Panasonic Holdings Corporation v Xiaomi Technology UK Limited & Ors

Where a standard-essential patent holder invokes the English court’s jurisdiction to determine global FRAND terms, and both parties undertake to enter the resulting licence, the holder must conduct the intervening negotiations in good faith. It cannot pursue foreign injunctions to coerce the implementer into accepting terms more favourable than the court-determined terms.

In those circumstances, a willing licensor would grant a short interim licence carrying an adjustable royalty. A declaration to that effect may serve the useful purposes of encouraging compliance and protecting the integrity of the English proceedings. Comity does not bar relief which neither controls nor advises the foreign courts.

Panasonic sought an English determination of the terms of a global FRAND licence for its portfolio of standard-essential telecommunications patents. Panasonic and Xiaomi gave unconditional undertakings to enter into the licence determined by the Patents Court. A FRAND trial was expedited, but Panasonic continued parallel infringement proceedings in Germany and the Unified Patent Court seeking injunctions.

Xiaomi applied for declarations that a willing licensor would enter an interim portfolio licence pending the FRAND determination. Leech J dismissed the application in [2024] EWHC 1733 (Pat), holding that Panasonic’s pursuit of foreign proceedings had not been shown to frustrate its FRAND commitment and that the declarations would serve no legitimate useful purpose.

The central issues were whether Panasonic’s good-faith obligation required an interim licence, what its terms should be, whether declaratory relief would be useful, and whether comity required refusal.

1. Appeal allowed by a majority. Arnold LJ, with whom Moylan LJ agreed, held that Panasonic breached its obligation of good faith under clause 6.1 of the ETSI IPR Policy. Panasonic had invoked the English jurisdiction to determine global FRAND terms, and both parties had undertaken to enter the resulting licence. Its continued pursuit of foreign injunctions was aimed at obtaining terms more favourable than those the Patents Court would determine. That conduct promoted hold-up and was inconsistent with FRAND as a process: paras [78]–[87], [101]–[102], [111].
2. Standard-essential patents differ from ordinary exclusionary patents because the holder must license any willing implementer on FRAND terms. The regime is effectively one of financial liability, with injunctions serving to enforce the entitlement to remuneration. A willing implementer is entitled from the first implementation of the standard to a continuous licence free from interruption by injunction, provided it is willing to accept FRAND terms: paras [79]–[81].
3. Because the reciprocal undertakings made a global licence and full retrospective remuneration certain, a rational willing licensor would accept an interim royalty rather than continue costly multinational proceedings. The interim licence was to run from 2011 until the court-determined licence took effect. Its royalty was to be midway between Xiaomi’s offer and the relevant pro rata proportion of Panasonic’s revised demand, subject to adjustment after the FRAND determination: paras [84]–[85], [99]–[101].
4. The declarations would serve a useful purpose by requiring Panasonic to reconsider its conduct and by safeguarding the integrity of the English proceedings. They did not determine or advise the foreign courts and therefore did not offend comity. If an interim licence resulted, it would instead relieve foreign courts of burdensome litigation: paras [88]–[97].
5. The civil standard remained the balance of probabilities. A requirement for a high degree of assurance concerns how far the court should examine the merits when granting effectively determinative interlocutory relief, rather than altering the standard of proof. That requirement was satisfied: paras [69]–[73].
6. Phillips LJ dissented. He agreed that Panasonic’s conduct was indefensible but considered that the ETSI undertaking did not create an obligation to grant an interim licence. The proposed terms had not been determined on evidence to be FRAND, the declaration was of doubtful utility, and anti-suit relief was the more conventional potential remedy: paras [104]–[110].

1. Court of Appeal (Civil Division): By a majority, allowed Xiaomi’s appeal and granted declarations that a willing licensor would enter an interim licence on the modified terms identified by the court: [2024] EWCA Civ 1143.
2. High Court, Patents Court: Leech J dismissed Xiaomi’s application for declarations, holding that Panasonic’s good-faith obligation did not require the proposed interim licence and that the declarations would serve no legitimate useful purpose: [2024] EWHC 1733 (Pat).