The UK Supreme Court ruled on several appeals relating to FRAND (fair, reasonable and non-discriminatory) licensing of standard essential patents (SEPs). The Court found that UK courts have jurisdiction to grant injunctions for infringement of UK patents, determine global FRAND licensing terms as a condition to avoid injunctions, and that Birss J's methodology was consistent with EU competition law and industry practice. While injunctions are usually appropriate, the rulings could cause implementers to leave the UK market rather than accept worldwide FRAND licenses set by UK courts.

1. THE SUPREME COURT
RULES ON FRAND
Jane Lambert
2 Sep 2020

2. The Judgment
On 26 Aug 2020, the UK Supreme Court gave judgment in
the following conjoined appeals:
• Unwired Planet International Ltd and another v Huawei
Technologies (UK) Co Ltd and another
• Huawei Technologies Co Ltd and another v Conversant
Wireless Licensing SÁRL, and
• ZTE Corporation and another v Conversant Wireless
Licensing SÁRL .
The Justices who heard the appeal were Lord Reed, Lord
Hodge, Lady Black, Lord Briggs, Lord Sales.
They delivered a single judgment to which each Justice
contributed.

3. The Judgment
• The transcript of the judgment can be found at Unwired
Planet International Ltd and another v Huawei
Technologies (UK) Co Ltd and another [2020] UKSC 37
(26 August 2020) on the BAILII (www.bailii.org) and
Supreme Court websites (www.supremecourt.uk)
• The Supreme Court website also contains a video of a
summary given by Lord Hodge, the text of the summary
and the arguments of counsel at the hearing of the appeal
between 21 and 24 Oct 2019.
• There is also my case note on the appeal dated 27 Aug
2020 at www.nipclaw.com.

4. Agenda
• What is “FRAND”
• Basic principles
• Antitrust law
• The Orange Book Case
• Case C-170/13 Huawei Technologies v ZTE Corp.
• Unwired Planet Litigation
• Conversant Wireless Litigation
• TQ Delta Litigation
• Philips v Asustek
• The Supreme Court Appeals
• Consequences

5. What is “FRAND?
FRAND stands for "fair, reasonable and non-
discriminatory". It refers to the terms upon which the owner
of a patent for an invention that is essential for compliance
with a technical standard ("standard essential patent" or
"SEP") is required by the organization that sets the
standard (“standing setting organization” or “SSO”) must
licence its use.

6. Standard Setting Organizations
• An SSO is an organization that is responsible for
developing, coordinating, promulgating and
revising technical standards for businesses in a particular
industry.
• Some are established by international organizations such
as the ITU.
• Others such as The European Telecommunications
Standards Institute (ETSI) consist of telecoms equipment
manufacturers and telecoms operators.

7. ETSI
• ETSI publishes an IPR Policy which I discussed in
Patents: What exactly does a FRAND Licence look like?
29 Aug 2020 on my website.
• The Supreme Court regarded that instrument as a
contract governed by French law.
• “It is ETSI's objective to create STANDARDS and
TECHNICAL SPECIFICATIONS that are based on
solutions which best meet the technical objectives of the
European telecommunications sector, as defined by the
General Assembly.” (clause 3.1)

8. ETSI
• “In order to further this objective the ETSI IPR POLICY
seeks to reduce the risk to ETSI, MEMBERS, and others
applying ETSI STANDARDS and TECHNICAL
SPECIFICATIONS, that investment in the preparation,
adoption and application of STANDARDS could be
wasted as a result of an ESSENTIAL IPR for a
STANDARD or TECHNICAL SPECIFICATION being
unavailable.”
• “In achieving this objective, the ETSI IPR POLICY seeks a
balance between the needs of standardization for public
use in the field of telecommunications and the rights of
the owners of IPRs.”

