Defining FRAND terms - end of the beginning?

At first instance, it was held that a worldwide licence was FRAND, and various FRAND rates based on technology and geography were determined. Accordingly, a licence agreement reflecting the judgment was drafted. This ‘settled licence’ is set out as an annex to a subsequent judgment [2017] EWHC 1304 (Pat), which followed a hearing at which Huawei were granted permission to appeal on:

• whether an English court could set a worldwide licence as FRAND, in infringement proceedings for EP(UK) patents;
• whether Huawei should have been offered the same licence rates that Samsung agreed with Unwired Planet, which were much lower than the court-determined rates, and
• whether the well-known Huawei v ZTE requirements relating to injunctive relief and abuse of dominance had been satisfied by Unwired Planet.

In today’s judgment from the England and Wales Court of Appeal, the findings of the first instance judge were upheld, and Huawei’s appeal was dismissed.

The appeal court went to great lengths to address the alleged discrepancy between the geographical scope of a worldwide FRAND licence and the geographical jurisdiction of the English court and the UK patents in suit, which can be summarised as follows.

Remedies for infringement of the UK patents that can be awarded by a UK court are those provided for by UK law in respect of UK patents. Similarly, the UK courts may assess validity and infringement of the UK patents.

However, Unwired Planet made a FRAND undertaking to the standards organisation (ETSI) in respect of those (UK) patents and Unwired Planet must accordingly offer a FRAND licence. Huawei could take advantage of this FRAND licence in order to avoid a finding of infringement of the UK patents. As the court observed (paragraph 80):

“It was then a matter for Huawei whether it was prepared to take that licence, and to do so in its full scope. It could not be compelled to do so, and if it chose not to, the only relief to which UP would be entitled would be relief for infringement of the two UK SEPs the judge had found to be valid and essential”.

The appeal court agreed with the judge at first instance, who held that a willing licensor and willing licensee would have agreed a global licence, and that such a licence was therefore FRAND.

The court rejected Huawei’s assertion that, since the worldwide licence covers non-UK patents, Huawei cannot challenge the validity and infringement of those patents in their respective jurisdictions. The alternative, i.e. country-specific licences, would require the patentee to initiate costly infringement proceedings in every jurisdiction and would have been (using the judge’s language) “madness”.

The remaining aspects of the appeal were similarly rejected.

The appeal court did, however, disagree with the judge’s finding that, necessarily, only one set of terms could be FRAND: in some circumstances, there could be different sets of FRAND terms and it would be FRAND for the patent holder to offer any such terms.

However, this was not material in the circumstances of this case.

This judgment sets an important precedent, confirming the ability of English courts to set worldwide FRAND licence rates, and supporting the more recent finding of Mr Justice Carr in Conversant vs. Huawei and ZTE - click here for further information.