Unwired Planet v Huawei, UK Court of Appeal

2018年10月23日 - 事件番号: A3/2017/1784, [2018] EWCA Civ 2344

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

A. Facts

The Claimant, Unwired Planet International Limited, holds a significant portfolio of patents which are essential for the implementation of the 2G/GSM, 3G/UMTS and 4G/LTE wireless telecommunications standards (Standard Essential Patents, or SEPs). The Defendants, Huawei Technologies Co. Ltd. and Huawei Technologies (UK) Co. Ltd., manufacture and sell mobile devices complying with the above standards worldwide.

Starting in September 2013, the Claimant contacted the Defendants several times, requesting the latter to engage in discussions for a licence regarding its SEP portfolio. [954] In March 2014, the Claimant sued the Defendants as well as Samsung and Google for infringement of five of its UK SEPs before the UK High Court of Justice (High Court). [955] The Claimant also initiated parallel infringement proceedings against the Defendants in Germany. [956]

The High Court conducted three technical trials first, focusing on the validity and essentiality of four of the SEPs in suit. [957] By April 2016, these trials were completed; the High Court held that two of the SEPs in suit were both valid and essential, whereas two other patents were found to be invalid. [957] The parties agreed to postpone further technical trials indefinitely. [957]

In July 2016, Samsung took a licence from the Claimant covering, among other, the SEPs in suit. [958] The Claimant also settled the infringement proceedings with Google. [959]

In late 2016, the trial concerned with questions regarding to the licensing of the SEPs in suit commenced between the Claimant and the Defendants. Over the course of these proceedings the parties made licensing offers to the each other. However, they failed to reach an agreement. The Defendants indicated they were willing to take a licence under Claimant’s UK patent portfolio, whereas the Claimant contended that it was entitled to insist upon a worldwide licence. [960]

In April 2017, the High Court granted an UK injunction against the Defendant, until such time as it entered into a worldwide licensing agreement with the Claimant on the specific rates, which the court determined to be Fair, Reasonable and Non-Discriminatory (FRAND) [961] in accordance with the undertaking given by the Claimant towards the European Telecommunications Standards Institute (ETSI). [962] Pending appeal, the High Court stayed the injunction. [963]

Shortly after the High Court delivered its decision, the Defendants began proceedings against the Claimant in China, which are still pending. [964]

With the present judgment, the UK Court of Appeal dismissed the Defendants’ appeal against the decision of the High Court. [965]

B. Court’s reasoning

The Defendants appealed the decision of the High Court on the following three grounds:

1. The High Court’s finding that only a worldwide licence was FRAND is erroneous; the imposition of such a licence on terms set by this court based on a national finding of infringement of UK patents is wrong in principle. [966]

2. The offer imposed to the Defendants by the High Court is discriminatory in violation of Claimant’s FRAND undertaking, since the rates offered are higher than the rates reflected in the licence granted by the Claimant to Samsung. [967]

3. The Claimant is not entitled to injunctive relief; by bringing the infringement proceedings against the Defendants, without meeting the requirements established by the Court of Justice of the European Union (“CJEU”) in the matter Huawei v ZTE [968] (Huawei judgment) before, the Claimant abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the European Union (“TFEU”). [969]

Notably, the High Court’s determination of the rates which apply to the worldwide licence that the court requested the Defendants to take was not challenged by any of the parties to the proceedings. [970]

1. Worldwide licences

The Court of Appeal disagreed with the Defendants’ notion that imposing a worldwide licence on an implementer is wrong, because it amounts to an (indirect) interference with foreign court proceedings relating to patents subsisting in foreign territories, which would have been subject to materially different approaches to the assessment of FRAND royalty rates and could, therefore, lead to different results (particularly the ongoing litigation between the parties in China and Germany). [971]

The Court of Appeal explained that in imposing a worldwide licence the High Court did neither adjudicate on issues of infringement or validity concerning any foreign SEPs, nor was it deciding what the appropriate relief for infringement of any foreign SEPs might be (particularly since it made clear that a FRAND licence should not prevent a licensee from challenging the validity or essentiality of any foreign SEPs and should make provision for sales in non-patent countries which do not require a licence) [972] . [973]

Moreover, the High Court simply determined the terms of the licence that the Claimant was required to offer to the Defendants pursuant to its FRAND undertaking towards ETSI. [974] Such an undertaking has international effect. [975] It applies to all SEPs of the patent holder irrespective of the territory in which they subsist. [976] This is necessary for two reasons: first, to protect implementers whose equipment may be sold and used in a number of different jurisdictions. [976] Second, to enable SEP holders to prevent implementers from “free-riding” on their innovations and secure an appropriate reward for carrying out their research and development activities and for engaging with the standardisation process. [977]

