The English High Court backed licensing company Unwired Planet in its patent dispute with Chinese technology business Huawei yesterday.
Back in March 2014, Unwired Planet sued Huawei, Samsung and Google, alleging infringement of six UK patents.
Five of these were claimed to be standard-essential patents (SEPs) for various telecommunications standards, such as 3G and 4G.
The European Telecommunications Standards Institute’s policy requires that a patentee declaring patents as standard-essential commits to licensing those patents on fair, reasonable and non-discriminatory (FRAND) terms.
After proceedings began, in April 2014 Unwired Planet made an open offer to the defendants to license its entire global portfolio (SEPs and non-SEPs).
However, Huawei, Samsung and Google denied infringement, argued that the patents were invalid and counterclaimed for revocation.
The defendants also claimed that because of this, no licence was required, and that Unwired’s offer was not FRAND and so a breach of competition law.
Unwired made a further offer in July 2014, only covering the company’s SEPs, but this was rejected as not meeting FRAND standards by the defendants.
As a result of directions from the court, in June 2015 each side made certain open offers of licensing terms.
Huawei contended that a UK SEP licence was an “inevitable and mandatory outcome”, while Unwired instead offered a worldwide licence.
Google subsequently settled over the SEPs in the summer of 2015 and Samsung settled a year later.
The main dispute that had to be resolved was whether and to what extent various terms on offer are or would be FRAND, with one key issue being the value of Unwired’s patents reflected in the royalty rates.
Mr Justice Birss held that a worldwide licence would not be contrary to competition law and that “willing and reasonable parties” would agree on a worldwide licence.
“Therefore, Unwired Planet are entitled to insist on it. It follows that an insistence by Huawei on a licence with a UK-only scope is not FRAND,” he said.
Birss added that an injunction ought to be granted because “Huawei stand before the court without a licence but have the means to become licensed open to them”.
However, he explained that an injunction would not be granted now but be dealt with at a later hearing, once Unwired Planet has drawn up a full set of the terms of the worldwide licence incorporating the decisions made.
Gary Moss, head of EIP Legal, and representative of Unwired, said: “As well as being a significant decision, and validation of Unwired’s licensing approach, this decision will be of great interest to the telecoms sector in general.”
He explained that up until now, there has been a view that even if the infringing party is successfully sued, it would have to pay no more than the royalty rate it would have had to pay anyway and only for the countries in which it was sued.
“That gave an incentive for implementers to hold out in the hope of achieving a more favourable royalty rate,” said Moss.
According to Moss, the judgment confirms that this need not be the case, and that the court will take a “commercially sensible, real-world” approach to such issues.