SEP Licensing Wars: Put Up Or Shut Up

• Published date: 04 October 2021
• Subject Matter: Intellectual Property, Patent
• Law Firm: Gowling WLG
• Author: Ms Alexandra Brodie and Seiko Hidaka

UK Court says implementers must either commit to taking a court-determined Fair, Reasonable, and Non-discriminatory (FRAND) licence once a patent trial has been won or face an injunction in Optis v. Apple.

Optis v Apple is a Standard Essential Patent (SEP)/FRAND case. The implementer works the standard to which a SEP holder's patents are essential. The patent holder approaches the Implementer to seek a FRAND licence (or the implementer might make the first approach to seek a FRAND licence). In an ideal world negotiations commence and a FRAND licence is agreed. But all too often negotiations stall or simply fail to start or the parties fail to agree the licence (typical flash points are the royalty rate or lump sum payable, geographical coverage, term, licensed standards and licensed products).

At this point, the implementer is continuing to work the standard without paying a licence fee and so the next step is litigation or arbitration. The patent holder can sue for patent infringement or the implementer might seek a rate-setting determination in certain jurisdictions, typically China. Where the patent holder sues for patent infringement, the implementer can seek to enforce the patent holder's undertaking to ETSI to grant a FRAND licence to anyone who seeks one. Should the implementer do this then, if the patent holder is successful, the implementer has the option - enter into the FRAND licence or be enjoined. The big question is - when? When does an implementer have to put their cards on the table and commit to take the FRAND licence? Don't forget that the patent holder, when providing their undertaking to ETSI has already committed to grant a FRAND licence.

When does an implementer have to commit to take the court-determined FRAND licence?

This issue of 'when?' came before Mr Justice Meade in the Optis v Apple case. Optis had succeeded in the patent trial which resulted in a judgment holding that the asserted patents were essential and valid. Apple had refused to give an unqualified commitment to take the FRAND licence to be determined by the UK Court. Optis argued that Apple was being unwilling by reserving to itself a right to reject the court's findings once it had chance to review them, thereby enabling it to further delay having to pay royalties to Optis. Furthermore, Optis stated that Apple should provide the commitment to take the licence once it was found to have infringed an essential and valid patent, that is, on receipt of judgment. The...