The UK Supreme Court has given a landmark decision in cases relating to standard essential patents (SEPs) and the obligations for “fair, reasonable and non-discriminatory” (FRAND) licensing.
Upholding the judgments of the Patents Court and Court of Appeal to find in favour of two patent assertion entities (PAEs), Unwired Planet and Conversant Wireless Licensing, the ruling confirms the UK courts’ willingness to set the terms of a global FRAND licence and injunct a prospective licensee to keep it out of the UK market if that licence is not taken. The prospect of a global resolution will impact future licensing of telecommunications patents, including for 5G technology, and makes the UK an attractive forum for holders of SEPs with global portfolios.
The Supreme Court’s decision
The Supreme Court convened in October 2019 for the joint hearing of appeals in two separate cases relating to the licensing of patents declared essential to the implementation of international standards for 2G, 3G and 4G telecommunications. Huawei and ZTE were appealing against the judgments of the Court of Appeal which had found in favour of Unwired and Conversant in their respective infringement actions. Apple, Ericsson and Qualcomm were also represented in the appeals to the Supreme Court, having been granted permission to intervene, and put forward views on industry practice.
The Supreme Court confirmed that the Patents Court in England & Wales has the jurisdiction, without the parties’ agreement, to grant an injunction restraining infringement of a UK SEP unless the defendant enters into a global licence under a multinational patent portfolio. The UK courts have the power to set the royalty rates and other terms of the worldwide licence, and to declare that such terms are FRAND.
The Supreme Court also confirmed that England is the proper forum for such a claim in the circumstances of the Conversant proceedings, where Huawei and ZTE sought to challenge jurisdiction and applied for a stay of the UK case in favour of the Chinese court. This further reinforces the prominence of the Patents Court in England & Wales as a forum for SEP cases, and notably even where the parties have only a relatively small commercial stake, or patent interest, in the UK.
Consequently, companies needing to implement technical standards, for example by manufacturing 4G or 5G phones, must be prepared to take a global licence or face the possibility of an injunction which prevents them accessing the UK market. If a patent holder establishes that one of its UK SEPs is valid, essential and infringed, the court is likely to require a prospective licensee to take a global licence where offered a multinational patent portfolio. A prospective licensee can expect to be injuncted unless it makes an unqualified commitment to take a licence on FRAND terms determined by the UK court.
This is a powerful tool for SEP holders, made all the sweeter for non-practising entities (NPEs) by the Supreme Court’s rejection of Huawei’s concern that PAEs may abuse the power that SEP ownership bestows. The Supreme Court’s reinforcement that PAEs have the same rights as any other entity may attract more licensing companies or other NPEs with global portfolios to the UK courts. Coinciding with the increased use of 5G patents across a range of connected technologies such as automotive, energy, e-health and infrastructure, the UK courts may be kept busy with waves of further SEP litigation in the UK for some years to come.
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