Nokia v Oppo

11 July 2022 - Case No. [2022] EWCA Civ 947

http://caselaw.4ipcouncil.com/english-court-decisions/uk-court-appeal/nokia-v-oppo

A. Facts

The Claimants are two companies belonging to the Nokia group with headquarters in Finland (Nokia). Nokia owns a global portfolio of patents declared as essential to various wireless telecommunications standards (standard essential patents, or SEPs).

The Defendants are subsidiaries in the Chinese Oppo group incorporated in the UK, China, and Hong Kong (Oppo). Oppo manufactures and markets devices implementing wireless standards. Oppo had signed a three-year cross-license agreement with Nokia which expired on 30 June 2021. The parties negotiated for a further 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 requested a declaration that the UK patents asserted are standard-essential, valid, and infringed; a declaration that specific license offers made to Oppo were FRAND; damages and injunctive relief. At a later stage, Nokia sought a determination of the FRAND terms for licensing its UK patents and an injunction, in case Oppo would not commit to take a licence on the terms determined by the High Court to be FRAND.

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 claims – to determine the terms of a global licence for Nokia's SEP portfolio. Oppo committed to sign a licence on the terms set by the Chongqing Court. Subsequently, Oppo sought the High Court to stay the UK proceedings, contesting the jurisdiction of English courts over the claims asserted by Nokia as far as the non-UK affiliates sued are concerned.

On 4 November 2021, the High Court dismissed Oppo's motion, confirming the jurisdiction of English Courts over the claims raised by Nokia. [1] Oppo appealed.

On 9 November 2021, the High Court scheduled 'technical' trials concerning the validity, infringement, and essentiality of the patents in suit, which will be followed by a trial regarding the claim for injunctive relief. The trial on the FRAND-related issues (FRAND-trial) was scheduled in October 2023.

With the present ruling the Court of Appeal (Court) confirmed English jurisdiction and affirmed the dismissal of Oppo's motion to stay the UK proceedings. [2]
 

B. Court's reasoning

First, the Court addressed the question of whether English courts should assume jurisdiction over the present case. The Court then dealt with the question of whether the UK proceedings should be stayed with view to the Chinese proceedings launched by Oppo.
 

General framework of FRAND-related disputes

Before turning to these two questions, the Court reflected upon the particular characteristics of disputes involving SEPs.Ibid, paras. 7-17. The Court recognised the advantages of standardisation for both manufacturers and consumers, concluding that "standards have enabled major technological advances to be rapidly developed and commercialised in recent years", which "has required huge investments to be made in research and development", para. 8. The Court noted that Intellectual Property Rights (IPR) policies of Standard Development Organisations (SDOs), such as the European Telecommunications Standards Institute (ETSI), typically require patent owners to undertake making standard-essential patents accessible to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions (FRAND undertaking). [4] The aim is to strike a balance between the interests of the parties, by ensuring patentees 'a fair reward for the use of their inventions' and guaranteeing implementers 'access to those inventions at a fair price'. [4] In the eyes of the Court, 'this balance is in the public interest', encouraging both patent owners and users to engage with standards. [4]

The Court argued that the success of IPR policies is contingent upon the avoidance of hold up and hold out ('two particular potential evils'), which 'depends upon the existence of a well-functioning dispute resolution system'. [5] Although standards are 'global in nature' and the FRAND undertaking is 'also a global one' [4] , SDOs (including ETSI) do not provide for an international tribunal that could deal with FRAND- related disputes. [6] When parties rule out arbitration, the only option are national courts, which, generally, cannot exercise jurisdiction over patents granted abroad, since patents are territorial rights. [7] As a result, 'SEPs must be enforced territory by territory.' [8]

In the view of the Court, this fact gives implementers 'an important tactical weapon', by placing 'a significant burden' on patent owners. [9] The resulting 'war of attrition' tends to favour implementers, as delays in enforcement bear 'the potential to starve patentees of income from licensing'. [9]

A way to accommodate this, is to allow courts of a single country to determine the terms of a global FRAND licence. [10] A global FRAND determination by a single national court could facilitate an overall solution, making proceedings in several jurisdictions obsolete: this would, however, not occur, when the implementer is prepared to stop exploiting patents in the respective country and, thus, avoid taking a licence on the court-determined terms. [10]

