As all FRAND aficionados should already know, with a judgment handed down yesterday the Court of Appeal of England and Wales upheld Birss J’s first instance decision in Unwired Planet v Huawei (the appeal decision is available here, whilst Birss J’s decision is available here).
In doing so, the Court agreed with the first instance court in holding that a global SEP portfolio owner can comply with its FRAND obligations by offering a worldwide licence, whose terms can be determined by the UK Courts, and, if that offer is refused by the implementer, is entitled to an injunction covering the UK territory based on the UK SEPs in dispute in the UK national proceedings.
In reaching this conclusion, the Court agreed with Birss J’s findings that global portfolio licensing is efficient and in line with industry practice of the mobile industry, echoing the relevance given to “recognised commercial practices in the field” by the CJEU’s decision in Case C‑170/13 – Huawei (not expressly cited by the Court of Appeal in support of this finding, though).
The Court also dismissed Huawei’s appeal on the non-discrimination prong of the FRAND commitment, holding that the FRAND obligation does not amount to a “most favoured nation” approach to licensing, an approach which had been rejected by ETSI at the time it set its IP Policy. Instead, in the Court’s view, a SEP holder’s FRAND undertaking only requires it to offer licences which reflect the proper valuation of its portfolio, in a global assessment which has to consider the FRAND obligation as a whole. This, of course, does not exclude the relevance of the parallel obligations stemming out of competition law, as mandated by the CJEU in its Huawei decision (which expressly refers to “licensing agreements already concluded with other competitors” as a relevant factor “to check whether [the SEP holder’s] offer complies with the condition of non-discrimination”) or in MEO-Serviços de Comunicações e Multimédia SA v Autoridade da Concorrência. This issue, and the meaning in the context of FRAND licensing of the notion of competitive disadvantage under Article 102 TFEU, was however left unaddressed by the Court, as it only focused on the obligations not to discriminate stemming out of the FRAND commitment.
Finally, the Court confirmed Briss J’s view that the steps outlined by the CJEU’s Huawei decision only amount to a safe harbour and do not automatically trigger liability under Article 102 TFEU if not complied with by the SEP holder: whether an abuse of dominance exists is to be assessed taking all circumstances of the case into account. In the Court’s view, the only exception to this principle is to be found in the SEP holder’s obligation to alert the alleged infringer prior to file suit, as the language used by the Huawei decision on the point is clear cut and excludes interpretations that do not view this step as a compulsory pre-condition for bringing action.
In terms of next steps, the Court of Appeal refused permission to appeal to the Supreme Court and, unsurprisingly, Huawei has indicated that they intend to seek permission to appeal to the Supreme Court itself.
The decision has already received a warm welcome by SEP holders, as it opens the door to global FRAND rate setting in the framework of national infringement proceedings. It is yet to be seen, however, whether the Court’s findings will remain applicable in future cases, where the defendant timely objects to jurisdiction or applies for a stay of the FRAND related issues pending resolution of other preliminary issues to be decided in foreign, more convenient, fora . These steps were indeed not taken by Huawei and it is also on this basis that the Court of Appeal dismissed Huawei’s jurisdictional challenges (see ). Also, should these jurisdictional issues be overcome in future cases (such as in the pending Conversant v. Huawei and ZTE appeal, where some of these issues are currenly being discussed), one is left wondering whether the current praise might soon be reconsidered, as the approach of the UK Courts is progressively adopted by jurisdictions where SEP holders might be less inclined to litigate matters such as the global FRAND rate for their entire SEP portfolios.
Also, there is one passage of the decision of the Court which is difficult to reconcile with the CJEU’s Huawei decision and the general consensus on the contents of the FRAND obligations of SEP holders. The Court of Appeal indeed disagreed with Briss J that there is only one set of FRAND terms for any given set of circumstances. In the Court’s view, it is perfectly possible that there is more than one set of FRAND terms. The Court then went on arguing that if both the SEP holder’s and the implementer’s offers are found to be FRAND, it is the offer of the SEP holder that should prevail and should be accepted by the licensee. With the words of the Court, if both the (global) license offered by SEP holder and the (national) license offered by the implementer were FRAND, “the global licence would, on this hypothesis, be fair, reasonable and non-discriminatory. It would then be a matter for the prospective licensee whether to accept it”. This of course implies that, in the Court’s view, the SEP holder would be entitled to injunctive relief against a willing licensee, i.e. against an implementer willing to take a license on terms which, even if diverging from the equally FRAND terms requested by the SEP holder, were nonetheless found to be FRAND by the Court. This is obviously a conclusion hard to agree with, which is probably the result of the fact that the point was addressed only in obiter in the decision, given that the Court had previously found that Huawei’s offer limited to the UK patents was not FRAND.
The decision also includes additional interesting findings on a variety of aspects (from the presumption of dominance conferred by SEPs, to the, partially unsatisfactory, attempt to reconcile its findings on non-discrimination with the US and German precedents on the point). We will cover them all very soon.