9. ETSI
Clause 6.1
"When an ESSENTIAL IPR relating to a particular
STANDARD or TECHNICAL SPECIFICATION is brought to
the attention of ETSI, the Director-General of ETSI shall
immediately request the owner to give within three months
an irrevocable undertaking in writing that it is prepared to
grant irrevocable licences on fair, reasonable and non-
discriminatory (“FRAND”) terms and conditions ETSI IPR
POLICY under such IPR to at least the following extent:

10. ETSI
• MANUFACTURE, including the right to make or have
made customized components and sub-systems to the
licensee's own design for use in MANUFACTURE;
• sell, lease, or otherwise dispose of EQUIPMENT so
MANUFACTURED;
• repair, use, or operate EQUIPMENT; and
• use METHODS.”

11. “Holding up” and “Holding out”
• ETSI’s IPR Policy is intended to address two evils:
• “Holding Up” by patent proprietors, and
• “Holding out” by implementers or users of patented technology,
• “Holding up” is refusing to grant a licence except at
exorbitant rates or upon other unreasonable terms.
• “Holding out” is using the technology without paying a
royalty or licence fee on the pretext that the patent is
invalid, not essential to the patent or the use does not
infringe.

12. Competition Law
Patents confer monopolies that need to be controlled like
any other. The legal instruments for effecting such control
are as follows:
• USA - §2 Sherman Act 1890
• EU – art 102 Treaty on the Functioning of the European
Union
• UK – s.18 Competition Act 1998

13. Orange Book
• Judgment of the Bundesgerichtshof (German Federal
Supreme Court) on 6 May 2009 KZR 39/06
• Claimant: Philips
• Standard: Orange Book for rewritable compact discs
• SSO: Philips and Sony
• Held: An undertaking to accept a patent on FRAND terms
can be a defence to an action for patent infringement but
only on condition that the implementer abides by those
terms including the payment of the licence fee.

14. Case C-170/13 Huawei Technologies v
ZTE Corp
• SSO: ETSI
• Long term evolution standard
• ZTE undertook to take a licence but never actually got
round to paying anything to Huawei.
• Huawei complained of hold out by ZTE and sued it in the
Dusseldorf District Court.
• ZTE relied on the Orange Book decision of the BGH.
• The District Court sought a preliminary reference from the
CJEU under art 267 TFEU on the circumstances in which
the offer to take a licence on FRAND terms can be a
defence to an infringement claim.

15. Case C-170/13 Huawei Technologies v
ZTE Corp
Held: Art 102 does not prevent proprietor of SEP from
claiming an injunction for patent infringement so long as:
• patentee notifies infringer of the patent and infringement
and offers it a licence on FRAND terms specifying the
royalty and how it has been calculated before issuing
proceedings; and
• infringer continues to use the patented technology without
diligently responding to the offer in accordance with
recognised commercial practices in the field and in good
faith.

16. Unwired Planet Litigation
• Unwired patent acquired 2,185 patents or patent
applications from Ericson many of which are SEPs for
ETSI’s mobile phone standards in 2013,
• In 2014 it invited Huawei, Samsung and Google to take
licences on FRAND terms.
• Huawei declined on the grounds that the patents were
invalid, not essential and not infringed and that the licence
terms were unreasonable.
• Unwired Planet sued Huawei for infringement of those
patents.

17. Unwired Planet Litigation
• Birss J docketed 5 trials on whether the patents were
valid, essential and infringed known as “technical trials”
and a “non-technical trial” on whether the terms were
FRAND.
• Unwired Planet won 2 of the technical trials and Huawei
the rest.
• After a 7 week trial, Birss J handed down an 807
paragraph judgment on 5 April 2017 which:
• Defined FRAND;
• Considered enforceability of FRAND undertakings;
• Held that there can be only one set of FRAND terms; and that
• Once agreed, FRAND terms applied to worldwide patent portfolios.

18. Unwired Planet Litigation
• In a further judgment on 7 June 2017,.Birss J drew up a
draft licence agreement between Unwired Planet and
Huawei which it invited Huawei to enter with the threat of
an injunction and damages it if refused to do so.
• Huawei appealed unsuccessfully to CA.
• Huawei appealed to the Supreme Court which upheld the
judgments of CA and Birss J.