The fact that national courts 'in an increasing number of countries' now hold that they have jurisdiction for the determination of global FRAND terms, creates – according to the Court – the risk of inconsistent decisions (and high legal costs). [11] To avoid this risk, the Court suggested that, as a matter of principle, the court first seized with the case should be the only forum determining such terms with binding effect for any other proceedings. [11] This could, however, cause a 'race' between the parties to the presumably most favourable jurisdiction as well as applications for 'anti-suit' and 'anti-anti-suit' injunctions. [11]

The Court expressed the view that only supranational dispute resolution proceedings can solve these problems. [12] When parties do not agree to the only supranational option available now, that is arbitration, national courts will decide FRAND-cases by applying their own jurisdictional rules and taking comity into account, without being able to 'solve the problems inherent in the present system of resolving SEP/FRAND disputes'. [12]
 

Jurisdiction / appropriate forum

Addressing the question of whether English courts are the appropriate forum for the present case, the Court explained that starting point should be the 'proper characterisation of the dispute', for which 'the totality of the dispute between the parties' should be considered. [13] At first instance, the High Court assumed that the dispute in hand involves allegations of infringement of UK patents and relief in terms of a global FRAND licence. Oppo, on the other hand, argued that the dispute purely concerns the FRAND terms for a global licence to Nokia's SEP portfolio, whereas the infringement of UK patents is no more than 'the tail of an elephant'. [14]

The Court rejected the notion that the case only deals with the terms of a global licence and confirmed the High Court's characterisation of the dispute as a claim to enforce UK patents with relief in terms of a global FRAND licence. [15] For this dispute, the Court held that English courts are clearly the appropriate forum. [16] Moreover, there is no alternative forum, given that only English courts have jurisdiction over the validity, infringement, and essentiality of UK patents as well as a defence seeking to enforce the patent owner's FRAND undertaking. [17]

In the eyes of the Court, the dispute cannot be characterised as one involving solely the terms of a global FRAND licence for Nokia's SEP portfolio. The fact that Oppo accepted the need to take a global licence and was willing to obtain one made no difference, since – as Oppo also acknowledged – the dispute includes issues regarding the validity, infringement, and essentiality of UK patents. [18] Would the dispute be only about global licensing terms, then one could have expected that Oppo, when asked by the Court respectively, would have no objection to drop the validity, infringement, and essentiality challenges to Nokia's UK patents in suit and to proceed directly with the determination of the license terms in the FRAND-trial, which Oppo, however, refused to do. [19] The Court further found that Oppo's characterisation of the dispute was 'not in truth forum-neutral', as Oppo had committed to take a licence only on the terms determined by the Chongqing Court: this was an attempt 'to build the answer as to forum into the question of how the dispute is to be characterised', which the Court considered to be 'an illegitimate approach'. [20]

In addition, the Court highlighted that Nokia's claim for injunctive relief was 'inescapably a key aspect of the dispute'. [21] The Court explained that the determination of FRAND rates 'makes no difference to the question of enforcement': Since it is uncertain whether court-determined terms are directly enforceable against Oppo, Nokia would eventually still need to take recourse to injunctive relief, which is the only available remedy for preventing hold-out. [21]

Having endorsed the way in which the High Court had characterised the dispute between the parties, the Court explained that Oppo's second ground of appeal was no longer relevant, given that it was contingent upon the assumption that the High Court had erred in this respect. For completeness, the Court, nevertheless, addressed the question of which would be the appropriate forum, if the dispute would have been – for argument's sake – seen as one solely over the terms of a global licence for Nokia's SEP portfolio. [16]

The Court concluded that in this case, there would be no 'natural' forum for the determination of a global FRAND licence: England would be an appropriate forum, since Nokia seeks to enforce UK SEPs. Chongqing would, however, be an alternative forum that comes into question as well, given that the Chongqing Court had confirmed its jurisdiction and under Chinese law Nokia would be allowed to seek a global cross-licence from Oppo in the Chinese proceedings. [22]

According to the Court, if the dispute would be seen as one concerning purely the determination of global FRAND terms, none of the factors that the parties had invoked in support of the English or the Chinese jurisdiction would favour 'one forum over the other'. [23] For instance, the Court noted that the domicile of the parties 'is of little weight as a connecting factor'. [24] The place, where the majority of Oppo's devices are manufactured or sold (which Oppo argued was China, with the UK accounting for less than 0.5 % of its global sales), or the place, where revenues from a potential licence between the parties will mainly be generated, were not considered as decisive factors either. [24] The same was true with respect to the proper law, which the court seized with the case would apply [25] , the form of relief available, [26] and the level of experience of the court with FRAND-related cases. [27]

