Court of Appeal hands down landmark judgment on FRAND licensing of standard essential patents

24/10/18

On 23 October 2018 the Court of Appeal (Lord Kitchin, Lord Justice Floyd, Lady Justice Asplin) handed down a landmark judgment in Unwired Planet International Ltd v Huawei Technologies Co Ltd [2018] EWCA Civ 2344 concerning the obligation of the holder of standard essential patents (“SEPs”) to licence them on fair, reasonable and non-discriminatory (“FRAND”) terms.

The Court of Appeal dismissed Huawei’s appeal and upheld the judgment of Birss J in relation to three key elements of the SEP holder’s FRAND obligations.

First, the Court of Appeal held that an SEP holder in the position of Unwired Planet can satisfy its FRAND obligations by offering a global licence to its patent portfolio. If an implementer declines to take a global licence, the Court may grant an injunction restraining infringement in the UK. The Court of Appeal rejected Huawei’s argument that the grant of a national injunction to compel a prospective licensee to take a global licence amounted to “international coercion”.

Secondly, the Court of Appeal held that the non-discrimination limb of the FRAND undertaking entails setting a benchmark rate by reference to the value of the portfolio. Such a rate is non-discriminatory because it is made available to all potential licensees seeking the same kind of licence without distinguishing according to their individual characteristics. The Court of Appeal rejected Huawei’s argument that there was a “hard-edged” non-discrimination obligation akin to a “most-favoured licensee” clause which required an SEP holder to licence at the lowest rate it had offered to any other similarly situated licensee.

Thirdly, the Court of Appeal held that the judgment of the CJEU in Huawei v ZTE sets out a series of procedural steps amounting to a “safe harbour” for SEP holders enabling them to enforce their patent rights by seeking injunctive relief without the risk of being deemed to have abused their dominant position contrary to Article 102 TFEU. The Court of Appeal rejected Huawei’s contention that an SEP holder automatically abuses its dominant position and is precluded from obtaining injunctive relief at the conclusion of patent proceedings if it has not complied with the CJEU’s procedural framework.

The judgment is here.