Supreme Court judgment on FRAND

07/09/20

On 26 August 2020 the Supreme Court handed down its first judgment concerning the obligation on the holder of a standard essential patent (“SEP”) to grant licences on fair, reasonable and non-discriminatory (“FRAND”) terms.

The issues arose in two appeals: Unwired Planet International Limited & Anor v Huawei Technologies (UK) Co Limited & Anor (“the Unwired Planet appeal”); and Huawei Technologies Co Ltd & Anor and ZTE Corporation & Anor v Conversant Wireless Licensing SARL (“the Conversant appeal”).

The Supreme Court held that the English courts have jurisdiction to settle a global licence on FRAND terms for a multinational SEP portfolio and to grant an injunction restraining the infringement of a UK SEP unless the defendant enters into such a FRAND licence. The Supreme Court further held that England rather than China was the appropriate forum for the dispute in the Conversant appeal.

As to the meaning of the non-discrimination limb of the FRAND undertaking, the Supreme Court held that this was a “general” rather than “hard-edged” obligation. A licensor must offer a royalty rate set by reference to the true value of the SEPs being licensed without discriminating between licensees by reference to their individual characteristics. Such a rate does not cease to be FRAND because the licensor has previously granted a licence on more favourable terms.

The Supreme Court further considered the meaning of the decision of the Court of Justice of the European Union (“CJEU”) in Case C-170/13 Huawei v ZTE. It held that it would be necessarily abusive contrary to Article 102 TFEU for a SEP owner to bring an action for an injunction without some kind of notice to the alleged infringer, but that otherwise the CJEU’s judgment did not impose mandatory requirements which had to be complied with in all cases.

Finally, the Supreme Court addressed the equitable jurisdiction to award a prohibitory injunction and held that the grant of an injunction was necessary in order to do justice and that damages in lieu would not be an adequate substitute.

The judgment is here.