Binding commitments to unknown FRAND licences & willing licensees
UK court decides position on implementers who are unwilling to commit to taking a court-determined FRAND licence before they have seen the final terms decided.
A UK decision handed down earlier today contains important findings on the UK approach to implementers who are unwilling to commit to taking a court-determined FRAND licence before they have seen the final terms decided.
What was the dispute about?
The two parties to the case, Optis and Apple, are currently engaged in a high-profile global dispute regarding the licensing of Optis' SEP portfolio. The proceedings in the UK were originally scheduled to include four technical trials on Optis' patents (Trials A - D) and a FRAND trial (Trial E). One of Optis' unexpired patents has already been found valid, essential and infringed in Trial B in June 2021. The FRAND trial is scheduled for June/July 2022.
After trials A-E were fixed Optis amended their case to seek an injunction against Apple in the period between the early technical trials and the FRAND trial if Optis were successful at the technical trials. Trial F was listed for July 2021 to decide on this injunction.
The issues in dispute at this Trial F can be summarised as follows:
Apple has refused to commit to taking a licence on the terms to be determined at the FRAND trial. Apple clearly intends to remain on the market in the UK in the period pending the FRAND trial.
Optis argued that Apple's refusal to undertake to accept the court determined FRAND licence made Apple an unwilling licensee who should not benefit from the ETSI protection, and should therefore be injuncted.
Optis' primary case was that refusal to undertake to accept a FRAND licence meant the implementer irrevocably lost the right to take a FRAND licence and an unqualified injunction should be granted. As a fall back, they argued that there should be a FRAND injunction in the form normally granted after a FRAND trial.
Apple argued that it should be entitled to see the terms of the FRAND licence before it made a decision whether to accept it or not. Apple also argued that Optis' conduct had breached competition law in such a way that the court should not grant the injunction sought.
What did the UK Court decide?
In reaching his decision Mr Justice Meade relied heavily on the previous case law in Unwired Planet, referring at length to the decisions of the High Court, Court of Appeal and Supreme Court. He noted that the Supreme Court decision ("UPSC") had been the subject of "much commentary" but concluded that this commentary "is really all beside the point for my purposes because UPSC is binding on me to the extent that it covers the issues I have to decide".
So what are the key points from the judgment?
- Does an implementer have to commit to taking a FRAND licence to avoid an injunction?
Yes - once a UK SEP has been found valid, essential and infringed in the UK the court considers that the implementer requires a licence to avoid acting unlawfully and to avoid being injuncted. As the terms of this licence won't be decided until the FRAND trial the court will allow the implementer to avoid an injunction by instead commiting to take the (global) FRAND licence once the detailed terms of that licence have been determined, but it is not enough for the implementer to say that they may take a licence in the futureif they intend to continue operating in the UK until that time. As a result, the implementer cannot wait to find out what the terms of the FRAND licence will bebefore making the commitment,otherwise it will not benefit from the ETSI protection.
The implementer does not need to make a commitment to take a FRAND licence on terms set by the UK court until there is a valid, essential and infringed patent in the UK, which may have implications for early stage negotiations.
- If the implementer refuses to make such a commitment at any stage does it permanently lose its right to a FRAND licence?
No - the court accepted that an implementer might decline to commit to taking a FRAND licence as set by the courts for a number of reasons and then later change their mind. The fact that the implementer did not commit to a FRAND licence earlier does not prevent them from later seeking such a FRAND licence, but if there is a valid and infringed patent an implementer refusing to give that commitment should expect to be injuncted until such licence is in place.
- What form will any injunction granted take?
The injunction granted against the implementer will be a standard FRAND injunction as first developed in Unwired Planet, which forbids the implementer from infringing the patent unless and until the implementer enters into a FRAND licence.
- If an SEP holder has acted in an anti-competitive way during negotiations, does this prevent it from obtaining a FRAND injunction against an implementer?
No, not necessarily - where a SEP holder commits to offering FRAND licences on terms to be decided by the court, it is unlikely that the UK court will deny them a FRAND injunction even if their behaviour during negotiations was anti-competitive. The court considered that by undertaking to offer licences on the court's FRAND terms the SEP holder was purging its abusive behaviour, and the SEP holder should not be denied their injunction as damages in lieu of an injunction were not an adequate remedy.
The court did note that the outcome might well be different if the SEP holder was not committing to offer FRAND licences on terms set by the court, but this would be unusual by the time the parties are in UK litigation.
Next Steps
This decision is likely to be appealed by Apple, who is already appealing the validity decision on the UK SEP it was found to infringe. With the FRAND trial being set for June 2022 it is not clear yet whether Apple will be forced to elect to accept the FRAND terms now to avoid an immediate injunction in the UK despite any appeal. The licence fee due to Optis has been estimated to be a possible $7bn, so the stakes in this litigation are very high.
In the meantime, we expect the principle underlying the decision - that an implementer who is found to infringe a valid UK SEP must give an undertaking to accept a licence on the FRAND terms which will subsequently be set by the UK court - to be applied in other UK SEP cases.
The decision and underlying principle are likely to remove some of the satellite issues about "FRAND behaviour" and willingness from UK SEP/FRAND cases - both the allegation that the implementer is not entitled to a licence and the allegation that the SEP owner should not be entitled to enforce its UK SEP. These behavioural aspects of negotiations will, however, remain very important in cases in other countries in Europe, especially Germany and Netherlands, where they are a key part of the decision about whether to grant an injunction, in circumstances where those courts do not determine the detailed FRAND royalty rate and other disputed terms of a FRAND licence.
