The role of injunctions in FRAND proceedings – a UK perspective

1. The role of injunctions in FRAND proceedings – a UK perspective David Kitchin Justice of the UK Supreme Court

2. Recent UK jurisprudence • Unwired Planet v Hauwei [2018] EWCA Civ 2344 • Hauwei v Conversant [2019] EWCA Civ 38 • TQ Delta v ZyXEL [2019] EWHC 745 (Pat)

3. Key features of the FRAND framework • Telecommunications standards • The FRAND undertaking to: “grant irrevocable licences on fair, reasonable and non-discriminatory terms” • Hold-up • Hold-out

4. The tools available to the court • Injunction • Competition law – do proceedings infringe Article 102 TFEU because they amount to an abuse of a dominant position?

5. Unwired Planet v Huawei – the trials • UP alleged infringement of five SEPs • Huawei denied infringement: contended SEPs were not essential and invalid, and claim infringed Art 102 TFEU • Issues decided in a series of trials • Held: two SEPS valid and infringed • Judge settled terms of a global FRAND licence; no abuse by UP

6. Principal arguments on appeal • Ground 1: The imposition of a global licence was wrong in principle • Ground 2: Licence was discriminatory - Huawei ought to have been offered the rates agreed with Samsung • Ground 3: UP’s conduct infringed Art 102 TFEU in light of decision in Case C-170/13 Huawei v ZTE

7. Global licensing – decision of Birss J • Only one set of terms could be FRAND • UP’s portfolio was much smaller than those of Huawei, Samsung and Ericsson but this did not justify a difference in treatment • UP’s portfolio covered a substantial part of the world • UP’s portfolio was still large enough to make it impractical to litigate over every patent • Willing licensor and licensee would agree a global licence • Since Huawei had refused to take a global licence on FRAND terms, an injunction would be granted (subject to the competition law defences and any appeal)

8. Global licensing - Huawei’s arguments in the Court of Appeal • These were UK proceedings in respect of UK SEPs only • Other countries have adopted different approaches • Judge failed to respect the principal of comity • Judge presumed infringement of foreign SEPs • Decision was contrary to public policy and disproportionate • Decision creates significant practical problems • There is no single set of FRAND terms

9. Global licensing - decision of the Court of Appeal • SEPs are national but the FRAND undertaking is global • A willing licensor and a willing licensee may negotiate a global licence • The concept of a global licence does not offend any principle of comity, nor is it contrary to public policy • A global licence may be FRAND • There is no single set of FRAND terms; the obligation on the SEP owner is to offer a FRAND licence • An implementer who refuses to take a global FRAND licence will face an injunction, but only in respect of the national SEPs in issue

10. Unlawful discrimination? • What does the “non-discriminatory” limb of FRAND require? • “Hard edged” and “general” non-discrimination • Most-favoured licensee? Or: • Must offer a fair and reasonable licence to every implementer? • Samsung had been granted a licence with a very low royalty rate which did not reflect the value of the portfolio

11. General non-discrimination – the Court of Appeal • The objective is not to level down, but to ensure all implementers can secure a licence on terms which reflect the true value of the portfolio • Differential pricing is not of itself objectionable, unless it causes competitive harm • No purpose in constraining SEP owner to offer licences at less than a fair rate

12. Had UP abused a dominant position? • Was UP in a dominant position? • What was the market? • UP had 100% of the market for licences of its SEPs • FRAND undertaking and the possibility of hold-out • Had UP abused its dominant position? • Failure to make a FRAND offer before commencement of proceedings? • Depended on the proper interpretation of the decision of the CJEU in Huawei v ZTE

13. The key facts relevant to abuse allegation • 2009: Huawei took licence under Ericsson patents, including the SEPs • January 2013: UP acquired an Ericsson portfolio, including the SEPs • June to November 2013: Discussions between UP and Huawei • By end of 2013: Huawei knew or ought to have known it needed a licence under the SEPs • March 2014: UP issued proceedings in UK and Germany • April 2014: UP made its first licensing offer

14. Huawei v ZTE (1) • [60]   … the proprietor of an SEP which considers that that SEP is the subject of an infringement cannot, without infringing Article 102 TFEU, bring an action for a prohibitory injunction or for the recall of products against the alleged infringer without notice or prior consultation with the alleged infringer, even if the SEP has already been used by the alleged infringer. (Emphasis added)

15. Huawei v ZTE (2) [71] … the proprietor of an SEP … does not abuse its dominant position … by bringing an action for infringement seeking an injunction prohibiting the infringement of its patent … as long as: –        prior to bringing that action, the proprietor has, first, alerted the alleged infringer of the infringement complained about by designating that patent and specifying the way in which it has been infringed, and, secondly, after the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, presented to that infringer a specific, written offer for a licence on such terms, specifying, in particular, the royalty and the way in which it is to be calculated, and –        where the alleged infringer continues to use the patent in question, the alleged infringer has not diligently responded to that offer, in accordance with recognised commercial practices in the field and in good faith, this being a matter which must be established on the basis of objective factors and which implies, in particular, that there are no delaying tactics. (Emphasis added)

16. Are these mandatory conditions? The Court of Appeal said “no”: • Account must be taken of all the circumstances • The use of permissive language (cf para 60) • Consonance with the purpose of FRAND regime • Procedural rules relating to injunctions vary from state to state • Consistent with decisions in other Member States: • Pioneer v Acer (2016) • St Lawrence v Vodafone (2016) • Sisvel v Haier (2017)

17. TQ Delta v ZyXEL • SEP found valid and infringed • Inconsistent behaviour by implementer • Refusal to commit to FRAND terms settled by court – whether global or national • SEP would expire in three months • Injunction granted

18. Huawei v Conversant • Forum shopping? • Promotion of disputes as to the appropriate forum? • Is the claim justiciable? • Forum non conveniens: • How is the dispute to be characterised? • Can the claim be tried more suitably elsewhere?