19. Conversant Wireless Litigation
• Conversant Wireless Licensing SARL is a Luxembourg
company which has acquired patents and patent
applications from Nokia many of which are essential to
ETSI’s standards.
• After inviting Huawei and ZTE to take licences on FRAND
terms, Conversant sued those companies for patent
infringement.
• Huawei and ZTE applied unsuccessfully to Henry Carr J
to stay the proceedings.
• Huawei and ZTE appealed unsuccessfully to CA.
• Huawei and ZTE also appealed to the Supreme Court
which upheld judgments of the courts below.

20. TQ Delta Litigation
• TQ Delta holds a number of patents in various key
technologies which it offers to license including home
broadband.
• The ITU-T is the SSO of the International
Telecommunications Organization which is an UN agency.
It publishes recommendations on Digital Subscriber Line
(“DSL”) technology which includes several SEPs. One of
the conditions for inclusion of a patent in a standard is an
undertaking to grant licences on FRAND terms.
• In July 2017, TQ Delta sued the UK and Danish
subsidiaries of a Taiwanese company known as “the Zyxel
companies for the infringement of two patents.

21. TQ Delta Litigation
• The Zyxel companies denied infringement, validity and
essentiality but agreed to take a licence on FRAND terms
if they were wrong.
• On 21 Nov 2017 Henry Carr J ordered a “technical trial”
on validity, essentiality and infringement to take place
early in 2019 and “a non-technical trial” on which terms
were FRAND to take place In September 2019.
• At the technical trial Henry Carr J found that one patent
was valid, essential and infringed but had only a few
weeks to run while the other patent was invalid.
• As the infringed patent was about to expire the Zyxel
companies withdrew their undertaking to take a licence.

22. TQ Delta
• TQ Delta responded by complaining of the infringement of
2 more patents.
• The Zyxel companies applied unsuccessfully to Birss J to
strike out the new claims as an abuse of process and
vacate the non-technical trial on the ground that they no
longer had an interest in the outcome.
• The Zyxel companies appealed successfully to CA
against the refusal to vacate the non-technical trial.
• The new proceedings are continuing.

23. Philips v Asustek
• After a technical trial, Asustek withdrew its offer to take a
licence, accepted an injunction and damages and applied
to Marcus Smith J for permission to withdraw from the
litigation on the basis of CA’s decision in TQ Delta.
• Marcus Smith J refused the application. He distinguished
TQ Delta on the grounds that the damages against
Asustek would take account of the FRAND terms.
Consequently, Asustek still had an interest in the outcome
of the non-technical trial.

24. Questions before the Supreme Court
Paragraph [1] of the Judgment:
"The first (in all three appeals) is whether a court in the
United Kingdom (“UK”) has jurisdiction and may properly
exercise a power, without the agreement of both parties, to
(a) grant an injunction to restrain the infringement of a UK
patent where the patented invention is an essential
component in an international standard of
telecommunications equipment, which is marketed, sold
and used worldwide unless the implementer of the
patented invention enters into a global licence of a
multinational patent portfolio, and (b) determine royalty
rates and other disputed terms of such a global licence.”

25. Questions before the Supreme Court
“Secondly, there is a dispute (in the Conversant appeals:
........) whether England is the appropriate forum to
determine those matters. Thirdly, (in the Unwired appeal:
........) there is a question as to the nature of the
requirement that the licence, which the owner of a
Standard Essential Patent (“SEP”) must offer to an
implementer, be non-discriminatory.”

26. Questions before the Supreme Court
“Fourthly, (again in the Unwired appeal) there is a question
whether the court should refuse to grant the owner of such
a SEP an injunction on the ground that it has breached EU
competition law because it has not complied with the
guidance given in the judgment of the Court of Justice of
the European Union (“CJEU”) in Huawei v ZTE (Case C-
170/13) EU:C:2015:477; [2015] 5 CMLR 14; [2016] RPC 4.
Fifthly, the appeals raise a more general question as to the
circumstances in which it is appropriate for an English court
to grant a prohibitory injunction or to award damages
instead."

