Nokia v Oppo

26 July 2023 - Case No. [2023] EWHC 1912(Pat)

http://caselaw.4ipcouncil.com/english-court-decisions/england-and-wales-high-court/nokia-v-oppo

A. Facts

The Claimants belong to the Nokia group with headquarters in Finland (Nokia). Nokia owns a global portfolio of patents essential to various wireless telecommunications standards (standard-essential patents or SEPs) developed by the European Telecommunications Standards Institute (ETSI). ETSI requires that patent owners undertake to make their SEPs accessible to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions.

The Defendants are part of the Chinese Oppo group (Oppo). Oppo manufactures and markets devices implementing ETSI standards worldwide.

Nokia and Oppo signed a three-year cross-license agreement which expired on 30 June 2021. The parties negotiated for a new licence without success.

On 1 July 2021, Nokia filed a lawsuit against Oppo before the High Court of Justice (High Court) in the UK (UK proceedings). Nokia inter alia asked for a determination from the High Court as to the FRAND rate and an injunction in the UK.

On 13 July 2021, Oppo filed an action against Nokia before the Intermediate People’s Court of Chongqing (Chongqing Court) in China (Chinese proceedings). Oppo requested the Chongqing Court – among other things – to determine the terms of a global licence for Nokia’s SEP portfolio. Oppo gave an undertaking to Nokia to sign a licence on the terms set by the Chongqing Court.

In the UK proceedings, the High Court scheduled three ‘technical’ trials (Trials A-C) concerning the validity and infringement of the patents in suit. In addition, the High Court scheduled Trial E, dealing with the availability of injunctive relief and particularly the potential impact of Oppo’s undertaking to take a license on the terms set in the Chinese proceedings on an injunction in the UK (injunction trial). The terms of a (global) licence to Nokia’s portfolio would be determined by the High Court in the subsequent Trial D (FRAND trial).

Oppo refused to commit to the terms that would be set by the High Court in the FRAND trial. Nokia, on the other hand, undertook to grant a licence to Oppo on the terms determined in the FRAND trial.

In January 2023, the High Court found that the patent in suit in Trial A is valid and essential.^[1] Oppo appealed. The parties agreed to stay the appeal as well as the further technical Trials B and C. The Chinese proceedings continued in parallel.^[2]

With the present ruling, the High Court delivered its decision in the injunction trial.^[3] In summary, the High Court concluded that there were no grounds for withholding an injunction. Oppo would have to make a choice: It would either commit to accept the terms determined by the High Court in the following FRAND trial or be subjected to an injunction in the UK.^[4]

B. Court’s reasoning

The High Court found that an injunction is warranted, since (i) Oppo is not already licensed to Nokia’s patents under the ETSI IPR Policy; (ii) Oppo is (currently) no beneficiary of Nokia’s FRAND undertaking towards ETSI; and (iii) Nokia did not abuse a market dominant position.

No licensee under ETSI IPR Policy

Contrary to Oppo’s contention, the High Court held that Clause 6.1. ETSI IPR Policy does not allow an implementer to become licensed without any negotiation taking place with the patent owner.^[5] Oppo had argued that – even absent a signed contract – it is licensed to Nokia’s portfolio by operation of Clause 6.1. ETSI IPR Policy: Under this provision, an implementer can simply invoke its right to a licence, creating a contractual relationship with the patent owner without more.^[6]

The High Court disagreed.

Following previous rulings, the High Court pointed out that under French law, which governs the ETSI IPR Policy, the undertaking of Clause 6.1. creates a so called ‘stipulation pour autrui’ or ‘stipulation de contrat pour autrui’.^[7] In general terms, a contact is formed between the patent owner and ETSI, from which third parties (i.e., standards implementers) can draw benefits.^[8] Accordingly, two contractual relationships emerge: on the one hand, the relationship between the patent owner and ETSI, and, on the other hand, the relationship between patent owner and third party/implementer.^[9] While the relationship between patent owner and ETSI is subject to French law, the relationship between patent owner and implementer can be, but is not necessarily governed by French law.^[10]

