Ruling on cellular standards patents scrambles global enforcement landscape

The United Kingdom isn’t generally known for making waves in
the intellectual property (IP) ocean, but a recent British ruling last month
appears to have done just that.

In a highly anticipated decision, the UK Supreme Court held
in August in Unwired Planet v. Huawei that in certain
circumstances, UK courts may decide the worldwide licensing terms of
standard-essential patents (SEPs) and may impose an injunction on use of those
patents if those terms are not honored.

via Reuters

As a general principle, when an industry group establishes a
certain technical standard — such as the 5G mobile networking standard — those
bodies typically decide what patents are covered by the relevant standard.
These SEPs then become subject to an obligation on the part of their owners to
license them on fair, reasonable, and nondiscriminatory (FRAND) terms.

In the UK case, Unwired, a licensing entity that acquired
certain patents from Ericsson deemed essential to the 2G, 3G, and 4G standards,
sued Huawei and other smartphone makers for patent infringement. The relevant
standard body here was the European Telecommunications Standards Institute (ETSI), which imposed a FRAND
obligation on owners of patents it deemed essential. The trial court found in
favor of Unwired that its patents were valid and infringed by Huawei.

On appeal, Huawei argued that agreed-on FRAND terms would
cover only the UK patents, but the supreme court held instead that the ETSI
agreement was “intended to have international effect.”

In addition, while Huawei asserted that Unwired failed to
offer to license its SEPs on nondiscriminatory terms, the high court defined
“nondiscriminatory” within the broader “fair” and “reasonable” context to mean
that “the terms and conditions on offer should be such as are generally
available as a fair market price for any market participant” and held that
Unwired’s offers had satisfied this standard.

Finally, the court also sided with Unwired regarding
injunctions, concluding that an ETSI SEP owner can enjoin use of the patents if
an alleged infringer refuses to agree to a license on FRAND terms. The Lord
Justices concluded:

The possibility of the grant of an injunction by a national court is a necessary component of the balance which the [ETSI agreement] seeks to strike, in that it is this which ensures that an implementer has a strong incentive to negotiate and accept FRAND terms for use of the owner’s SEP portfolio.

While London isn’t a hotbed of IP litigation, the Unwired
ruling is likely to have an impact on global patent enforcement proceedings,
for better or for worse. Some observers, such as solicitor David Lancaster of
Pinsent Masons’ London office, predicted “greater volume of litigation over
technology patents in the UK, satellite litigation in other European countries,
and increased clarity on the rates businesses reliant on communications
technologies will need to pay to use the technology.”

Others such as Utah law professor Jorge Contreras expressed
displeasure at the decision. “I am concerned,” Contreras wrote at PatentlyO, “about its conclusions regarding the authority
of one country’s courts to determine global FRAND rates, the availability of
injunctive relief against standards implementers and the demotion of
non-discrimination as an independent prong of the FRAND analysis.”

And yet others were more measured. A global team of lawyers
at Norton Rose Fulbright raised the possibility that “courts in other nations —
including China and Germany — may determine that they too have the ability to
set the terms of a global FRAND license between SEP-holders and implementers,”
a trend that would prod litigants to “race to their preferred jurisdiction to
resolve future FRAND disputes.”

However, not all SEPs or standard-setting organizations, for
that matter, are created equal, and the impact of the ruling is likely to be
uneven. For instance, the licensing terms of some standards bodies do not allow
for the possibility of an injunction. Even so, the UK has now put itself on the
map for IP cases.

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