The Court reasoned that in a dispute over the terms of a global FRAND licence (and particularly over the royalty rates) the 'key factor' would be 'the value of a global licence of Nokia's SEP portfolio (taking into account the value of a cross-licence of OPPO's SEP portfolio).' [28] This value would depend on different factors than those mentioned by the parties, namely 'the strength (in terms of validity and essentiality)' of Nokia's SEP portfolio and 'the contribution of that portfolio to the standards in question.' [28] Consequently, in deciding the case, any competent national court or arbitral tribunal 'will depend very largely upon expert technical and valuation evidence taking into account any comparable licences.' [28] This means, in the view of the Court, that a dispute over the terms of a global FRAND licence 'has no real connection with any territory' and could, therefore, be 'determined by any competent national court or by a supranational arbitral tribunal.' [28]
 

No stay of the UK proceedings

Finally, the Court confirmed the decision of the High Court to dismiss Oppo's motion for a stay of the UK proceedings. [29]

The Court was not convinced that the Chinese proceedings would be speedier than the UK proceedings, [30] or that waiting for the decision of the Chongqing Court would save time and money, since it was unclear whether this decision would resolve all issues between the parties. [31] What is more, the Court held that Oppo was not really 'concerned to save time or legal costs', considering that it had not agreed to speed- up the FRAND determination before the High Court: On the contrary, Oppo had refused to withdraw the validity and essentiality challenges against the patents in suit and even objected to have the FRAND trial moved before the 'technical' trials. [32] In the eyes of the Court this indicated that Oppo 'just want the FRAND issues to be determined in the forum of their choice.' [32]

On the other hand, the Court noted that rather it would be inclined to give a factor favouring the dismissal of Oppo's motion to stay the UK proceedings 'more weight' than the High Court did. [29] Indeed, the fact that – based on the evidence presented – the Chongqing Court would apply Chinese and not French law [33] in its decision would speak in favour of refusing a stay, given that Nokia could face disadvantages by the application of the Chinese law, especially when it comes to the interpretation of the 'non-discrimination' element of FRAND. Ibid, para. 79. In contrast to the interpretation of the ETSI FRAND commitment under the applicable French law, Chinese law seems to endorse a "hard-edged" non-discrimination obligation on the side of the SEP owner, which could likely result in lower licence fees for the implementer. see ibid, paras. 56-59.
 

• [1] Nokia v Oppo, High Court of Justice, judgment dated 4 November 2021, Case No. 2021 EWHC 2952 (Pat).
• [2] Nokia v Oppo, Court of Appeal, judgment dated 11 July 2022, Case No. 2022 EWCA Civ 947.
• [3] Ibid, paras. 7-17. The Court recognised the advantages of standardisation for both manufacturers and consumers, concluding that "standards have enabled major technological advances to be rapidly developed and commercialised in recent years", which "has required huge investments to be made in research and development", para. 8.
• [4] Ibid, para. 9.
• [5] Ibid, para. 10.
• [6] Ibid, para. 11.
• [7] Ibid, paras. 12 et seqq.
• [8] Ibid, para. 13.
• [9] Ibid, para. 14.
• [10] Ibid, para. 15.
• [11] Ibid, para. 16.
• [12] Ibid, para. 17.
• [13] Ibid, para. 30.
• [14] Ibid, paras. 34 and 35.
• [15] Ibid, paras. 39 et seqq., and 44.
• [16] Ibid, para. 44.
• [17] Ibid, para. 46.
• [18] Ibid, paras. 39 and 41.
• [19] Ibid, para. 40.
• [20] Ibid, para. 42.
• [21] Ibid, para. 43.
• [22] Ibid, para. 66 and paras. 48-51.
• [23] Ibid, para. 66.
• [24] Ibid, para. 54.
• [25] Ibid, paras. 56-61.
• [26] Ibid, paras. 62-64.
• [27] Ibid, para. 65.
• [28] Ibid, para. 55.
• [29] Ibid, para. 79.
• [30] Ibid, para. 76.
• [31] Ibid, para. 77.
• [32] Ibid, para. 78.
• [33] ETSI IPR Policy is subject to French law.
• [34] Ibid, para. 79. In contrast to the interpretation of the ETSI FRAND commitment under the applicable French law, Chinese law seems to endorse a "hard-edged" non-discrimination obligation on the side of the SEP owner, which could likely result in lower licence fees for the implementer. see ibid, paras. 56-59.