In the view of the High Court, Clause 6.1. ETSI IPR Policy cannot be interpreted as enabling an implementer to put itself in a contractual relationship with a patent owner when they had no negotiation history, as ‘[e]verything about their relationship would be at large: the licence duration, whether it was lump sum or running royalty, the applicable law, the price, and so on’.^[11] In this case, a (license) agreement cannot be formed, particularly when French law would be applicable, as the requirement of determinability of the contractual terms is not met.^[12] The High Court observed that it would not make a difference if the implementer would agree to have the terms of the licence determined by a court, since ‘the court would be making an agreement for the parties, not deciding what an agreement that they have actually made means, or filling in minor gaps.’^[13] What is more, allowing an implementer facing infringement proceedings in a country to render itself a licensee at its own election (by sole request ) and have the licensing terms determined by another court abroad would establish an ‘obvious possibility of delay and possibly hold-out’, especially at an advanced stage of a pending infringement trial.^[14]

The High Court favoured the notion that Clause 6.1. ETSI IPR Policy requires an offer of the patent owner ‘which is in fact FRAND and capable of acceptance’.^[15] According to the High Court, this approach ‘fits with the importance that the ETSI IPR regime attaches to negotiation’ and ‘is more consistent with the existing case law […] and, relatedly, the concept that the patentee is entitled to choose between two different sets of terms if both are FRAND’.^[16] When litigation is launched, the High Court noted that compliance with Clause 6.1. ETSI IPR Policy would require the patent owner to give an undertaking that it would make an offer to the implementer on the FRAND terms determined by the court, as Nokia had done here; otherwise, the patent owner would not be entitled to injunctive relief.^[17]

No beneficiary of FRAND undertaking

Furthermore, the High Court found that Oppo is currently no beneficiary of Nokia’s FRAND undertaking towards ETSI and, therefore, cannot invoke that undertaking to avoid an injunction.^[18]

In the view of the High Court, Oppo is not a ‘willing licensee’.^[19] Oppo’s willingness to obtain a licence is ‘qualified’, since Oppo insists on the terms set by the Chongqing Court.^[20] The fact that Oppo gave an undertaking to sign an agreement on the terms determined in the Chinese proceedings is not enough to make it a beneficiary of Nokia’s FRAND undertaking.^[21]

According to UK case-law, an implementer that has been found to infringe an UK patent must choose between an injunction and committing to the FRAND license terms set by the English courts. The High Court opined that allowing an infringer to avoid such election by committing to accept the outcome of foreign proceedings ‘could be really damaging for the patentee’: if the foreign proceedings ‘miscarry’, then the infringer ‘would have remained on the market, unlicensed, for a substantial extra period and without being obliged to take the English court’s FRAND licence.’^[22]

In this context, the High Court noted that English courts are not ‘always and without any possible exception’ obliged to set FRAND terms.^[23] Nevertheless, English courts must make sure that ‘an effective remedy is given’.^[24] In case that infringement of an UK patent is established, the risk that the infringer avoids an injunction in the UK ‘by opting for a FRAND assessment in a court abroad which either would be unacceptably slow or which might ultimately not set FRAND terms at all, or might not compel the implementer to enter into a licence’ should be mitigated.^[25] The High Court saw no significant risk that the Chongqing Court would not set FRAND terms or take too long to do so in the present case, but considered the fact that the Chongqing Court would not compel Oppo to take a licence as being ‘unsatisfactory’.^[26]

