Unwired Planet International Ltd and another v Huawei Technologies (UK) Co Ltd and another

A court determining infringement of a valid UK standard essential patent may settle the terms of a global FRAND portfolio licence and restrain continued UK infringement unless the implementer accepts that licence. This enforces the contractual undertaking under the standard-setting regime without deciding the validity or infringement of foreign patents.

FRAND is a unitary obligation. Its non-discrimination element requires a generally available fair market rate, not the replication of the most favourable previous licence. Under EU competition law, prior notice or consultation is mandatory before an injunction claim. The remaining negotiation steps identified by the CJEU provide a safe harbour whose application depends on the circumstances. Damages will not ordinarily provide an adequate substitute for an injunction where they would encourage continued infringement and territorial holding out.

These conjoined appeals concerned multinational portfolios of patents declared essential to ETSI telecommunications standards. Unwired Planet had established infringement of valid UK patents by Huawei. Birss J determined the terms of a global FRAND licence and granted an injunction, suspended on Huawei entering that licence. The Court of Appeal dismissed Huawei’s appeal in [2018] EWCA Civ 2344.

Conversant brought separate UK infringement proceedings against Huawei and ZTE and sought determination of global FRAND terms. Henry Carr J rejected challenges to jurisdiction and forum in [2018] EWHC 808 (Pat). The Court of Appeal affirmed that decision in [2019] EWCA Civ 38.

The Supreme Court considered jurisdiction to determine a global licence, forum non conveniens, FRAND non-discrimination, compliance with EU competition law and whether damages should replace an injunction.

1. The appeals were dismissed. The ETSI intellectual property rights policy creates an enforceable contractual undertaking to license standard essential patents on FRAND terms. Its international context, its application to patent families and established industry practice permit an English court adjudicating infringement of a UK patent to determine the terms of a global portfolio licence. The court thereby determines the contractual defence and remedy; it does not decide the validity or infringement of foreign patents.

2. The policy balances protection against patent-owner “holding up” with fair reward and protection against implementer “holding out”. An implementer may reasonably reserve challenges to significant foreign patents and seek a licence mechanism adjusting royalties after successful challenges. An injunction remains available where a valid UK patent has been infringed and the implementer declines the available FRAND licence.

3. China was not an available alternative forum for the Conversant dispute. The evidence established that Chinese courts could not then determine a global FRAND licence without the parties’ agreement, and their willingness to do so even with agreement was speculative. The forum challenge therefore failed at the threshold. The Court of Appeal had also been entitled to refuse a temporary stay because the Chinese proceedings concerned only Chinese patents and further delay would prejudice enforcement of an ageing portfolio.

4. The FRAND undertaking is a single, unitary obligation. Its non-discrimination element requires licence terms reflecting the fair market value of the portfolio and generally available to similarly situated market participants. It does not impose a “hard-edged” most-favourable-licensee requirement. A specially favourable earlier licence therefore does not dictate the terms available to every comparable licensee.

5. Under article 102 of the Treaty on the Functioning of the European Union, a dominant SEP owner must give notice or engage in prior consultation before seeking an injunction. The further steps described in Huawei v ZTE constitute a safe harbour rather than universally mandatory rules. Their application depends on the particular legal and factual circumstances. Unwired gave sufficient notice, was willing to accept the court’s FRAND terms and had not acted abusively.

6. Damages were not an adequate substitute for an injunction. A damages-only remedy would encourage implementers to continue infringement until compelled to pay royalties patent by patent and country by country. The FRAND undertaking prevents the injunction from being used to extract excessive terms because enforcement is conditional on the availability of a licence which the court finds fair, reasonable and non-discriminatory.

• United Kingdom Supreme Court: Dismissed the appeals from [2018] EWCA Civ 2344 and [2019] EWCA Civ 38.
• Court of Appeal — Unwired proceedings: In [2018] EWCA Civ 2344, dismissed Huawei’s appeal from the FRAND determination and injunction. It rejected the proposition that there can be only one set of FRAND terms but upheld the conclusion that only a global licence was FRAND in the circumstances.
• High Court — Unwired proceedings: In [2017] EWHC 711 (Pat), reissued as [2017] EWHC 2988 (Pat), Birss J settled global FRAND terms. In [2017] EWHC 1304 (Pat), he granted an injunction which would cease upon entry into the settled licence and stayed it pending appeal.
• Court of Appeal — Conversant proceedings: In [2019] EWCA Civ 38, dismissed Huawei’s and ZTE’s jurisdiction appeals.
• High Court — Conversant proceedings: In [2018] EWHC 808 (Pat), Henry Carr J rejected the jurisdiction and forum challenges and permitted service outside the jurisdiction.