The future of standard essential patent licensing

Out-Law Analysis | 09 Mar 2021 | 10:28 am | 7 min. read

The law on standard essential patent (SEP) licensing has been heavily shaped by courts around the world in what is an increasingly global battleground over rights to use standardised communication technologies. It is expected to evolve further in 2021.

A complicated web of injunctions, the potential for forum shopping, and further clarity on the complex protocols to follow when engaging in SEP licensing negotiations are all possible developments in the months ahead.

Once of sole concern to companies active in telecoms, issues of SEP licensing are now the business of organisations in technology-rich sectors increasingly reliant on digital communication technologies – from automotive manufacturers and financial services institutions, to producers of healthcare devices and consumer goods.

Marfe Mark

Mark Marfe

Legal Director

Given that these disputes are global it is clearly impossible for courts to make decisions without an awareness of the wider legal landscape

Unwired Planet: a global decision

Disputes involving SEPs relate to patents granted on a national basis but often involve multinational corporations with interests in many jurisdictions. The courts need to balance the tension of national patent challenges, with the global commercial interests of the businesses on both sides of the dispute. 

Last year, in the case of Unwired Planet v Huawei, the UK Supreme Court decided that a UK court has the power to grant an injunction to prevent the infringement of a SEP and determine the royalty rates and terms of a global 'FRAND' licence. FRAND is fair, reasonable and non-discriminatory. SEP owners are typically obliged to license their SEPs on FRAND terms to account for the fact they are considered essential to the implementation of a technical standard and to reflect the collaborative environment in which the underlying technologies are developed.

It remains to be seen whether this ruling will lead to an increasing volume of FRAND litigation in the UK or whether it will be influential in other jurisdictions. On one hand, there are previous examples of courts in other jurisdictions following the UK lead. For example, with the ruling of the German Federal Court of Justice in the case of Sisvel v Haier (the Sisvel I case), the law on the licensing of SEPs in Germany came into closer alignment with the position in the UK. On the other hand, the fact that this issue has not yet been addressed by higher courts in other jurisdictions could prompt technology implementers to raise legal proceedings outside the UK in an attempt to avoid a global licensing rate being set by a UK court. 

From anti-suit injunctions to anti-anti-anti-anti-suit injunctions

The global nature of FRAND disputes, and the associated SEP portfolios, will of course lead SEP holders and implementers to either enforce or challenge patents in jurisdictions outside the UK, depending on their commercial practices and strength of the relevant local markets.

That such disputes are not limited by territory is demonstrated by the increasing number of anti-suit injunctions (ASIs) that have been filed globally. ASIs prevent an opposing party from commencing or continuing proceedings in another jurisdiction. ASIs have most notably been sought in the US. For example, the Western District Court of Washington issued an ASI which prohibited Motorola from enforcing an injunction of the Mannheim Patent Court against Microsoft. 

Corresponding anti-anti suit injunctions (AASIs), which prevent a party seeking or enforcing an ASI in the first place, have been filed in various FRAND disputes in a number of jurisdictions, and are increasingly being seen in Europe. For example, the Paris Court of Appeal granted an AASI to prevent Lenovo and Motorola from enforcing an ASI that they had obtained against IPCom in the US.   

To make matters even more complicated, the possibility of an anti-anti-anti suit injunction (AAASI), to prevent a litigant from obtaining an AASI to block another litigant from requesting an ASI, and an anti-anti-anti-anti suit injunction (AAAASI), has arisen. In late February this year, the Regional Court of Munich issued an AAAASI in favour of InterDigital in its dispute with Xiaomi. This prohibited Xiaomi from enforcing an ASI issued by a Chinese court. The AAAASI means that InterDigital can now file patent infringement proceedings against Xiaomi in Germany.

Taylor Sarah_Feb 2020

Sarah Taylor

Senior Practice Development Lawyer

Chinese entities are very active in FRAND litigation in other jurisdictions, and we are expecting increased activity in the Chinese courts over the coming months

East versus West?

 

ASIs are increasingly common in Europe, but China, where a number of mobile telecommunications companies are situated, has seen a recent spate of applications too. This follows the Chinese Supreme People's Court granting the first ASI in a case between Huawei v Conversant. This ASI prevented Conversant from enforcing a German injunction against Huawei. 

On Christmas Day 2020, the Wuhan Intermediate Court issued an ASI in a dispute between Samsung and Ericsson, on the basis of Samsung's earlier application to the Chinese court to set a global FRAND licence rate for Ericsson’s SEPs.  In issuing the ASI, the Chinese court established its jurisdiction, prohibited Ericsson from enforcing an injunction against Samsung under its 4G and 5G patents, and declared that Ericsson may not have a FRAND licence set by any other court. It also prohibited Ericsson from seeking an order elsewhere to restrict Samsung from enforcing the ASI from Wuhan. The Chinese court therefore not only issued an extensive ASI, but also an AAASI at the same time.