Having said that, the High Court dismissed Oppo’s contention that Nokia is not a ‘willing licensor’.^[27] On the contrary, Nokia was seen as a ‘willing licensor’, because it had made an ‘unqualified commitment’ to offer and grant a license to Oppo on the terms determined by the High Court in the subsequent FRAND trial.^[28] The fact that Nokia would (presumably) not be willing to accept the terms set by the Chongqing Court was not considered to be harmful, not least because Nokia has the possibility to prefer the terms set in England over the terms set in China.^[29] The High Court elaborated that patent owners are, generally, allowed to choose between different FRAND terms: this holds true not only when a single court determines more than one FRAND alternatives, but also when different courts set different FRAND terms.^[30] In this context, the High Court addressed also the question of whether making the election prospectively (that is in advance of the respective court rulings) would factually result in a selection of the  venue preferrable to the SEP owner.^[31] Given particularly that the Chinese proceedings would not result in a cross-license here, the High Court found that Nokia’s choice to commit to the outcome of the UK proceedings (which would set a cross-licence) was, indeed, a choice between two different FRAND options and could not be qualified as an exercise of selection of the preferrable venue.^[32]

No abuse of market dominance

Finally, the High Court dismissed Oppo’s argument that Nokia abused a market dominant position.^[33]

The High Court assumed that Nokia holds a market dominant position without detailed analysis.^[34] Nevertheless, an abusive behaviour on the side of Nokia was ruled out: the High Court held that Oppo failed to show anything amounting to an abuse.^[35]

In general terms, the High Court pointed out that once a patent owner commits to offer a licence on those terms that will be determined by the court, seeking an injunction against an infringer, who will not make such commitment ‘will not without more be an abuse of a dominant position.’^[36]

Having said that, the High Court concluded that none of Oppo’s individual allegations of abuse can succeed.^[37]

The High Court dismissed Oppo’s contention that Nokia leveraged market power by threatening to exclude Oppo from the UK market. The High Court stressed that there is no threat of exclusion from the UK market, just so long as Oppo agrees to pay FRAND fees.^[38] The rates that would be determined in the FRAND trial will be FRAND ‘by definition’; since Oppo can rely on this fact, it makes no difference that Oppo would ‘numerically speaking’ not be aware of the rates at the time it made a commitment to accept them.^[39]

Furthermore, the High Court was not convinced that an abuse could emerge from an (alleged) disruption of the negotiations between the parties, mainly because, at least for the moment, the negotiation ‘has run its course’.^[40]

The High Court also disagreed with Oppo’s argument that Nokia gained an unfair advantage in the rate setting process.^[41] In the eyes of the High Court, there is ‘nothing unfair’ in seeking a court decision, as Nokia did, since Oppo can rely on and benefit from all available procedural safeguards in trial.^[42]

Finally, the High Court could not identify an abuse in the fact that Nokia requested FRAND rate-setting in the UK regardless of the decision in the Chinese proceedings.^[43] The High Court particularly highlighted that Oppo failed to provide any evidence that the Chongqing Court will provide a ‘better or better-informed result’.^[44]

C. Other issues

Apart from the above, the High Court shared some reflections on two broader questions related to the FRAND system in general and the management of SEP litigation in the UK in particular.

Responding to Oppo, the High Court explained that it would be no failure of the FRAND system, if Oppo would withdraw from the UK market.^[45] Oppo can get a FRAND licence in the UK; if Oppo’s ‘self-interest’ is to exit a market in expectation of getting a lower rate for other territories, ‘that is not a failure of the FRAND system.’^[46] The High Court elaborated that the FRAND system is there ‘to provide access to the standards on FRAND terms, and it works’.^[47] Oppo has access on FRAND terms, ‘but may elect not to use it’.^[48]

Turning to the management of SEP-related trials in the UK, the High Court noted that the usual approach of scheduling ‘technical’ trials before the ‘FRAND trial’ could be improved.^[49] The fact that the ‘FRAND trial’ can be scheduled up to two years or longer after the start of the proceedings – even when ‘significant portfolios’ are involved and it is ‘plain or at least very likely’ that at least some patents are valid and infringed – ‘has the capacity to work unfairness on the patentee’.^[50] What is more, the sequencing of the ‘technical’ and ‘FRAND trial’ used ‘incentivises an implementer to fight the technical trials for tactical and timing reasons, even when it knows it needs a licence’.^[51]

