Interdigital Technology Corporation & Ors. v Lenovo Group Limited & Ors.

A FRAND determination should identify the terms which willing parties would agree, using objective evidence of market transactions. The court should focus on the consideration actually passing between licensor and licensee, rather than retrospective internal allocations or notional discounts used to support programme rates.

Large volume discounts require objective justification. Discounts which principally preserve headline rates and produce materially different effective royalties for similarly situated licensees are discriminatory. Limitation periods do not reduce the payment due under a retrospective FRAND licence where the implementer invokes the SEP owner’s irrevocable undertaking. The appropriate rate should ordinarily apply consistently to past and future units, subject to legitimate time-value-of-money adjustments.

The claim concerned the terms on which Lenovo should take a worldwide licence to InterDigital’s declared cellular SEPs covering 3G, 4G and 5G technology. The court had to determine whether InterDigital’s 5G Extended Offer or Lenovo’s Lump Sum Offer was FRAND, and, if neither was, what lump sum and licence terms were appropriate.

The proceedings formed part of a wider series of technical and non-technical trials. The court also considered whether Lenovo had remained entitled to invoke InterDigital’s irrevocable undertaking under the ETSI IPR Policy, whether either party had acted as a willing participant in negotiations, and whether an injunction should be granted.

1. The court rejected both parties’ principal offers as outside the FRAND range. It determined that the appropriate lump sum for a licence to 31 December 2023 was $138.7m, calculated at $0.175 per cellular unit.

2. The court adopted the objective approach reflected in Unwired Planet and TCL v Ericsson. The best evidence was the actual consideration paid or payable under comparable licences divided by an objectively supported estimate of the units covered. Internal accounting allocations between past and future sales, and post hoc rationalisations of discounts, were not reliable measures of market value.

3. LG 2017 was the best comparable. The other Lenovo comparables were considered, but Samsung 2014 appeared somewhat depressed, Apple 2016 was an outlier, ZTE 2019 was unreliable, and the later Huawei and Xiaomi licences were less comparable because of differing sales profiles and circumstances. The court declined to derive separate rates by generation because the available data required excessive speculation.

4. Volume discounts of 60–80 per cent for the largest licensees lacked economic justification. They did not reflect economies of scale in SEP licensing and primarily supported InterDigital’s programme rates, producing discrimination against smaller licensees. Modest discounts might be justified by transaction costs, but the discounts relied upon in this case were not.

5. Limitation periods had no role in the FRAND relationship between a willing licensor and willing licensee. A willing licensee should pay for all past units and should not obtain a benefit from delay. The same basic rate should apply to past and future sales. Legitimate time-value-of-money adjustments remained permissible.

6. InterDigital had not acted as a willing licensor because it consistently demanded supra-FRAND rates and failed adequately to disclose comparable information. Lenovo was generally justified in seeking information and rejecting those offers, although it delayed on occasions and failed to act as a willing licensee when it declined to undertake unconditionally to accept the court-determined licence.

7. Lenovo retained the ability to change its position and accept a FRAND licence because the ETSI undertaking was irrevocable. The court rejected the fact-sensitive case that Lenovo had permanently lost the benefit of the undertaking, but held that Lenovo should be put to its election and should accept the full consequences of becoming a willing licensee.

This was a first-instance FRAND determination. The judgment records related technical trials and proceedings in other jurisdictions, but no appeal from the present decision.