Reports of the proceedings in China suggest that Ericsson did not become aware of the Chinese litigation until a few days before Christmas, and therefore did not have the opportunity to argue against the ASI. A later hearing, on 29 January 2021, provided them with the opportunity to argue against these measures, although at the time of writing the outcome of the hearing has not been disclosed. Chinese entities are very active in FRAND litigation in other jurisdictions, and we are expecting increased activity in the Chinese courts over the coming months.

Bad for business?

The aim of an ASI is generally to prevent an opposing party from commencing or continuing proceedings in another jurisdiction. Representatives of both the telecoms and automotive sectors have said at recent webinars on this topic that the recent FRAND dispute ASIs are bad for business, but perhaps of greater concern is the trend of the Chinese courts to issue ASIs with effect outside of its territorial borders. There is already evidence of the impact this is having in the context of the ongoing dispute between Samsung and Ericsson.

Immediately after Christmas, Ericsson filed an AASI at the District Court of Texas, the same court in which it had sued Samsung in December for violating contractual obligations to negotiate in good faith, and to license patents on FRAND terms. On the basis that the two cases are not identical and both are able to succeed, the US judge argued that he has jurisdiction to determine if Samsung and Ericsson are fulfilling their obligations to licence their SEPs on FRAND terms, and prohibited Samsung from enforcing a ruling that limited Ericsson’s ability to pursue its case. The judge did not intervene directly in the Chinese proceedings. Had he done so, it is likely that such an action would have been viewed negatively by the Chinese court. However, these decisions are uncomfortable and we expect to see further tussles between Samsung and Ericsson in the coming months.

Willing licensee

A significant body of SEP licensing case law has developed in recent years, and the national court rulings in Europe have been framed by the Huawei v ZTE ruling of the Court of Justice of the EU (CJEU) in 2015. This case considered the circumstances where an assertion of rights by a patent holder is in breach of EU competition law.

The CJEU confirmed that SEP holders must first provide written notification to an implementer of their alleged patent infringement, and in response, the implementer must confirm its willingness to take a FRAND licence. The decision confirmed that passive behaviour on the part of the implementer will be viewed as delaying tactics and not as the actions of a 'willing' licensee. National courts across Europe have since come to their own interpretations as to what constitutes a 'willing licensee', but most notable is the Sisvel I case before the German Federal Court of Justice case, referred to above.  

Marfe Mark

Mark Marfe

Legal Director

The implementer’s cooperation and contribution to the negotiation is the indispensable counter to SEP owner’s claims of infringement

In the Sisvel I case, the court, among other things, confirmed that businesses using SEPs will only be considered to be 'willing' licensees of that technology if they are willing to take a licence from patent holders on whatever terms are deemed to be FRAND. This brought the law on the licensing of SEPs in Germany into closer alignment with that which applies in England and Wales.

The second FRAND decision of German Federal Court of Justice since Huawei v ZTE has now been published, in parallel proceedings between Sisvel v Haier, referred to as 'Sisvel II'. The Sisvel II case confirmed, amongst other things, that any duties of the SEP owner other than the notification of infringement are conditional on the implementer’s expression of a clear and unambiguous willingness to license on FRAND-terms. The implementer’s cooperation and contribution to the negotiation is the indispensable counter to SEP owner’s claims of infringement. The implementer should undertake all reasonable efforts to conclude any such agreement. 

The UK courts have yet to decide on this issue, although the High Court judge in the Unwired Planet v Huawei case did say that "…a willing licensee must be one willing to take a FRAND licence on whatever terms are in fact FRAND." However, the matter is due to be considered further by the High Court this summer in the FRAND trial between PanOptis and Apple.

The weakest link?

Questions over the correct forum, and the nature of a willing licensee, are not the only disputed issues in global FRAND litigation. Where to seek a license in the supply chain remains a contentious issue in Europe, and is unlikely to be clarified until the CJEU answers questions referred to it by the Regional Court of Düsseldorf. The Düsseldorf case concerns an ongoing SEP dispute between Nokia and Daimler, with the German court seeking clarification over which company in a supply chain a SEP holder must grant a licence to. Nokia initially appealed against the reference of questions to the CJEU but last month withdrew its appeal. 

There is less uncertainty over this issue in the US following the appeal in the case of FTC v Qualcomm, which found that licensing SEPs exclusively at the original equipment manufacturer level does not amount to anti-competitive conduct. 

Whether the CJEU will make a similar decision, or even decide on this issue at all, remains to be seen. The CJEU does not move particularly quickly, and therefore this referral is unlikely to be considered by the court until 2022 at the earliest. 

What's next?

FRAND disputes in the cases of Apple v PanOptis and Mitsubishi v Oneplus are due to be heard by the High Court in London later this year, and we wait with interest to see how the lower courts will apply the UK Supreme Court's decision in the Unwired Planet v Huawei case in a workable manner.

We also expect the Supreme Court's judgment to at least be considered by other national courts in other jurisdictions, and given that these disputes are global it is clearly impossible for courts to make decisions without an awareness of the wider legal landscape.