UK FRAND update: three judgments that change the dynamic of SEP disputes

For anyone with an interest in standard essential patents (SEPs), there has been a flurry of activity recently with three important fair, reasonable, and non discriminatory (FRAND) judgments handed down, which together may represent the biggest change since Justice Birss's Unwired Planet decision in 2017.

A well-trodden path

In the years that have followed, the English court has seen a number of other SEP cases seeking an Unwired Planet injunction. However, to date, all have settled before reaching a FRAND trial and so, until recently, there had been little development of the law in this area. However, one point that became apparent was the time it took to reach a FRAND trial.

As an English FRAND trial is considering the question of relief for patent infringement, the established position is that a finding (or admission) of infringement is needed before it can take place, meaning that it will normally be listed after several 'technical' patent trials. This means that it can often take two or more years from issue to reach a FRAND trial.

The question of willingness to take a licence

One of the cases to follow the Unwired Planet model is Optis v Apple. Optis issued proceedings in February 2019 alleging infringement of eight of its SEPs and, following a judgment of validity, essentiality and infringement in the second trial in June 2021, Optis asked Apple to give an unqualified undertaking to take a licence on whatever terms the English court determine to be FRAND.

Apple refused and, given the FRAND trial is not listed until June 2022, Optis applied to enforce the injunction. Mr Justice Meade's judgment of September 27 2021 held that Optis could have a FRAND injunction now unless Apple gave a suitable undertaking to demonstrate its willingness to take a licence on FRAND terms. He considered that the undertaking being offered by Apple was not sufficient but gave it an opportunity to reconsider what undertaking it was prepared to give.

This judgment has the potential to significantly alter the dynamic in English FRAND cases. As implementers have traditionally resisted giving an unqualified undertaking to take a licence on whatever terms the Court determines to be FRAND, it has meant that patentees have not only faced a significant wait for a FRAND determination, but also no guarantee that it will ultimately resolve the dispute.

Although this judgment does not directly speed up the resolution of the dispute, it may bring certainty at an earlier stage that the case will be determinative, which brings many benefits. In addition, it opens up the possibility of an SEP proprietor suing an unwilling implementor being able to obtain an injunction at an earlier stage than in a normal patent action, where the injunction is often stayed pending appeal.

China enters the fray

A matter of days before the judgment in Optis was handed down, the Supreme People's Court in China published a judgment from the Oppo v Sharp SEP dispute ((2020) Zui Gao Fa Zhi Min Xia Zhong No. 57).

Although the parties had reached a settlement before the judgment was published, it confirmed that the Chinese courts not only had the jurisdiction to determine the terms of a global FRAND licensing by way of a freestanding action, not linked to a patent infringement suit, but that in certain circumstances it could do so without all of the parties' consent.

While the judgment is relatively short, it is arguably the most important judgment globally relating to FRAND since Unwired Planet, by confirming that China is now a forum that will determine FRAND terms on a global basis but, unlike others, it will do so on the basis of a freestanding action not linked to patent infringement. However, it raised the question of what might happen if there were parallel FRAND actions before the English and Chinese courts.

Recipe for chaos or opportunity to improve the system?

As it turned out, that question was answered fairly swiftly in Nokia v Oppo. On July 1 2021, Nokia sued Oppo for infringement of its SEPs in a number of jurisdictions, including England, seeking a determination that the terms of its offers to Oppo were FRAND.

Oppo subsequently commenced proceedings before the Chongqing court, requesting determination of the terms for it to take a licence to Nokia's SEPs, and sought a stay of the English case on either forum conveniens grounds or a discretionary basis.

His Honour Judge Hacon handed down judgment on November 4 ([2021] EWHC 2952 (Pat), rejecting Oppo's application on both basis by finding that the correct characterisation of the action as one of UK patent infringement, for which the English Court will always have jurisdiction. In relation to the discretionary stay, His Honour Judge Hacon recognised that such a stay would only be granted in rare and compelling circumstances and considered that none applied in this case.

Where, then, does this leave things? There is another jurisdiction that has confirmed it will, in certain circumstances, determine global FRAND terms. While this choice of forum may result in forum shopping, this has both potential positive benefits to court users, as well as negatives. For example, the competition may drive courts to manage cases in a way that allows them get to trial more quickly and efficiently, which is to the benefit of all parties. However, we will have to wait and see quite how things unfold.