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

A standards-essential patent owner’s FRAND undertaking to ETSI is enforceable by implementers. In a given situation there is one set of FRAND terms, which the court may determine objectively by reference to what willing parties would agree without hold-up or hold-out.

A benchmark royalty should principally reflect the portfolio’s value and apply without regard to the licensee’s size. A worldwide portfolio licence may be FRAND where it reflects normal industry practice and commercial efficiency. An implementer which refuses the licence found to be FRAND may be restrained from infringing valid essential patents. An opening offer above the FRAND rate is not necessarily abusive where it forms part of genuine negotiations and does not disrupt them.

The claimant owned a worldwide portfolio containing patents declared essential to the 2G, 3G and 4G telecommunications standards. It had undertaken through the ETSI framework to license those patents on fair, reasonable and non-discriminatory terms. It sued Huawei for infringement of UK patents and sought injunctive relief.

Two patents had been held valid, essential and infringed in earlier technical trials. This non-technical trial concerned the enforceability and content of the FRAND obligation, royalty rates, the territorial scope and other terms of the appropriate licence, alleged abuse of dominance under Article 102 TFEU, and the remedies for infringement. The central issues included whether the FRAND licence should be worldwide or confined to the United Kingdom, and whether Huawei’s refusal of the worldwide terms justified an injunction.

1. Disposition. The court declared that the worldwide licence settled by the judgment was FRAND. Huawei’s requested declaration of abuse of dominance was refused. Because Huawei had not agreed to take the FRAND worldwide licence, a final injunction against infringement of the two valid essential patents should be granted after the licence had been put into final form.

2. The ETSI FRAND undertaking formed an enforceable contract under French law between ETSI and the declarant for the benefit of implementers through the doctrine of stipulation pour autrui. FRAND was objectively justiciable. Patent remedies could give practical effect to the undertaking without compelling either party to execute a contract.

3. For a given set of circumstances there was one set of FRAND terms. The court could determine those terms and adjust concrete proposals. Both parties had to negotiate in a FRAND manner. A willing implementer had to be prepared to accept whatever terms were objectively FRAND, whether settled by negotiation, adjudication or arbitration.

4. The appropriate benchmark rates were determined principally from comparable licences, adjusted for relative portfolio strength and checked against the aggregate royalty burden. The benchmark rates were 0.062% for 4G handsets and 0.072% for 4G infrastructure; 0.032% and 0.016% respectively for 3G; and 0.064% for both 2G categories. Both parties’ previous offers were non-FRAND because the claimant’s rates were too high and Huawei’s too low.

5. General non-discrimination required a portfolio-value benchmark applicable to all similarly licensed implementers. It did not give Huawei an independent right to Samsung’s specially low rate. Even if such a hard-edged obligation existed, it required a tendency to distort competition, which the evidence did not establish.

6. Willing parties would license this substantial, geographically broad portfolio worldwide. Country-by-country licensing was inefficient. The worldwide licence used reduced rates for China and other markets and higher rates for major markets. Requiring that licence was neither unlawful tying nor an abuse of dominance.

7. The claimant was dominant in each market for licences under its SEPs. Nevertheless, neither commencing and maintaining the proceedings, the royalty offers, the requested worldwide scope nor the initial combined SEP and non-SEP proposal constituted abuse. The framework in Huawei v ZTE, Case C-170/13, was a safe scheme and a standard against which conduct should be assessed, rather than a rigid rule making every deviation abusive.

8. Damages, if required instead of licence royalties, were to reflect what willing parties would have agreed. They were therefore payable at the applicable FRAND portfolio rate for UK sales, rather than at a higher per-patent rate.

• High Court (Patents Court): This was the non-technical trial in a managed series of proceedings. Earlier technical trials had held two patents valid, essential and infringed, and two patents invalid. Those technical decisions were under appeal, but their citations are not stated in this judgment.
• Earlier public forms: The judgment was initially delivered confidentially as [2017] EWHC 705 (Pat) and in redacted form as [2017] EWHC 711 (Pat). The present judgment is the final public form.