UK Supreme Court dismisses telecoms patent infringement appeal by Huawei

A patent infringement appeal brought against the UK branch of the telecommunications company Huawei has been dismissed by the UK Supreme Court after the company challenged the decision by the English Court of Appeal to uphold the trial judge’s order.

Unwired Planet International Ltd, the respondent to the appeal, claimed that Huawei had infringed five of its UK patents, which it claimed to be Standard Essential Patents without which it would be impossible to make, sell, use, or operate mobile phones compliant with international standards for mobile telephony. An order in respect of two of those patents was made and then upheld on a previous appeal.

The appeal was heard by Lord Reed, Lord Hodge, Lady Black, Lord Briggs, and Lord Sales.

FRAND requirements

Owners of SEPs that are members of the European Telecommunications Standards Institute (ETSI) are required to give an irrevocable undertaking to license their patented technology on terms that are “fair, reasonable and non-discriminatory” (“FRAND”). The business of the respondent was licensing its patents to companies that make and sell telecoms equipment.

In 2013, the respondent acquired a portfolio of patents and patent applications from Ericsson, which had previously licensed some of its patents to Huawei. The licence granted by Ericsson to Huawei expired in 2012, after which time Huawei continued to use the technology covered by the patents. Negotiations were entered into between the parties, but produced no final agreement.

The respondent commenced proceedings in England in March 2014 against Huawei and others, alleging the infringement of some of those patents. In subsequent technical trials, two of the SEPs were found to be both valid and essential, and in a non-technical trial the judge, Justice Birss, found that the respondent’s undertaking to licence its SEPs on FRAND terms was justiciable in the English courts. The order was subsequently upheld in the Court of Appeal.

On appeal to the Supreme Court, Huawei argued that the English courts were not entitled to grant an injunction for the infringement of a UK patent unless an implementer agrees to take a licence of disputed foreign patents because this involves the implementer having to compromise foreign rights. If the declared SEPs were foreign patents, the relevant national courts alone could determine validity and infringement.

Huawei further argued that the FRAND requirements of non-discrimination required like situations to be treated similarly, and thus the respondent should have offered them a comparable royalty rate on a patent licence to previous agreements with other companies. It also argued that Unwired’s claim for an injunction should be regarded as an abuse of its dominant position under EU competition law.

As such, the issues before the court were: a) whether a court in the UK could grant an injunction to restrain the infringement of a UK patent where the invention was an essential component in an international standard of telecoms equipment; b) whether the nature of the requirement that the licence, offered by an SEP owner to an implementer be non-discriminatory; and c) whether the court should refuse to grant the owner of such a SEP an injunction on the ground that it has breached EU competition law because it has not complied with the guidance given in the judgment of the Court of Justice of the European Union in Huawei v ZTE (2015).

Consistent approach

In the judgment, to which all five justices contributed, the court said on jurisdiction: “If the judgments of the English courts had purported to rule on the validity or infringement of a foreign patent, that would indeed be beyond their jurisdiction. But that is not what Birss J and the Court of Appeal have done. Instead, they looked to the commercial practice in the industry of agreeing to take a licence of a portfolio of patents, regardless of whether or not each patent was valid or was infringed by use of the relevant technology in the standard, and construed the IPR Policy as promoting that behaviour.”

It continued: “We recognise that Birss J has gone further than other courts have done thus far in his willingness to determine the terms of a FRAND licence which the parties could not agree, but that does not involve any difference in principle from the approach of courts in other jurisdictions. Otherwise his approach is consistent with several judgments in other jurisdictions.”

Of the discrimination arguments, it said: “The obligation set out in [the FRAND undertaking] is that licences should be available ‘on fair, reasonable and non-discriminatory … terms and conditions’. In our view, the undertaking imports a single unitary obligation. Licence terms should be made available which are ‘fair, reasonable and non-discriminatory’, reading that phrase as a composite whole. There are not two distinct obligations, that the licence terms should be fair and reasonable and also, separately, that they should be non-discriminatory.”

It continued: “A powerful indication that the non-discrimination obligation is ‘general’ rather than ‘hard-edged’ is that ETSI had previously considered and rejected the imposition of a ‘most-favourable licence’ clause in the undertaking. This was done in documents which were published and accessible to all market participants. To interpret the FRAND undertaking as incorporating the ‘hard-edged’ non-discrimination obligation for which Huawei contends would have the effect of re-introducing a ‘most-favourable licence’ term by the back door.”

On whether the respondent had breached competition law based on Huawei v ZTE, it said: “Had the CJEU’s judgment been in terms clearly intended to lay down universal, immutable, conditions, [the respondent’s arguments] would not have been sufficient to displace [them], but, in our view, given that the judgment is not in such terms, the point does perhaps provide a degree of further confirmation that all the circumstances of the case must be taken into account before concluding that article 102 has been infringed.”

It concluded: “What mattered on the facts of this case was that Unwired had shown itself willing to license Huawei on whatever terms the court determined were FRAND, whereas Huawei, in contrast, had only been prepared to take a licence with a scope determined by it.”

For these reasons and others, the appeal was dismissed, with the judgment of the Court of Appeal upheld.

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