Unwired Planet International Ltd & Anor v Huawei Technologies Co Ltd & Anor (Rev 1)

A standard-essential patent owner’s undertaking to license on FRAND terms may, depending on the portfolio, the implementer’s business and industry practice, be satisfied by offering a worldwide portfolio licence. A national court does not thereby determine the validity or infringement of foreign patents. It determines the terms required by the FRAND undertaking and may grant a national injunction for infringement if the implementer refuses the FRAND licence.

FRAND is not confined to a single possible set of terms. The non-discrimination limb requires a generally available benchmark reflecting the portfolio’s value. It does not ordinarily give a similarly situated licensee a right to the lowest earlier royalty where that rate undervalued the portfolio. The Treaty on the Functioning of the European Union requires a fact-sensitive assessment of alleged abuse; the procedural framework in Huawei v ZTE provides a safe harbour, save for prior notice or consultation.

Unwired Planet International Ltd sued Huawei Technologies Co Ltd for infringement of UK standard-essential patents (SEPs) acquired from Ericsson. Two SEPs were found valid and essential in technical trials. The remaining trial concerned the licensing undertaking given under the ETSI intellectual-property-rights policy.

Birss J held that a willing licensor and licensee would agree a global FRAND licence, that the court could settle its terms, and that Unwired Planet had not abused a dominant position. He granted a UK injunction, stayed pending appeal, unless Huawei entered the global licence: [2017] EWHC 705 (Pat); [2017] EWHC 1304 (Pat).

Huawei appealed, challenging global licensing, the non-discrimination analysis in light of Samsung’s lower-priced licence, and the conclusion that proceedings had not infringed Article 102 TFEU under Huawei v ZTE.

1. Appeal dismissed. The judge was entitled to hold that, for this portfolio and this multinational implementer, only a global licence was FRAND. A UK injunction remained confined to infringement of the two valid and essential UK SEPs. The court did not decide the validity, essentiality or infringement of foreign patents, nor compel Huawei to accept the licence. It determined the terms Unwired Planet had to offer under its international ETSI undertaking. If Huawei refused that FRAND offer, Unwired Planet was entitled to ordinary relief for the UK infringements.

2. A global or multi-territorial portfolio licence may be FRAND where it reflects industry practice and the conduct of willing parties. Country-by-country licensing may be inefficient and may enable hold-out. A FRAND licence should nevertheless preserve challenges to the validity and essentiality of licensed foreign patents and accommodate sales in non-patent territories. The court rejected arguments based on comity, proportionality and the territorial character of patents.

3. The court disagreed with Birss J’s view that there can be only one set of FRAND terms in a given situation. Different combinations of contractual terms may each be fair and reasonable. A tribunal will normally declare one set of FRAND terms, and a SEP owner meets its undertaking by offering those terms. That correction did not affect the judge’s fact-sensitive finding that a UK-only licence could not itself be FRAND on the facts.

4. The Samsung and Huawei transactions were equivalent for non-discrimination purposes. However, the ETSI undertaking did not impose a hard-edged obligation to match every lower royalty previously granted to a similarly situated licensee. Its proper construction required a generally non-discriminatory benchmark rate based on the value of the portfolio and available without reference to licensee-specific characteristics. Differential pricing below that benchmark did not itself breach the undertaking, though competition law could address pricing that caused competitive harm.

5. Unwired Planet held a dominant position in the market for licences under each SEP. Its 100% market share created a strong inference of dominance. The justiciable FRAND undertaking and the possibility of hold-out were relevant constraints, but did not displace the judge’s evaluative conclusion on the evidence.

6. Huawei v ZTE, [2015] Bus LR 1261, did not prescribe inflexible pre-action conditions whose every breach automatically constituted abuse. Prior notice or consultation was mandatory, with its content depending on the circumstances. Compliance with the further steps identified by the CJEU provided a safe harbour. Outside it, alleged abuse had to be assessed in all the circumstances. Unwired Planet had not abused its dominant position, and there was no separate basis to refuse the injunction.

• Court of Appeal (Civil Division): Dismissed Huawei’s appeal and upheld the conditional UK injunction and global FRAND licence determination: [2018] EWCA Civ 2344 .
• High Court, Patents Court: Birss J held that a global licence was FRAND, settled global and contingent UK rates, and found no abuse of dominance: [2017] EWHC 705 (Pat).
• High Court, Patents Court: Birss J resolved consequential matters and made the final conditional injunction order, stayed pending appeal: [2017] EWHC 1304 (Pat) .