Jurisdictional tussling: the UK is open for business on FRAND

The recent Supreme Court decision in Unwired Planet v Huawei (see our reporting here and PLC Magazine article here) answered many important questions about the UK court’s approach to FRAND disputes. However, it also left areas of uncertainty, particularly on the issue of jurisdiction. The High Court decision in Philips v TCL ([2020] EWHC 2553 (Ch)), handed down around a month after the Supreme Court’s judgment, confirms that the UK will take an expansive approach to its jurisdiction to determine FRAND licence terms. Indeed, it is unclear under what circumstances (if any) the UK courts will cede jurisdiction to another national court.

Background

Philips commenced proceedings in the UK against TCL on 30 October 2018 for patents it claimed were (and are now accepted to be) essential to the 3G and 4G standards. Its particulars of claim confirmed that it was willing to license those patents on fair, reasonable and non-discriminatory (FRAND) terms.

On 19 February 2019 TCL commenced proceedings in France for the determination of FRAND licence terms under Philips’ undertaking to the European Telecommunications Standards Institute (ETSI). The ETSI undertaking is governed by French law.

On 5 July 2019 Philips served a FRAND statement of case in the UK, setting out what it considered to be FRAND terms. On 19 July 2019 it submitted a written challenge to the jurisdiction of the French court under, inter alia, Articles 29 and 30 of the Brussels I Regulation (EU) 1215/2012 (the “Brussels Regulation”) essentially on the basis that the French and English proceedings had the same cause of action between the same parties and the English court was first seised.

The French court delivered its judgment on 6 February 2020. It rejected Philips’ jurisdictional challenge, confirming that the French courts had jurisdiction to hear the dispute. Philips filed an appeal to that judgment which is due to be heard on 15 February 2021. Judgment in the main French proceedings (assuming the appeal fails) is expected in late 2022 or early 2023, which is after one of the patents in suit in the English proceedings expires.

The decision

On 9 April 2020 TCL issued an application for a stay of “all aspects of [the UK proceedings] concerning [Philips’] FRAND licensing obligations”. The judgment of Mr Justice Mann was issued in relation to that application. In its application TCL asked that the UK proceedings be stayed under Articles 29 and 30 of the Brussels Regulation.

Article 29

Article 29 states that “where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established”.

TCL argued that although the English proceedings had been commenced first, the issue of appropriate FRAND licence terms had not arisen until Philips served its FRAND pleadings, which it did after the French proceedings had been commenced. Accordingly, TCL argued that the French courts were first seised with the FRAND licensing issues. A key basis for TCL’s argument was that the French courts had already ruled in favour of French jurisdiction on the basis that the French courts were first seised and so the English court must give effect to that judgment.

Philips, on the other hand, argued that the French court had not decided that it was first seised but rather that the issues in dispute in the two proceedings were different and therefore Article 29 was not engaged. The basis for this interpretation being that the English proceedings concerned infringement of UK patent rights (and the FRAND determination merely arose as a consequence of TCL raising a FRAND defence), while the French proceedings were contractual in nature.

Mr Justice Mann preferred Philips’ interpretation of the French judgment. In particular, he noted that this was consistent with the UK Supreme Court’s characterisation of FRAND proceedings that the key issue in dispute is one of UK patent rights (the FRAND aspects of the proceedings apparently being ignored for the purposes of considering jurisdiction). Accordingly the Article 29 challenge failed at that stage.

Mann J nevertheless went on to consider when the issue of a FRAND licence determination first arose in the English proceedings. His view was that Philips’ original statements of case clearly brought the issue of a FRAND licence determination into play in the UK proceedings. The fact that it later served a specific FRAND statement of case was to further particularise its position on appropriate FRAND licence terms, but it did not raise a new issue in the proceedings. He therefore held that the English court would have been first seised with the FRAND issues if those issues had been the same as those in France.

Article 30

Article 30 states that “Where related actions are pending in the courts of different Member States, any court other than the court first seised may stay its proceedings” where there is a “risk of irreconcilable judgments”.

Given that Mann J had already found that the English court was first seised the Article 30 challenge failed immediately as there was therefore no jurisdiction for it to stay proceedings under Article 30 (because article 30 only applies to courts “other than the court first seised”). Mann J nevertheless went on to consider the position if he were wrong about the English court being first seised.

Following UK Court of Appeal authority, he found that even if the proceedings only became “related” within the meaning of Article 30 at the point when Philips served its FRAND statement of case, the fact that the UK proceedings were commenced first still meant that the English court was first seised and so there was still no discretion to order a stay.

Although not determinative given Mann J’s previous findings, he also considered evidence from Philips’ French law expert that there was serious doubt about whether the French court would in fact determine FRAND terms. Along with that point, he also considered relevant the fact that the English court would be in a position to decide on the issue imminently, while any French judgment would take another two years and, importantly, would be given after expiry of one of the patents in dispute.

Mann J therefore decided that, even if he did have discretion to order a stay under Article 30, he would exercise that discretion against ordering a stay. The only point he considered weighed in favour of the French court determining FRAND terms was the fact that the ETSI undertaking was governed by French law. However, Mann J noted that “English courts are well used to construing foreign contracts, with the aid of evidence from foreign lawyers, and this contract is no exception”.

Analysis

Given this judgment, it is hard to envisage a situation where the English courts would cede jurisdiction to another national court to determine FRAND licence terms where English infringement proceedings are afoot.

