Case Law post CJEU ruling Huawei v ZTE

Unwired Planet v Huawei, [2017] EWHC 1304 (Pat)

7 June 2017 - Case No. HP-2014-000005

http://caselaw.4ipcouncil.com/english-court-decisions/unwired-planet-v-huawei-2017

A. Facts and Main Judgment

The claimant is a company that grants licenses for patented technologies in the telecommunications industry. The patents at issue relate to telecommunication network coding and procedures. In 2014, the claimant made a declaration under the ETSI IPR Policy that it was willing to grant licenses on FRAND terms. There were five technical trials relating to the validity, infringement and essentiality of these patents and one non-technical trial relating to competition law issues, FRAND issues, injunctive relief and damages for past infringements.Unwired Planet v. Huawei [2017] EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html In its decision on 5 April 2017 (the ‘main judgment’), the Patents Court (Birrs J) held that two patents were valid and that they had been infringed, and that the claimant was in a dominant position, but had not abused this position. The court stated that a final decision about an injunction to restrain patent infringements should be made separately. A few weeks after the main judgment, a license representing the FRAND terms between the two parties was prepared (the ‘settled license’), but had not yet been entered into. [112] Further, the defendant offered to give an undertaking to the court to enter into the license settled by the Patents Court or any other court. [113]

In its subsequent decision on 7 June 2017 (the case at hand), the parties argued whether the court should grant an injunction order given the existence of the settled license. Other minor issues of the case related to damages, declaratory relief, costs and permission to appeal. [114] The court granted an injunction for infringements of patents EP (UK) 2 229 744 and EP (UK) 1 230 818 (the ‘final order’). [115] The injunction order would be discharged if the defendant entered into a FRAND license and it would be stayed pending appeal. The court also declared that the settled license represented the FRAND terms in the given circumstances between the parties and that the defendant had to pay GBP 2.9 million of the claimant’s costs. Permission to appeal was granted to the defendant in respect of three issues and to the claimant in respect of one issue. [115]

B. Court’s Reasoning

1. Injunction

The main issue considered by the court was the interplay between the injunction, the settled license and the undertaking offered by the defendant. Patent EP (UK) 2 229 744 will expire in 2028. The settled license’s expiry date is 31 December 2020, [116] which would put the defendant in a difficult position if it attempts to renegotiate the license while the injunction is still in place. The defendant would even risk being in contempt of court if it continued to sell equipment if there was an argument that the license had come to an end for other reasons (e.g. repudiatory breach of contract). [117] However, the court took the view that it cannot be said that the defendant must be free to sell products if the license has ceased to exist. [116] Similarly, it cannot be said with certainty that the claimant must have an injunction at that date.

Thus, the court considered what the correct form of injunction in respect of a FRAND undertaking should be when a court has settled a license but the defendant has not entered into it (‘FRAND injunction’). [118] The court held that the FRAND injunction should contain a proviso that it will cease to have effect as soon as the defendant enters into the FRAND license. The injunction should also be subject to an express liberty to either party to return to court in the future if the FRAND license ceases to exist or expires while the patent is still valid. [118]

The court also held that despite the court’s discretion as to whether an injunction is granted, an injunction is normally effective, proportionate and dissuasive in IP cases. [119] Although the practical effect of a defendant’s undertaking and an injunction are similar, rights holders usually insist on an injunction. [120] One reason is that it involves a public vindication of the claimant’s rights. [120] As the claimant has been forced to come to court, an offer of undertaking after judgment is usually considered too late. [120] In this case, the defendant had maintained throughout the negotiations and the trial that it was under no obligation to accept a worldwide license. [121] Thus, according to the court, the right thing to do was to grant a FRAND injunction which will be stayed on terms pending appeal.

2. Other Issues

The court held that the issue of damages is closely related to the main issue. [122] If the defendant entered into the settled license, all payments would be covered by the license. If the defendant did not enter into the settled license, an order for damages is required. As a consequence, the court order should be in the same form as the FRAND injunction (stayed pending appeal and ceasing to have effect if the parties enter into the settled license). [122]

The parties also disagreed about the wording of the court declaration regarding the FRAND terms of the settled license. [123] The court dismissed the defendant’s suggestion as too complicated and the claimant’s suggestion as incomprehensive. Instead, the court declaration would be ‘the license annexed to the judgment represents the FRAND terms applicable between the parties in the relevant circumstances’. [124] Further, the court rejected the defendant’s petition to make a declaration that the claimant had not abused its dominant market position. [125] It took the view that the main judgment made a clear finding on this issue in summary paragraph 807(17).

Further, the parties disagreed about the extent of the defendant’s obligation to bear the claimant’s costs. The claimant argued that it should be regarded as the successful party so that the defendant had to pay its costs (GBP 6.4million). [126] The defendant argued the claimant had been clearly wrong regarding the applicable FRAND rate [127] and the appropriate thing would be to make no cost order. The court rejected the idea that there was no overall winner (as argued by the defendant) because the claimant was successful on the issues of the nature of the license and the existence and abuse of market dominance. [128] The ensuing question was whether any deductions were appropriate. [129] The court held that neither party had offered terms that were essentially FRAND. [130] However, the rates offered by the claimant were significantly further away from the end result than the rates offered by the defendant. [130] Thus, the defendant’s costs in relation to the FRAND rate issue were not recoverable by the claimant.

The fifth and final issue was in respect of permission to appeal. The court granted the defendant permission on three grounds: first, the necessity of granting a global license (including the court’s view that there is only one applicable license fee); [131] second, the hard-edged non-discrimination point; [132] and third, the issue of injunctive relief and abuse of market dominance under the CJEU ruling Huawei v. ZTE. [133] Conversely, the claimant was granted permission to appeal on the blended global benchmark issue (using a blended global rate as a benchmark, leading to the question whether another discount for the Chinese market should given). [134]

  • [111] Unwired Planet v. Huawei [2017] EWHC 711(Pat), available at http://www.bailii.org/ew/cases/EWHC/Patents/2017/1304.html
  • [112] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 2.
  • [113] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 8.
  • [114] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 1.
  • [115] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 70.
  • [116] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 22.
  • [117] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 19.
  • [118] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 20.
  • [119] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 25.
  • [120] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 26.
  • [121] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 29.
  • [122] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 33.
  • [123] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 34.
  • [124] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 36.
  • [125] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 38.
  • [126] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), paras 39-40.
  • [127] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 41.
  • [128] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 44.
  • [129] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 45.
  • [130] Unwired Planet v Huawei, [2017] EWHC 1304 (Pat), para 56.
  • [131] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 170 et seqq.
  • [132] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 177 and 481 et seqq.
  • [133] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 627 et seqq.
  • [134] See Unwired Planet v. Huawei [2017] EWHC 711(Pat), paras 537 et seqq.