High Court Judgement could prevent Huawei selling mobile phones in UK

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Specialist Intellectual Property (IP) Law firm EIP today secured a significant decision on behalf of its client in a case of international relevance to the telecoms sector.

A High Court judgment was handed down in the case of Unwired Planet International Limited v Huawei Technologies Co. Limited et al which could potentially see Huawei prevented from selling its mobile phones in the UK.

This judgment is set to be a landmark decision providing long-awaited guidance on licencing for standard essential patents (“SEPs”) in the telecoms field.

Unwired Planet, which was acquired by PanOptis in June 2016, has previously succeeded before the High Court in establishing that Huawei has infringed patents in Unwired Planet’s portfolio which are essential to telecoms standards. The latest judgment, which sets out the basis on which Unwired Planet will be compensated for Huawei’s past infringements, also makes clear that unless Huawei agree to enter into a worldwide licence for Unwired Planet’s patent portfolio, Huawei could be injuncted from selling its mobile telephones in the UK.

The patents in question are standard essential patents (“SEPs”) for mobile telephony.  Unwired Planet has committed to licence these on fair, reasonable and non-discriminatory (“FRAND”) terms (for more information on FRAND, please see the attached background note). Unwired Planet has been willing to enter into a fair and reasonable worldwide licence with Huawei. Today’s judgment confirms the basis of that licence.

In general, companies owning SEPs are required to provide licences on Fair, Reasonable And Non-Discriminatory terms, known by the acronym “FRAND”. This is to ensure that one company does not try and use its patent rights to hold the industry to ransom by requiring excessive royalty payments or other commercial advantage, or to single out a particular company for unfavourable treatment.

The concept of FRAND has been the subject of litigation in various countries around the world. The “leading decision” is probably that of Judge Robart in the United States in Microsoft v Motorola, although there have been several subsequent cases in various jurisdictions. This is the first occasion on which the issue has been examined in detail by the UK Court.

It has been argued that if a party does not comply with its obligations to behave in a FRAND-ly manner that party will be acting in an anti-competitive manner. This has led to accusations that if SEP owner is seeking a licence to their patents, they must initially make a licensing offer to the party using their patented technology, and that if the terms, and in particular the royalty rate, of that proposed license are not deemed to be FRAND, then the SEP owner is in breach of competition law. It has also been postulated that a SEP owner may be in breach of competition law by starting a legal action for patent infringement before allowing sufficient time for licensing negotiations to progress. In particular, on one view, it would be anti-competitive for a SEP owner to ask the court to grant an injunction preventing a mobile telecoms company from selling its products in a particular jurisdiction, as the SEP owner will ultimately be required to offer a licence to the mobile telecoms company.

Each of these points was considered in the trial and the judgment is expected to provide important guidance, in particular addressing:

  • whether Unwired Planet has been in breach of its FRAND commitments and competition law having regard to the offers made to date:
  • Whether Unwired Planet is entitled to insist Huawei accept a global licence of its patents or whether Huawei is entitled to insist that only a UK licence is appropriate, given that the proceedings relate to UK rights only,
  • the amount Huawei will have to pay to Unwired Planet for infringing its patent rights to date and the amount it will have to pay for a licence of those rights going forward;
  • whether the Court can grant an injunction preventing Huawei from selling its mobile telephones in the UK

Gary Moss, head of EIP Legal, who led the EIP team, commented,

“As well as being a significant decision, and validation for Unwired Planet’s licensing approach, this decision will be of great interest to the telecoms sector in general. Until now there has been a view that even if the infringing party is successfully sued, at the end of the day they would have to pay no more than the royalty rate they would have had to pay anyway, and only for the countries in which they were sued.  That gave an incentive for implementers to hold out in the hope of achieving a more favourable royalty rate. Today’s judgment confirms that this need not be the case, and that the English court will take a commercially sensible, “real-world” approach to such issues.  Mr Justice Birss’ judgment is an important contribution to the world-wide body of case law in this area.”

Represented by EIP Legal and Enyo Law, Unwired Planet contended that because they hold a significant portfolio of patents around the world, and because patent licences in this field tend to be global in scope, the appropriate licence should be a worldwide one. Huawei’s case was that it would only take a licence in the UK, and only for those patents which had actually been litigated in the UK and which the court had found to be valid and infringed.

Huawei changed its position shortly before trial to accept that a portfolio licence was appropriate but again only for the UK.  Huawei also argued that Unwired Planet was in breach of their commitment to fair, and reasonable licensing, and in breach of competition law, by seeking a worldwide licence rather than agreeing to a UK-only licence. The effect of a UK-only licence would mean that Unwired Planet would need to bring legal proceedings in each country in which they hold patents in order to obtain compensation from Huawei for the use of their patented technology in those countries.

Today’s judgment confirms that there had been no breach of competition law and that Unwired Planet are entitled to licence on a global basis. Because the High Court only has jurisdiction over patents in the UK, the judge, Mr. Justice Birss, cannot force Huawei to agree to a global licence. However, the judge has ruled that if Huawei continues to refuse to enter into a global licence on terms which he has determined are fair and reasonable, then he will issue an injunction preventing further infringements of Unwired Planet’s UK patents.

The terms of that injunction will be determined at a future hearing but it could mean that as a result Huawei will not be able to market their mobile phones in the UK going forward since such phones have to comply with the relevant standards, and complying with such standards requires the use of Unwired Planet’s patented technology.