Although in this case Mann J found that the UK courts were first seised, he made clear that even if that were not the case then (1) the Article 29 challenge would fail because the issues in dispute in the English and French proceedings were different and (2) he would have exercised his discretion under Article 30 against a stay. Therefore, even where English proceedings are commenced after those in another national courts, it seems possible that the courts will still refuse to stay the English proceedings.

This decision is another example of the English court’s expansive approach to jurisdiction in FRAND cases. It remains to be seen whether there will be any circumstances in which the court will cede jurisdiction. Ultimately, it may then become a question of which national court can give judgment on appropriate FRAND licence terms first and the risk of conflicting judgments is clear.

 

Andrew Moir

Andrew Moir
Partner, Intellectual Property and Global Head of Cyber & Data Security
+44 20 7466 2773

David Webb

David Webb
Associate, London
+44 20 7466 2629

FRAND patent licensing: Supreme Court stays the course

Andrew Moir and David Webb have today published an article about the recent Supreme Court FRAND decision in Unwired Planet in PLC Magazine.

This article first appeared in the October 2020 issue of PLC Magazine.

The article analyses the Supreme Court’s judgment, which provides welcome guidance on the UK’s approach to FRAND licensing, much of which will be welcomed by standard essential patent owners. You can also find an in depth summary of the case in our separate blog post.

Please do not hesitate to contact the authors if you would like to discuss this decision and its implications in more detail.

Andrew Moir

Andrew Moir
Partner, Intellectual Property and Global Head of Cyber & Data Security
+44 20 7466 2773

David Webb

David Webb
Associate, London
+44 20 7466 2629

UK Supreme Court stays the course in Unwired Planet and Conversant – confirming the approach to FRAND adopted by the lower courts

On 26 August 2020 the UK Supreme Court handed down judgment in Unwired Planet v Huawei [2018] EWCA Civ 2344 (the “Unwired Planet Appeal”) and Conversant v Huawei and ZTE [2019] EWCA Civ 38 (the “Conversant Appeal”). The Unwired Planet Appeal concerned the courts’ jurisdiction to determine global FRAND (Fair, Reasonable And Non-Discriminatory) licence terms, the meaning of the ‘non-discrimination’ element of FRAND and an SEP (Standard Essential Patent) owner’s right to an injunction. The issue in the Conversant Appeal was whether England was the appropriate forum to hear such a FRAND case in the circumstances of that case (further explained below). Continue reading

Innovation Disruption and Technology – the legal and commercial issues for your business

Drawing on our practitioners’ experience and understanding of the intellectual property and technology issues facing our clients in the fast changing world in which we all now do business, we made innovation and disruptive technology the key themes at our 2018 IP Update Conference.

Described by one attendee as “The perfect mixture of commercial and legal content”, the event was held in our London offices in February 2018. We were joined by over 140 clients from the Technology, Banking, Consumer, Energy, Manufacturing, Media, Pharmaceutical & Healthcare, and Telecommunications sectors.

Click here for a briefing summarising the legal and commercial issues raised by the Herbert Smith Freehills presenters and our keynote speaker Kevin Mathers, Country Director at Google UK.

Our keynote speaker, Kevin Mathers, set the scene by discussing the current technological landscape for innovation and how Google looks at the future. Taking examples of how artificial intelligence, augmented reality and virtual reality are already being used by Google and looking at the major trends which will dictate our digital future. Kevin’s presentation was a great success, with attendees describing it as “really insightful and inspirational”; “engaging and interesting” and “stimulating and thought-provoking”.

The conference continued with sessions on

  • tackling the impact of AI on your business,
  • on-line risk,
  • open innovation,
  • interoperability and product standards, and
  • targeted advertising and the GDPR.

There was also a panel session at the end of the conference to discuss the issues facing businesses in relation to disruptive technology with contributions from partners and of counsel across the IP and IT practice areas and from several of our European offices.

Clients were impressed by the range of issues presented by the speakers and the practical approaches offered.

 

Joel Smith

Joel Smith
Head of IP - UK
+44 20 7466 2331

Rachel Montagnon

Rachel Montagnon
Professional Support Consultant, London
+44 20 7466 2217

 

First High Court judgment on FRAND royalties

UK Court takes tough stance on party unwilling to take Worldwide licence on FRAND terms.

The UK High Court has handed down its first decision determining FRAND royalties, and has provided clear guidance as to the rights and obligations of parties to licensing negotiations and litigation relating to standard essential patents (SEPs).

In the context of a dispute between patent owner, Unwired Planet, and prospective licensee, Huawei, relating to patents declared essential for various telecommunication standards, the Court has emphasised that FRAND characterises both the terms of a licence and a process by which a licence is negotiated. The Court will be prepared to grant an injunction against a party, such as Huawei, who fails to satisfy the Court of its willingness to take a license on FRAND terms.

The Court also answered many longstanding questions relating to the principles by which FRAND royalty rates are to be calculated. Among other things, the Court has favoured benchmarking using the proportional value of the patentee's portfolio, taking the view that royalty rates should not vary depending on the size of the licensee. It has also rejected the argument that the non-discriminatory requirement of the FRAND undertaking forced the licensor to offer the same or a similar royalty rate or terms as that agreed in any earlier licence with a similar licensee (so-called “hard-edged non-discrimination”).

Some aspects of the decision will no doubt lead to further questions but, overall, the decision demonstrates a willingness of the Court to grapple with, and take a clear position on, complex questions relating to SEPs and FRAND licensing.

The full judgment can be found here

Continue reading