Interdigital Technology Corporation & Ors v Lenovo Group Limited & Ors

When a court determines the terms of a global FRAND licence, national limitation periods do not exclude earlier sales. A willing licensee would pay a fair royalty from the first use of the standard and should gain no advantage from delay.

Interest on past royalties ordinarily forms part of FRAND terms because payment timing should be economically neutral. Comparable licences affected by non-FRAND market distortions require adjustment. The court must estimate an appropriate rate rather than assume that the precise rate extracted from the best comparable is itself FRAND.

InterDigital and Lenovo disputed the lump sum payable for a global licence of patents declared essential to ETSI’s 3G, 4G and 5G standards. Mellor J determined a royalty of $138.7 million for sales from 2007 to 2023 and awarded $46.2 million interest at 4% compounded quarterly: [2023] EWHC 538 (Pat) and [2023] EWHC 1578 (Pat).

InterDigital appealed against the royalty rate and sought a declaration that it had been a willing licensor. Lenovo cross-appealed, contending that pre-August 2013 sales should be excluded by reference to limitation principles and that interest should be removed or reduced. The central issues were the treatment of past sales, interest and distortions affecting comparable licences.

1. Disposition. InterDigital’s appeal was allowed in part. The unadjusted rate derived from the LG 2017 comparable was increased from $0.24 to $0.30 per unit, and the adjustment ratio was increased from 0.728 to 0.75. This produced a rate of $0.225 per Lenovo unit and a lump sum of $178.3 million. Lenovo’s cross-appeal was dismissed. The parties were directed to calculate interest at 4% compounded quarterly.
2. Past sales and limitation. A willing licensee requires a licence from the first day it implements the standard and would agree to pay a fair royalty from that date. National limitation periods concern claims such as damages for tort or breach of contract. They do not determine the contractual price of a global FRAND licence or the terms an implementer must accept to avoid an injunction. Excluding older sales would reward delay and discriminate against prompt licensees. Truly egregious licensor conduct may instead be addressed through interest or costs: paras [186]-[205].
3. Interest. Although no applicable statutory, equitable or ordinary contractual jurisdiction supplied interest, the court could include it because a willing licensor and willing licensee would agree that payment timing should be economically neutral. The same time-value principle used to discount future payments applies to past royalties. The judge was entitled to select the parties’ agreed late-payment rate of 4%, compounded quarterly: paras [208]-[227].
4. Comparable licences. The judge’s use of the precise blended LG 2017 rate was internally inconsistent with his findings that non-FRAND factors had depressed consideration for past sales. The court had to correct that distortion. InterDigital’s proposed future-only rate of $0.61 was also excessive because future rates had been inflated to compensate for discounted past sales. Doing the best possible with the evidence, the highest justified FRAND rate for LG was $0.30, subject to a 0.75 adjustment for Lenovo: paras [251]-[284].
5. Remaining grounds. The comparables analysis remained more reliable than InterDigital’s top-down cross-check. No declaration of past willingness was required because willingness no longer affected the only live question, namely the FRAND sum payable: paras [285]-[287]. Nugee LJ concurred in the result despite reservations about the comparable-rate issue. Birss LJ agreed with Arnold LJ and explained why the uncorrected $0.24 figure was necessarily too low.

• Court of Appeal (Civil Division): By [2024] EWCA Civ 743 , allowed InterDigital’s appeal in part, substituted a $178.3 million lump sum before interest, and dismissed Lenovo’s cross-appeal.
• High Court, Patents Court: Mellor J determined the principal FRAND terms in [2023] EWHC 538 (Pat), with public versions at [2023] EWHC 539 (Pat) and [2023] EWHC 1538 (Pat). He fixed a $138.7 million lump sum for sales from 2007 to 2023.
• High Court, Patents Court: In [2023] EWHC 1578 (Pat) , Mellor J awarded $46.2 million interest at 4% compounded quarterly.