BREAKING: Unwired Planet v Huawei Part III: Huawei is given permission to appeal to the Supreme Court

Kat friend Richard Vary (Bird & Bird) brings news of the latest installment in the on-going Unwired Planet and Conversant FRAND/SEP saga. Richard reports that Huawei and ZTE have been given permission to appeal to the UK Supreme Court. 

IPKat first takes the opportunity to refresh readers on the complex legal background of these significant cases.

Legal background

Unwired Planet and Conversant relate to standard essential patents (SEP) patents and Fair Reasonable and Non-Discriminatory (FRAND) licences. SEPs are patents protecting a technology which its owner has declared to be essential to the implementation of one or more of the telecommunications standards. The standards themselves are set by standard setting organisations ("SSOs"), e.g. the European Telecommunications Standards Institute ("ETSI").

The granting of SEPs runs the risk of facilitating anti-competitive behavior. An SEP owner may, for example, refuse to licence the SEP or could charge excessive royalty fees. This could lead to so-called "hold-up" of the technology. SSOs such as ETSI therefore require the owners of SEPs be prepared to grant licences of their SEPs on fair, reasonable and non-discriminatory ("FRAND") terms. Whilst the system of SEPs and FRAND licences is designed to prevent "hold-up" activity, "hold-up" may still occur if the SEP owner tries to extract excessive licence fees using the threat of injunction. The infringer may also try to avoid payment a FRAND licence fees ("hold up") by, for example, behaving unreasonably in the licence negotiations.

Unwired Planet v Huawei [2018] EWCA Civ 2344

Unwired Planet (UP) sued Huawei for infringement of five of its SEPs in the UK (IPKat post here). The patents relate to 4G technology.  UP argued for an injunction against Huawei for infringement of the patents. UP claimed that the patents were essential (SEPs) and that Huawei had refused to take a FRAND licence. In response, Huawei argued that the SEPs were neither essential nor valid. Huawei also counter-claimed that UP had breached competition law on the grounds that UP had not made an offer to license the patents on FRAND terms. 

Following a series of trials in the High Court, Mr Justice Birss found two of the patents valid and essential (and thus assumed to be infringed). UP offered a worldwide SEP portfolio licence in combination with a UK SEP portfolio licence. Huawei proposed a licence only under UP's UK SEP portfolio. 

Negotiation

Mr Justice Birss found that the global licence offered by UP to Huawei was FRAND (with adjustment by the court of the licence fees) whilst the UK licence offered by Huawei was not FRAND . Mr Justice Birss further rejected Huawei's competition law claims against UP, finding that UP had not abused its dominant position.

Huawei appealed the decision to the Court of Appeal. Huawei argued that, far from being FRAND, the imposition of a global licence on terms set by a national court based on a national finding of infringement was wrong in principle. Lord Kitchin dismissed the appeal. Lord Kitchin particularly found that the High Court had been entitled to find that only a global licence would be FRAND. Agreeing with Mr Justice Birss at paragraph 128, Lord Kitchin reasoned: 

"a licensor and a licensee acting willingly and reasonably would have regarded country by country licensing as madness; and further, that no rational business would have done this if it could be avoided"

Lord Justice Kitchin (as he then was) thus agreed with the High Court that a UK only licence could not be FRAND. The Court of Appeal found no basis to refuse UP's request for an injunction:

Huawei v Conversant [2019] EWCA Civ 38

In the second case (IPKat post here), Conversant sued both Huawei and ZTE for infringement of, what it claimed, were its essential patents. Conversant sought an injunction, damages and a declaration that it had made FRAND offers to the defendants. Huawei and ZTE responded with a jurisdictional challenge.

As discussed on IPKat here, the Court of Appeal decisions in Unwired Planet and Conversant were significant. The Court found that the English courts have jurisdiction in considering and determining the terms of a global FRAND licence. The courts could not force Huawei to enter into a global licence. However, the court could prevent Huawei from using the technology to which the SEPs relate, unless they entered into a global licence. 

Recent developments

Kat friend Richard reports that last week Lord Wilson, Lord Hodge and Lady Black of the Supreme Court have given permission to Huawei to appeal the Court of Appeal's decision in Unwired Planet. Permission has also been given for Huawei and ZTE to appeal the Court of Appeal's decision in Conversant. Apple made representations about the grant of permission, and has been given permission to apply to intervene.

The rumor is that the hearing will be expedited to take place later this year when the Courts resume after the summer break, with a decision around Christmas.

Stay tuned to IPKat for further updates!