UK High Court Issues Important Ruling On Licensing Of Standard Essential Patents

On April 5, 2017, the High Court of Justice in the UK ruled that if a patent holder claims that a patent is essential under the ETSI IPR Policy, it must license that patent to third parties on fair, reasonable, and non-discriminatory (FRAND) terms, and the licensee must accept the FRAND terms or face the threat of an injunction barring product sales for items taking advantage of such technology. [2017] EWHC 711 (Pat).

In Unwired Planet v. Huawei Technologies, a dispute arose during a nontechnical trial regarding several standards essential patents (SEPs) owned by NPE Unwired, whose robust global patent portfolio includes numerous SEPs declared essential to various telecom standards (including 2G, GSM, 3G, UTMS and 4G LTE). In March 2014, Unwired sued Huawei, Samsung and Google for infringement of six of its UK patents. During the course of the litigation, Unwired offered to license its entire global portfolio (both SEPs and non-SEPs) to the defendants. The defendants refused this offer and argued that they did not infringe and that the SEPss were both invalid and nonessential. Unwired then made another offer to license its SEPss, but the defendants argued that this offer was not FRAND. Google and Samsung eventually settled, leaving Huawei to litigate the dispute to trial.

Huawei was found to be infringing. What remained for the High Court to determine in this decision were the following issues: (i) what FRAND royalty rate should apply to the Unwired SEPs, (ii) whether Unwired abused a dominant position during FRAND negotiations with Huawei by failing to adhere to the relevant procedural requirement set by the European Court of Justice in Case C-170/13, Huawei Technology Co. Ltd v ZTE Corp., ZTE Deutschland GmbH and (iii) whether injunctive relief against Huawei was appropriate should it refuse to accept global FRAND terms. Unwired advanced that if each side makes a FRAND offer, then the patentee should be entitled to seek injunctive relief on the basis that it discharged its FRAND obligations by making the offer. In opposition, Huawei argued that if each side makes a FRAND offer, then the injunction should fail since the patentee was refusing to accept a licensee's FRAND terms, and the very purpose of FRAND is to benefit those that would wish to implement the technology.

The High Court offered an extensive explanation of the purpose of FRAND and its principles under the applicable European law. The governing standards setting organization...