Unwired Planet International Ltd v Huawei Technologies Co. Ltd & Anor

FRAND is an objective standard. For a given situation there is one set of FRAND terms, although negotiations may involve offers above or below the eventual rate. A court may determine the rate and other terms by reference to concrete proposals, comparable licences and, where appropriate, a top-down assessment.

The ETSI undertaking is enforceable by implementers. It requires both parties to adopt a FRAND approach to negotiations. A worldwide portfolio licence may be FRAND where it is the licence that willing parties would reasonably agree. The non-discrimination obligation generally requires a benchmark rate based on portfolio value; a lower rate granted to a similarly situated licensee does not automatically apply unless competitive distortion is established.

Unwired Planet held a portfolio of patents declared essential to telecommunications standards and sued Huawei for infringement of UK patents. The parties disputed the validity and essentiality of the patents, the enforceability and scope of the ETSI FRAND undertaking, the appropriate royalty rates and licence terms, alleged abuse of dominance, and the availability of injunctive relief.

The non-technical trial concerned whether the parties’ offers were FRAND, whether the court could settle the terms of a licence, whether Huawei’s conduct justified an injunction, and whether Unwired Planet had abused a dominant position under Art 102 TFEU.

1. FRAND undertaking. The undertaking given under the ETSI IPR Policy was enforceable by implementers under French law through the doctrine of stipulation pour autrui. FRAND was also justiciable and enforceable in the English court. The undertaking did not itself make an implementer already licensed, but an implementer willing to accept whatever terms were FRAND could resist a final injunction.
2. FRAND terms and assessment. For a given situation there was one set of FRAND terms. The court could determine those terms from concrete proposals. A benchmark rate could be derived from comparable licences, portfolio-value assessments and a top-down cross-check. Patent counting was an inevitable practical method for large telecommunications portfolios. The court rejected the alleged hard-edged non-discrimination obligation. A lower rate granted to a similarly situated licensee would affect the FRAND rate only if distortion of competition were shown.
3. Licence scope. A worldwide portfolio licence was the licence which willing parties would reasonably agree in the circumstances. It was not unlawful bundling merely because it covered patents in different jurisdictions. A UK-only licence was not FRAND for this portfolio and licensee.
4. Competition law. Unwired Planet was dominant in the market for licences under the SEPs. However, it had not abused that position by commencing the proceedings, maintaining its injunction claim, seeking a worldwide licence, making its royalty offers, or initially including SEPs and non-SEPs in one offer. The principles in Huawei v ZTE were not rigid rules making every departure automatically abusive; the parties’ conduct had to be assessed in all the circumstances.
5. Outcome. None of the parties’ original offers was FRAND. The court settled the terms and rates of a worldwide FRAND licence. Huawei had not agreed to take that licence. Since valid and essential patents had been infringed and there was no competition-law defence, an injunction should be granted, but the injunction was deferred until a consequential hearing after service of the final licence terms. Damages, if payable, were assessed by reference to the applicable FRAND rate.