FRAND injunction issued by London court is 'globally ground-breaking', says expert

Out-Law News | 08 Jun 2017 | 4:19 pm | 3 min. read

A judge at the High Court in London has granted the world's first 'FRAND injunction' in a move which could see devices manufactured by Chinese technology company Huawei banned from sale in the UK.

Patent law specialist Deborah Bould of Pinsent Masons, the law firm behind Out-Law.com, said the ruling was "globally ground-breaking" and provided "exciting new case law" which has the potential to shape how other businesses approach negotiations over the licensing of standard-essential patents (SEPs) as well as how disputes over those licensing issues are handled.

The ruling by Mr Justice Birss followed an earlier judgment issued in April where the judge ruled that Huawei should take a worldwide licence to patents for wireless communications owned by Unwired Planet or face an injunction which would impose a sales ban on its devices in the UK. Huawei has appealed against that ruling. It has argued that it should be able to take out a UK-specific licence for Unwired Planet's patents.

In the latest stage of the case, Mr Justice Birss assessed whether it was right to issue a final injunction against Huawei for failing to take up a global licence with Unwired Planet while the Chinese company pursues its appeal. Huawei, as an alternative, submitted that the judge should accept undertakings it offered to accept licence terms set by the court whatever the outcome of its appeal, in an arrangement which would see it make royalty payments to Unwired Planet in the interim period.

Mr Justice Birss rejected Huawei's suggestion and instead said that a new form of injunction – a FRAND injunction – would be the most appropriate form of order to make. 'FRAND' stands for fair, reasonable and non-discriminatory, which are the principles by which owners of SEPs are obliged to licence their patents to others.

The judge said that a FRAND injunction offered flexibility because its effect could be delayed pending the ongoing appeal by Huawei, and because it would provide for the potential future renegotiation of the terms of any licence imposed.

"A FRAND injunction should be in normal form to restrain infringement of the relevant patent(s) but ought to include a proviso that it will cease to have effect if the defendant enters into that FRAND licence," Mr Justice Birss said. "If as in this case, the FRAND licence is for a limited time, shorter than the lifetime of the relevant patents then the injunction should also be subject to an express liberty to either party to return to court in future to address the position at the end of the term of the FRAND licence. In any case the FRAND injunction should also be subject to an express liberty to apply in the event the FRAND licence ceases to have effect for any other reason."

Mr Justice Birss said granting a FRAND injunction was more appropriate in this case than accepting Huawei's undertakings. However, he implied that prospective SEP licensees that agree to accept whatever licence a court sets at an early stage of disputes with SEP owners would be more likely to avoid an injunction being imposed.

Bould said this was "a sensible endorsement of normal commercial practice".

Mr Justice Birss said: "In my judgment it is not irrelevant that the undertaking offered by Huawei is only offered now, after many years of litigation and after judgment has been handed down. If, from the outset, Huawei had given an unqualified undertaking to enter into whatever licence the court (including an appellate court) had decided was FRAND, then an injunction at this stage would not have been appropriate."

"Throughout these proceedings Huawei have maintained a determined stance that they would not accept a worldwide licence in this way. It has been a fundamental issue. In my judgment the undertaking offered by Huawei now is too late. By refusing to offer an unqualified undertaking before trial and before judgment Huawei forced Unwired Planet to come to court and vindicate its rights. The right thing to do now is grant a FRAND injunction albeit one which will be stayed on terms pending appeal," he said.

In his ruling, the judge also offered guidance on the protocols SEP owners and licensees should follow when seeking to renegotiate the terms of FRAND licences. He made it clear that SEP owners should not wait for existing licence agreements to expire before opening negotiations over new terms.

"If the patentee has failed to start a process of FRAND negotiation well in advance of the expiry of the current FRAND licence then no doubt the court will be unsympathetic to the patentee even if no licence has been finalised to start the day after expiry. So too if the patentee has dragged its feet in the negotiation," Mr Justice Birss said. "Conversely if the patentee engages reasonably but the putative licensee does not, then the court's sympathies may well lie the other way round."

Bould said businesses would welcome the fact that Mr Justice Birss has published the FRAND licence he has proposed should apply between Unwired Planet and Huawei, pending Huawei's appeal, alongside the judgment. She said it will provide guidance to others on how their SEP licence agreements should be framed.