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

A court determining compliance with a FRAND undertaking may find that only a worldwide portfolio licence is fair, reasonable and non-discriminatory. This does not determine the validity or infringement of foreign patents. The implementer remains free to reject the licence, but may then be restrained from infringing the domestic patents.

FRAND may encompass several permissible sets of terms. Its non-discrimination requirement ordinarily demands a benchmark rate reflecting the portfolio’s value and available to similarly situated licensees. It does not confer an automatic right to the lowest comparable rate previously granted.

A SEP owner must notify or consult an alleged infringer before seeking an injunction. The remaining steps in Case C-170/13 provide a safe harbour. Departure from them requires an assessment of all the circumstances rather than an automatic finding of abuse.

The respondents owned a worldwide portfolio of standard essential patents subject to an undertaking to grant licences on fair, reasonable and non-discriminatory terms. They sued Huawei for infringement of UK patents. Two patents were ultimately held valid, essential and infringed.

Following a licensing trial, Birss J held that willing and reasonable parties in the respondents’ and Huawei’s positions would agree a worldwide portfolio licence. He settled its terms and granted an injunction restraining infringement of the UK patents unless Huawei entered that licence: [2017] EWHC 705 (Pat); [2017] EWHC 1304 (Pat).

Huawei appealed, contending that the court could require only a UK licence; that non-discrimination entitled it to the lower effective rates granted to Samsung; and that commencing proceedings without the steps described in Huawei v ZTE breached Treaty on the Functioning of the European Union, article 102. The respondents challenged the finding that they held a dominant position.

1. Appeal dismissed. The judge was entitled to find that, in the circumstances, only a worldwide portfolio licence was FRAND. The international effect of the ETSI undertaking, industry practice, the global character of the implementer’s business and the inefficiency of country-by-country licensing supported that conclusion. Determining the licence required by the undertaking did not determine the validity, essentiality or infringement of foreign patents. Huawei remained free to reject the licence, but the patent owner could then obtain the ordinary relief for infringement of its UK patents.

2. The judge erred in holding that only one set of terms could ever be FRAND. Fairness and reasonableness may accommodate several differently structured licences. If a tribunal finds that two sets of terms are FRAND, the patent owner satisfies its undertaking by offering either. The error did not affect the result because the judge’s findings excluded a UK-only licence in this case.

3. The Samsung and Huawei transactions were equivalent. Equivalence depends primarily on the commercial features of the transactions themselves. The licensor’s financial condition, subjective strategic objectives and reasons for accepting a lower rate did not change the nature of the patent licence, though such circumstances might objectively justify different treatment.

4. The non-discrimination limb of FRAND did not impose a hard-edged or most-favoured-licensee obligation. It required a benchmark rate reflecting the proper value of the portfolio, offered generally without discrimination based on licensee characteristics. A lower rate previously granted did not compel the owner to undervalue its portfolio. Differential pricing below the benchmark was not objectionable without harmful effects, although competition law remained available where competitive harm arose.

5. The owner’s 100% share of each SEP-licensing market supplied a strong starting presumption of dominance. The FRAND undertaking and potential licensee hold-out were relevant constraints, but the judge was entitled on the evidence to find that they did not rebut dominance.

6. Huawei v ZTE required notice or consultation before proceedings seeking an injunction. The notice must identify the relevant rights and communicate willingness to license on FRAND terms so far as the alleged infringer is not already aware. Its content depends on the circumstances. The remaining prescribed steps constitute a safe harbour. Departure from them permits, but does not compel, a finding of abuse after examining all the circumstances.

7. The respondents had given adequate prior notice and had not abused their dominant position. Having established infringement and offered the court-determined FRAND licence, they were entitled to an injunction unless Huawei took that licence.

• Court of Appeal (Civil Division): Dismissed Huawei’s appeal and rejected the respondents’ challenge to the finding of dominance: [2018] EWCA Civ 2344.
• Patents Court: Following the FRAND trial, Birss J held that only a worldwide licence was FRAND, determined its rates and rejected the competition-law defences: [2017] EWHC 705 (Pat). He subsequently settled the licence and granted a stayed UK injunction unless Huawei entered it: [2017] EWHC 1304 (Pat).
• Patents Court: Earlier technical trials resulted in two patents being found valid and essential and two being found invalid.