The High Court said that the respective delay should be avoided, as the ‘technical’ trials ‘are not about what is really an issue’ in this type of disputes; the real issue is what are FRAND terms.^[52] Moreover, delays in the ‘FRAND trial’ are likely to ‘impede progress towards the parties’ understanding of their positions, negotiation and potential settlement’.^[53]

The High Court took the view the case-law of the Supreme Court (Unwired Planet v Huawei^[54]) would not prevent English courts from prioritizing the ‘FRAND trial’ over the ‘technical’ trials.^[55] However, the parties should in any particular case be heard regarding the schedule of the proceedings.^[56]

^[1] At an early stage of the UK proceedings, Oppo contested the jurisdiction of the English courts for the claims asserted by Nokia. The High Court confirmed the jurisdiction of the English courts by judgment dated 4 November 2021, Case No. [2021] EWHC 2952 (Pat). This decision was confirmed by the Court of Appeal, cf. judgment dated 11 July 2022, Case No. [2022] EWCA Civ 947. 

^[2] As it was the case in the UK proceedings, jurisdictional questions were also raised in the Chinese proceedings. By judgment dated 27 December 2021, Case No. (2021) Yu 01 Min Chu No. 1232, the Chongqing Court confirmed the jurisdiction of Chinese courts to hear the case brought by Oppo. On appeal, the Chinese Supreme Court confirmed this view, cf. Oppo v Nokia, Supreme Peoples’ Court of the Peoples’ Republic of China, judgment dated 7 September 2022, Case No. (2022) Zui Gao Fa Zhi Min Xia No. 167.

^[3] Nokia v Oppo, judgment dated 26 July 2023, [2023] EWHC 1912(Pat).

^[4] Ibid, para. 351.

^[5] Ibid, paras. 241 et seqq. and para. 261.

^[6] Ibid, paras. 246 et seq.

^[7] Ibid, para. 191.

^[8] Ibid, paras. 174 et seqq.

^[9] Ibid, para. 241.

^[10] Ibid, para. 241.

^[11] Ibid, para. 248.

^[12] Ibid, para. 249.

^[13] Ibid, para. 248.

^[14] Ibid, para. 304.

^[15] Ibid, para. 243; paras. 250 et seq. and para. 258.

^[16] Ibid, paras. 250 et seq. 

^[17] Ibid, para. 261.

^[18] Ibid, para. 311.

^[19] Ibid, para. 313.

^[20] Ibid, para. 313.

^[21] Ibid, para. 311.

^[22] Ibid, para. 297.

^[23] Ibid, para. 301.

^[24] Ibid, para. 299.

^[25] Ibid, para. 299.

^[26] Ibid, para. 300.

^[27] Ibid, paras. 312 et seqq.

^[28] Ibid, para. 314.

^[29] Ibid, para. 314.

^[30] Ibid, para. 271.

^[31] Ibid, para. 273 et seqq.

^[32] Ibid, para. 292.

^[33] Ibid, paras. 330 et seqq.

^[34] Ibid, paras. 13 and 317.

^[35] Ibid, paras. 330 et seqq. and 337. 

^[36] Ibid, para. 337.

^[37] Ibid, para. 330.

^[38] Ibid, para. 331.

^[39] Ibid, para. 331.

^[40] Ibid, para. 331.

^[41] Ibid, para. 333.

^[42] Ibid, para. 333.

^[43] Ibid, para. 334.

^[44] Ibid, para. 334.

^[45] Ibid, para. 354.

^[46] Ibid, para. 354.

^[47] Ibid, para. 354.

^[48] Ibid, para. 354.

^[49] Ibid, paras. 356 et seqq.

^[50] Ibid, paras. 356 et seqq.

^[51] Ibid, para. 358.

^[52] Ibid, para. 359.

^[53] Ibid, para. 359.

^[54] Unwired Planet v Huawei, UK Supreme Court, judgment dated 26 August 2020, [2020] UKSC 37.

^[55] Nokia v Oppo, judgment dated 26 July 2023, [2023] EWHC 1912(Pat), para. 360.

^[56] Ibid, para. 362.