Huawei this morning lost a long-running patent lawsuit against Unwired Planet in a case that will determine global FRAND licensing rates for years to come – and also sets London as the jurisdiction of choice for squabbling telecoms multinationals.
In the judgment [PDF], the Supreme Court ruled that Huawei could not use standards-essential patents (SEPs) owned by Unwired Planet without agreeing a worldwide licence and royalties.
SEPs underpin common technologies such as LTE; to make a working mobile phone in today’s world, you will have to include patented technology that forms part of a mandatory global standard.
A concept called FRAND – Fair, Reasonable And Non-Discriminatory – sat at the heart of this case. SEPs must be offered on FRAND terms to so-called “implementers”, including handset makers such as Huawei, ZTE, Apple and Samsung.
In the case before the Supreme Court (which began years ago in the High Court) Huawei had wanted a UK-only deal with Unwired Planet for patents it intended to use. Unwired was only willing to strike a deal with Huawei for a worldwide FRAND licence – so the London courts were asked to decide the case by setting the licence terms.
Crucially, Unwired had previously granted favourable licence and royalty terms to Samsung for the same patents. Huawei argued that giving it different terms and conditions from Samsung would be a breach of Unwired’s FRAND commitments. Yet the court rejected the idea that the “most favourable licence” should become a binding FRAND-compliant licence for everyone wanting to use a particular patent.
“The court holds that as a result of the contractual arrangements in the ETSI [intellectual property rights] policy, the courts of England and Wales have jurisdiction and may properly exercise a power, without the parties’ agreement, to grant an injunction to restrain infringement of a UK patent that is a standards-essential patent unless the implementer enters into a global licence of a multi national patent portfolio, and to determine the royalty rates and returns of that licence,” intoned Supreme Court judge Lord Hodge, delivering the court’s unanimous verdict, this morning.
Huawei lost on all five of its grounds of appeal, including an argument that courts in China were better placed to decide the case than London courts.
According to the judgement, Mark Howard QC, acting for Huawei, had earlier argued that English judges were "setting up the English jurisdiction as 'a de facto international or worldwide licensing tribunal for the telecommunications industry'. [And that] In so acting the English courts were out of step with the approach of other national courts."
The ruling has big implications for the international patent world but doesn’t necessarily make UK courts into global setters of patent law and policy, as Andrew Sharples of law firm EIP, which represented Unwired Planet and co-defendant Conversant Wireless Licensing, told The Reg.
“For too long large implementers have been able to hold out and avoid paying royalties on the technologies they are using, tying companies up in lengthy negotiations, litigations or both. Court has recognised that and seen the need to balance the right to access tech with need for patents to be properly compensated for using that tech,” he said.
Sharples added to The Register: “When we were beginning this case there were a number of people who didn’t think that a court would grant an injunction on the basis of an SEP because the owner of that SEP had to give an undertaking to make licences available for that patent on FRAND terms.”
A parallel and related case that formed part of today’s judgments, between Conversant Wireless Licensing and Chinese firm ZTE, is set for further hearings in January.
Related patent lawsuits in America also concerned Unwired Planet's 4G patents, for which it scored $506.2m in FRAND royalties on LTE capability in the iPhone, iPad, and Apple Watch. The firm was once known as Openwave Systems. ®