Unwired Planet International Ltd v Huawei Technologies Co. Ltd & Anor (Rev 2)

An ETSI undertaking to license standards-essential patents on FRAND terms is legally enforceable by implementers. For a given set of circumstances, there is only one set of FRAND terms. Both the patentee and the implementer must negotiate fairly, and a court may determine the terms of a concrete FRAND licence.

FRAND ordinarily requires a benchmark royalty based on the value of the licensed portfolio, not the bargaining strength of a particular licensee. A worldwide portfolio licence may be FRAND where the portfolio and implementer have international reach. A lower rate granted to another similarly situated licensee does not itself require matching treatment unless any hard-edged discrimination distorts competition.

An implementer that refuses the licence found to be FRAND may be restrained from infringing valid essential patents.

Unwired Planet, which owned a worldwide portfolio of telecommunications patents declared essential to 2G, 3G and 4G standards, sued Huawei for infringement of UK patents. Earlier technical trials had established valid and essential claims in two patents. This non-technical trial determined FRAND licensing terms, competition-law defences, remedies and the royalty basis for past infringement.

Unwired Planet sought a worldwide portfolio licence. Huawei was prepared to accept only a UK portfolio licence and contended that Unwired Planet’s offers, litigation conduct and proposed licence scope infringed competition law. The central issues were the enforceability and content of the ETSI FRAND undertaking, the proper royalty rates, the geographical scope of a FRAND licence, and whether an injunction should follow.

1. FRAND obligation and terms. The ETSI declaration created an enforceable obligation under French law. It was a contract for the benefit of implementers, who could require a licence on FRAND terms. The undertaking did not itself make an implementer already licensed or permit either party to be compelled directly to contract. It was nevertheless effective through the court’s patent remedies.

2. There is one set of FRAND terms, including one FRAND rate, for a given set of circumstances. FRAND governs both the eventual licence and the parties’ conduct in negotiation. A patentee must be prepared to grant, and an implementer must be prepared to accept, the terms objectively found to be FRAND. A court may declare concrete terms FRAND and adjust rival proposals to reach that result.

3. Rates and non-discrimination. The appropriate approach was to assess a benchmark rate reflecting the intrinsic value of the portfolio, informed by comparables and patent-counting evidence. The court set benchmark rates for the portfolio. It rejected both parties’ offers as non-FRAND: Unwired Planet’s were too high and Huawei’s too low. The 2016 Samsung licence did not justify lower rates for Huawei. Any hard-edged non-discrimination obligation would require distortion of competition, which Huawei had not shown.

4. Scope. A worldwide licence, with lower rates for China and other markets, was the FRAND licence for this internationally held SEP portfolio and multinational implementer. A UK-only licence was not FRAND. Insisting on a worldwide portfolio licence did not amount to unlawful tying or bundling.

5. Competition law. Unwired Planet held a dominant position in the market for licences under each SEP. It had not abused that position. Its pre-action conduct and subsequent conduct did not breach the scheme in Huawei v ZTE Case C-170/13; its offers were negotiating positions and not excessive prices contrary to Treaty on the Functioning of the European Union article 102; and it did not unlawfully tie SEPs to non-SEPs.

6. Relief. Huawei had infringed valid essential patents and declined the worldwide FRAND licence. An injunction should therefore be granted, but its formal grant was deferred to a consequential hearing so that the settled worldwide licence could be drawn up. Damages, if required, were to reflect the royalty payable under that FRAND licence.

This was a first-instance decision in the non-technical tranche of the patent action.

• High Court (Patents Court): Earlier technical trials had found valid and essential claims in two patents. The results of those trials were stated to be under appeal, but no appellate determination was identified in this judgment.