UK Court A 'FRAND-LY' Face For Deciding SEP Licence Terms

The UK Patents Court has confirmed that it is willing to decide the appropriate terms for a global FRAND licence even where the dispute has a relatively small connection to the UK and where related foreign court proceedings are ongoing (and where that foreign court is the major market for the relevant technology) - see Conversant Wireless Licensing S.A.R.L v Huawei & ZTE [2018] EWHC 808 (Pat).

The determination of licence terms applicable to Standard Essential Patents (SEPs) is the focal point of any SEP litigation. When a patent holder owns a patent that is essential to a standard, they are entitled to royalties for the use of their invention by anyone using that standard. In return, most standard-setting organisations require that the SEP holder undertakes to provide an SEP licence on FRAND (fair, reasonable and non-discriminatory) terms. Anyone who wishes to implement the standard in their products should enter into a FRAND licence with the SEP holder (with payment of a fair royalty) or they face an injunction effectively preventing future use of the standard in their products. Where parties cannot agree the terms of a FRAND licence, the patentee is likely to start infringement proceedings.

SEP holders will often own large portfolios containing many different patents from different jurisdictions. Where disputes arise relating to infringement or validity of an SEP, the local court of the SEP's jurisdiction will usually be the correct forum to decide the issue. (In particular, where validity is likely to be an issue, there are rules which discourage or even prohibit the courts of other jurisdictions from becoming involved.) However, when a court is asked to decide the terms of a FRAND licence, this relief is often sought on a global basis meaning that the resulting FRAND licence will also cover international SEPs from outside that court's own jurisdiction. As a result, FRAND litigation often includes some jurisdictional challenge as to whether one court or another should decide the issue.

In this case, the Defendants challenged the UK's jurisdiction on the basis that the determination of a global licence constituted, in substance and effect, claims relating to infringement and validity of foreign patents (noting that a defence to the global FRAND claim was invalidity of the SEPs). The Court disagreed, finding that the two issues were separate. Any challenge of a particular SEP, including the question of its validity, could still be raised...