27. Structure of the Judgment
Judgment consists of 171 paragraphs:
• Para [1] – The issues
• Para [2] - The patent bargain
• Para [3] - Patentees’ entitlement to an injunction if a
patent is infringed
• Para [4] - Technical standards and the need to comply
with them.
• Para [5] – [7] Standard Setting Organizations
• Para [8] – [14] ETSI’s IPR Policy
• Para [15] – Industry practice in negotiating FRAND
licences

28. Structure of the Judgment
• Para [16] – [18] – Parties to the appeal
• Para [19]- [29] – Unwired Planet Litigation
• Para [30] – [35] – Conversant Wireless Litigation
• Para [36] – [41] – Markets and overseas decisions
• Para [42] – [49] – Birss J’s methodology
• Para [50] – [91] – Jurisdiction of English courts
• Para [92] – [105] – Forum non conveniens
• Para [106] – [127] – Whether Birss J’s licence was non-
discriminatory
• Para [128] – [158] – Consistency with CJEU’s judgment
• Para [159] – [169] – Whether injunction is appropriate

29. Issue #1: Jurisdiction of UK Courts
• Supreme Court emphasized that no UK court purports to
decide validity of a foreign patent or whether it has been
infringed.
• However, the English courts do have jurisdiction to decide
the validity of UK patents or European patents (UK) and
whether they have been infringed.
• An injunction is the usual remedy for infringement of a UK
patent but patentees have agreed to grant licences on
FRAND terms.
• UK courts can set acceptance of a worldwide patent on
FRAND terms as a condition for not being enjoined.
• Consistent with overseas decisions and practice.

30. Issue #2: Forum non conveniens
• Usually necessary to carry out a Spiliada analysis but in
this case the argument falls at the first hurdle because
Chinese courts do not claim jurisdiction to settle the terms
of a global FRAND licence.
• In any case, this litigation is not primarily over the terms of
a FRAND licence but over whether UK patents have been
infringed.

31. Issue #3: Non-discrimination
• Huawei complained that Birss J’s licence was
discriminatory and therefore not FRAND because the
royalty in Samsung licence was more favourable than the
one offered by Birss J.
• Fairness, reasonableness and non-discrimination are to
be considered collectively in the circumstances at the time
the agreement was made.
• Those circumstances can and do change.

32. Issue #4: Compliance with EU Law
• Huawei complained that CJEU’s conditions in Huawei v
ZTE had not been complied with.
• Supreme Court held that the Huawei case has to be read
in conjunction with CJEU’s other decisions such as Post
Danmark A/S v Konkurrenceradet.
• The substance of CJEU’s conditions had been complied
with.

33. Issue #5: Remedies
• Huawei argued that damages would be a more
appropriate remedy than an injunction for Unwired Planet
and Conversant Wireless which were non-practising
entities seeking to obtain maximum return for their patent
portfolios.
• Supreme Court rejected that contention. Injunctions were
the usual remedies for patent infringement.

34. Remaining Issues
• FRAND disputes often require a trial on whether a patent
is valid or essential to the standard and whether it has
been infringed (“a technical trial”) followed by a trial to
establish FRAND terms which is very long winded and
expensive.
• As the UK is a small market which will soon be outside
the single market, many implementers may decide to quit
the UK altogether rather than accept a worldwide FRAND
licence settled by a UK court as happened in the TQ Delta
and Philips cases.
• Should non-practising entities be allowed to hold
manufacturers to ransom.

35. Any Questions
Jane Lambert
Barrister
4-5 Gray’s Inn Square
London, WC1R 5AH
T 020 7404 5252
E jane.lambert@nipclaw.com
www.nipclaw.com