRAND obligation on Unwired Planet was struck out. The contractual arrangements required the relevant Unwired Planet entities to remain subject to encumbrances, to make an ETSI declaration and to license on FRAND terms. That undertaking was enforceable by persons seeking licences. Competition law did not require Ericsson’s own historical, portfolio-based FRAND obligation to be transferred.
2. The court rejected the argument that a fresh FRAND undertaking was inherently inadequate. Requiring a transferee to calculate present FRAND terms by reference to the transferor’s changing portfolio would be commercially unreal and unworkable. The transferor and transferee’s FRAND commitments were sufficient for this purpose.
3. The allegation concerning division of the portfolio was allowed to proceed. The combination of Ericsson’s continuing share in licensing revenues, its ability to transfer further patents, and Unwired Planet’s different economic position as a non-practising entity gave the allegation a real prospect of success. The developing relationship between standard-essential patents, FRAND, non-practising entities and competition law made summary disposal inappropriate. Art 102 TFEU might address abuse of a dominant position, but that did not by itself dispose of the separate Art 101 TFEU case.
4. The allegations concerning clauses 3.4 and 6.1(aa) were also allowed to proceed. A minimum royalty provision and a restriction requiring percentage-based royalties were not automatically unlawful, but had to be assessed in context. The clauses could contribute to anti-competitive incentives when considered with the portfolio-transfer allegations.
5. Arbitration stay. Section 9 imposed a mandatory stay where the statutory conditions were met. The relevant question was whether Ericsson had taken a step which objectively affirmed the court as the forum. By agreeing without reservation to join the proceedings, while aware that an indemnity claim under the licence might be made, Ericsson accepted that issues within the arbitration clause could be determined by the court. The stay was therefore refused.

Ericsson’s application succeeded only in striking out the first Art 101 TFEU allegation. The second and third allegations continued to trial, and Samsung’s damages or indemnity counterclaim was not stayed.

First-instance decision. No appellate history was stated in the judgment.