30/06/2017
Prior to the ‘non-technical’ hearing of the latest Unwired Planet v Huawei dispute (see our post here and the decision [2017] EWHC 711), there had been some doubt whether injunctive relief would, or should, be available when litigating patents that had been found to be essential to a technology standard (i.e. a Standards Essential Patent, or SEP). In the decision, Justice Birss found that an injunction should be available – but the follow-up decision [2017] EWHC 1304 tells us that this is not just any old injunction…this is a FRAND injunction, and we will explore what this means below.
FRAND injunction
The original technical hearings of the Unwired Planet v Huawei dispute found that at least two patents held by Unwired Plant were valid (consideration of two other patents was deferred by agreement of the parties), essential to telecommunications standards produced by the standards body ETSI, and infringed by Huawei. In the subsequent non-technical hearing, Justice Birss found that an implementer of technology that has been found to essential to compliance with a standard and who refuses to take a licence of the relevant valid SEP on terms found to be FRAND (fair reasonable and non-discriminatory) can have an injunction granted against them since they have chosen to have no licence to the SEP.
In the [2017] EWHC 1304 hearing, Huawei argued that the injunction should not be granted because Huawei could not enter into a FRAND licence agreement at this point in time since they were intending to appeal the decision and a different set of FRAND terms may be found by the Court of Appeal.
In principle, this logic appears to be sound – especially since Justice Birss found that there was a single FRAND royalty rate but that licensees would be free to agree rates away from the FRAND royalty rate that may ultimately be determined by a court. Moreover, Justice Birss considered that the non-discrimination aspect of FRAND was soft-edged, i.e. that a licensee could only challenge the terms of a FRAND licence in so far as it caused a distortion of competition or abuse of a dominant position under competition law. This is in comparison to a hard-edged approach whereby a licensee could demand a lower rate because such a lower rate had been given to a different but similarly situated licensee. Thus, Huawei may have been stuck with the agreed licence even if they were successful on appeal.
Seemingly attempting to negate the need for the injunction to be granted, Huawei offered undertakings that they would enter into such a licence as settled by the courts following their appeal and that in the meantime they would abide by the licence terms settled by Justice Birss as if they were in full force and effect. The decision indicates that Justice Birss felt that this was a very finely balanced point, but ultimately he considered the undertaking to be too little too late and decided that a form of injunction should be granted in this case, albeit one that is stayed pending any appeal by Huawei.
However, a standard final injunction would remain in force until the expiry of the relevant patents (in 2028 in this case) whereas the agreed terms of the licence were based on a licence term expiring much earlier (in 2020). Huawei had argued that the additional duration of such an injunction in comparison to the duration of the licence agreement would put them in an unfairly weak bargaining position for renegotiation at the end of the licence. This is because Huawei would then also risk being in contempt of court if they continued to sell equipment using the technology at a point when the licence had arguably ended.
This point did hit home with Justice Birss and this is why the new FRAND injunction has been revealed. In particular, the FRAND injunction crafted by Justice Birss includes a specific proviso that it will cease to have effect when a licence is entered into and that the parties could return to court to consider if the injunction should take effect again following the end of the licence. In Justice Birss’ words at paragraph [20]:
“A FRAND injunction should be in normal form to restrain infringement of the relevant patent(s) but ought to include a proviso that it will cease to have effect if the defendant enters into that FRAND licence. If as in this case, the FRAND licence is for a limited time, shorter than the lifetime of the relevant patents then the injunction should also be subject to an express liberty to either party to return to court in future to address the position at the end of the term of the FRAND licence. In any case the FRAND injunction should also be subject to an express liberty to apply in the event the FRAND licence ceases to have effect for any other reason.”
Costs and possible appeal
Justice Birss decided that Huawei must make a payment on account of costs for the non-technical trial to the order of £2.9 million – this covers Unwired Planet’s costs excluding the consideration of issues relating to Samsung and the FRAND rate.
However, Huawei has been granted a fairly wide-ranging permission to appeal (for more information on the following points, see our earlier post here) covering whether more than one set of terms can be FRAND, whether a UK only licence is FRAND, whether a UK court can determine FRAND terms covering territories other than the UK, whether it is appropriate to grant a UK injunction unless a global licence is taken, the hard edged consideration of non-discrimination in FRAND, and the issues of injunctive relief and abuse of dominance relating to the application of the Huawei v ZTE (CJEU C170/13) case.
Unwired Planet has also been granted permission to appeal on the ground that the decision does not take into account the blended global nature of the benchmark rate.
Summary
While it appears likely that Huawei will file an appeal covering some of the above points, the granting of this stayed FRAND injunction should give parties some further tips on how to handle themselves during FRAND litigation proceedings. This includes the consequences of not providing relevant undertakings early on during FRAND litigation proceedings and the real prospects of facing a FRAND injunction at the close of proceedings.
FRAND licences are usually negotiated in private and behind closed doors and thus the publication in the decision of Justice Birss’ settled licence will also no doubt provide food for thought for those parties that are newer to the FRAND licensing game and may not have as much experience or expertise in what constitute appropriate terms for FRAND licences.
This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking any action in reliance on it.
