This article was first published in PaRR (subscription only), December 2016
A current London High Court competition trial on the contested alleged infringement by Huawei of Unwired Planet’s global mobile phone technology standard essential patents, focusing on abuse of dominance counterclaims, will be the first EU case to rule on the meaning of a fair, reasonable and non-discriminatory (FRAND) offer.
The trial, which began in November before Mr Justice Colin Birss and is expected to conclude this week, as PaRR reported, is engaged in assessing whether Unwired Planet (UP), as Huawei counterclaims, has behaved in an “abusive” anti-competitive way in dealing with its patent litigation.
Judgment in the case is likely to be handed down in early 2017, according to sources briefed on the matter.
The court has been considering competition law arguments on the meaning of FRAND as the parties battle their ongoing dispute concerning UP’s global patent portfolio. As reported, yesterday Huawei’s counsel James Segan argued that the meaning of FRAND itself was so unclear in other case law that it had yet to be decided what FRAND meant in practice.
The 2014 patent infringement claims were brought against Samsung, Huawei and Google in the UK and Germany, and against HTC and LG, by UP, a US telecom patents portfolio owner whose business is licensing and collecting royalties. Its patents in this case are said to be essential to certain mobile telecom standards.
Huawei counterclaimed for a declaration that UP has abused its dominant position in breach of Article 102 TFEU. It claims UP’s declarations are incorrect, since neither the rates offered nor the terms are Article 102-compliant and therefore cannot be FRAND. UP then declared its portfolio was FRAND.
The case is considered highly significant by lawyers as it is the first in the EU in which a judge could rule on whether an offer to settle is FRAND. There is parallel German litigation of these claims.
A key issue before the court has been assessing what is a FRAND rate for UP’s five UK declared essential patents in question in the case. For Huawei, this will affect the quantum for damages and whether UP’s offers have been FRAND or, as it claims, non-FRAND compliant, in breach of Article 102.
The trial has heard from economic experts who have analysed the setting of a UK royalty rate for UP’s patents by taking a potentially FRAND global rate and applying a UK uplift, of which the rate and size is disputed. UP seeks an injunction and damages for UK patent infringement on a “non-FRAND” basis.
This case will be the first outside Germany to really grapple with the Huawei v. ZTE criteria laid down by the Court of Justice, Sophie Lawrance, a partner at Bristows in London – which acted for Samsung in this case before it settled with UP before the trial – told PaRR.
Huawei v. ZTE arose out of German patent litigation, and the questions referred were strongly influenced by that context. A key open question is whether the rather strict rules imposed by that judgment are fit for purpose in the UK procedural context, and whether the rules will actually assist the judge in deciding whether or not to order an injunction, Lawrance said.
Moreover, this will be the first case in Europe to make a formal FRAND assessment. That assessment will be driven by the particular facts in issue, but will be “closely watched” for the way in which the assessment is carried out and, in particular, how the judge deals with issues such as the relationship between the rates for a global portfolio licence as compared to a rate for the UK patents in suit, Lawrance told PaRR.
One of the most hotly disputed issues in the current High Court patent trial between UP’s Irish subsidiary, and China-headquartered Huawei, is the structure of licences UP must offer under its FRAND commitment.
UP alleged that Huawei had, until recently, declined to accept any licence other than one concluded under a patent-by-patent offer. UP said that the industry norm is worldwide patent portfolio licensing. UP also offered to license its UK portfolio only. But on the eve of the trial, Huawei changed its position, according to UP. It said that Huawei had accepted, for the first time, that FRAND terms did not require a patentee to license on a patent-by-patent basis, as reported.
This week, Justice Birss said that UP had declared its global patents were FRAND, adding that it was FRAND to have a global licence. He told Huawei that it was “holding out and refusing to enter into any global licence.”
Last October, as reported, UP sought to obtain Samsung’s and Huawei’s confidential internal policy and strategy documents on standard essential patents (SEPs) but were refused access to details on how the Asian tech giants negotiate FRAND terms, royalties and SEPs. Huawei, however, had to disclose certain SEP data documents to UP to respond to amended FRAND statements of case.
The disclosure would have covered internal management information and models on the standards and procedures applied to determine whether to declare a patent essential to a standard, but these decision-making documents were ruled unnecessary to determine if competition law was infringed.
Equally, at a later hearing, Birss refused Huawei’s bid for disclosure of a comparable number of Ericsson patent licence and assignment agreements but ordered disclosure of an Ericsson-Apple licence to Samsung. The patents in question were originally owned by Ericsson but transferred through agreement to UP.
A 2015 London Court of Appeal judgment reinstated Samsung’s competition law defence in the patent infringement claims after they were struck out, as PaRR reported, after agreeing this was also a developing area of law.
The case is HP-2014-000005 Unwired Planet International Ltd v Huawei Technologies Co., Ltd and others in the Patents Court of the Chancery Division, High Court of Justice of England and Wales.