Interdigital Technology Corporation v Lenovo Group Limited

In determining FRAND terms for a standard-essential patent licence, interest on past royalties may be awarded where a willing licensor and willing licensee would have agreed that compensation should reflect delayed payment. The court must assess interest as part of the FRAND terms, separately from procedural conduct relevant to costs. A FRAND rate determination is generally a tariff-setting exercise, so the overall winner is identified principally by the outcome on the rate and other substantial issues, rather than simply by who receives payment. A licence settled by the court should not contain an adjustment mechanism dependent on foreign proceedings where the licensee’s undertaking to accept the court’s terms is unconditional.

The judgment followed an earlier FRAND determination concerning InterDigital’s 3G, 4G and 5G standard-essential patent portfolio and a lump sum of $138.7 million for sales from 2007 to the end of 2023. The court determined outstanding issues concerning interest, costs, the form and operation of the FRAND licence, and permission to appeal.

The central questions were whether interest should be added to the past royalties, which party was the overall winner of the FRAND proceedings, whether foreign proceedings should affect the settled licence, and whether permission should be granted to appeal on identified points of principle.

1. Interest. The FRAND obligation under the ETSI IPR Policy supplied the jurisdictional basis for awarding interest. The question was whether willing parties would agree that past royalties should reflect the time value of money. The court held that interest had not already been included in the $138.7 million lump sum because the issue had expressly been reserved. InterDigital was therefore entitled to interest on past royalties at 4%, compounded quarterly, producing interest of $46.2 million and a total payment of $184.9 million.
2. The question whether interest formed part of FRAND terms was distinct from the parties’ conduct in the negotiations and proceedings. Conduct could be reflected in costs. Only an extreme case might justify depriving a licensor of interest on that basis.
3. Costs. A FRAND rate determination is properly characterised as a tariff-setting exercise. Lenovo was the overall winner because the principal comparables analysis, the top-down cross-check and the conduct issues were determined substantially in its favour. InterDigital’s November 2018 offer did not alter that conclusion. Lenovo was deprived of its costs of the foreign-law and interest issues and was ordered to pay InterDigital’s costs of those issues, subject to detailed assessment.
4. Licence. The settled licence was to give effect to the judgment. No adjustment mechanism was included for the Delaware, Beijing or other foreign proceedings because Lenovo’s undertaking to accept the court-determined licence was unconditional and a willing licensee would not make acceptance conditional on those proceedings. The foreign courts remained responsible for controlling their own proceedings. Pending appeal, the parties were to treat the settled licence as in force, except for the specified patent-peace and other provisions which were only engaged once the licence was fully operative.
5. Permission to appeal. Permission was granted on the identified points of principle concerning limitation periods, valuation of past and future sales, volume and other discounts, hold-out, interest and discrimination. Permission was refused for grounds which merely challenged evaluative findings or sought to reargue the evidence. Lenovo received permission to cross-appeal on limitation and to appeal on interest.
6. The court expressed considerable doubt that a licensor demanding supra-FRAND rates automatically becomes willing merely by offering third-party adjudication while maintaining those demands. That issue was fact-sensitive and was not necessary to decide in the earlier FRAND judgment.

The judgment followed the court’s earlier FRAND judgment, reported in confidential and public versions as [2023] EWHC 538 (Pat) and [2023] EWHC 539 (Pat). Permission to appeal was granted on specified points of principle, with a contingent cross-appeal and appeal on interest also permitted.