Accordingly, the High Court had not erred in finding that a worldwide licence was FRAND. On the contrary, there may be circumstances in which only a worldwide licence or at least a multi-territorial licence would be FRAND. [978] German Courts (in Pioneer Acer [979] and St. Lawrence v Vodafone [980] ) as well as the European Commission in its Communication dated 29 November 2017 [981] had also adopted a similar approach. [982]

Having said that, the Court of Appeal recognized that it may be “wholly impractical” for a SEP holder to seek to negotiate a licence for its patents on a country-by-country basis, just as it may be “prohibitively expensive” to seek to enforce its SEPs by litigating in each country in which they subsist. [977] In addition, if in the FRAND context the implementer could only be required to take country-by-country licences, there would be no prospect of any effective injunctive relief being granted to the SEP holder against it: the implementer could avoid an injunction, if it agreed to pay the royalties in respect of its activities in any particular country, once those activities had been found to infringe. [983] In this way, the implementer would have an incentive to hold out country-by-country, until it was compelled to pay. [983]

In its discussion of this topic, the Court of Appeal disagreed with the view taken by the High Court that in every given set of circumstances only one true set of FRAND terms exists. Nevertheless, the court did not consider that the opposite assumption of the High Court had a material effect to the its decision. [984]

In the eyes of the Court of Appeal, it is “unreal” to suggest that two parties, acting fairly and reasonably, will necessarily arrive at precisely the same set of licence terms as two other parties, also acting fairly and reasonably and faced with the same set of circumstances. [985] The reality is that a number of sets of terms may all be fair and reasonable in a given set of circumstances. [985] Whether there is only one true set of FRAND terms or not, is, therefore, more of a “theoretical problem” than a real one. [986] If the parties cannot reach an agreement, then the court (or arbitral tribunal) which will have to determine the licensing terms will normally declare one set of terms as FRAND. The SEP holder would then have to offer that specific set of terms to the implementer. On the other hand, in case that the court finds that two different sets of terms are FRAND, then the SEP holder will satisfy its FRAND undertaking towards ETSI, if it offers either one of them to the implementer. [986]

Furthermore, the Court of Appeal dismissed Defendants’ claim that imposing a worldwide licence is contrary to public policy and disproportionate. [987] In particular, the Defendants argued that this approach encourages over-declaration of patents [988] and is not compatible with the spirit of the Directive 2004/48/EC on the enforcement of intellectual property rights, [989] which requires relief for patent infringement to be proportionate. [990]

Although the Court of Appeal recognised the existence of the practice of over-declaration and acknowledged that it is a problem, it held that this phenomenon cannot justify “condemning” SEP holders with large portfolios to “impossibly expensive” litigation in every territory in respect of which they seek to recover royalties. [991] The court also found that there was nothing disproportionate about the approach taken by the High Court, since the Defendants had the option to avoid an injunction by taking a licence on the terms which the court had determined. [992]

2. Non-discrimination

The Court of Appeal rejected the Defendants’ argument [993] that the non-discrimination component of Claimant’s FRAND undertaking towards ETSI obliges the Claimant to offer to the Defendants the same rates as those contained in the licence granted to Samsung. [994]

The Court of Appeal made clear that the obligation of the SEP holder not to discriminate is, in principle, engaged in the present case, since the Claimant’s transaction with the Defendants is equivalent to the licence it granted to Samsung. [995] In the court’s eyes, when deciding whether two transactions are equivalent one needs to focus first on the transactions themselves. Insofar, differences in the circumstances in which the transactions were entered into, particularly economic circumstances, such as the parties’ financial position [996] or market conditions (e.g. cost of raw materials), cannot make two otherwise identical transactions non-equivalent (releasing, therefore, the patent holder from the obligation not to discriminate). Changes in such circumstances could only amount to an objective justification for a difference in treatment. [997]

Considering the specific content of the SEP holder’s respective obligation, the Court of Appeal agreed with the High Court’s finding that the non-discrimination element of a SEP holder’s FRAND undertaking does not imply a so-called “hard-edged” component (imposing on the patent holder an obligation to offer the same rate to similarly situated implementers). [998] It argued that the “hard-edged” approach is “excessively strict” and fails to achieve a balance between a fair return to the SEP owner and universal access to the technology. [999] It could have the effect of compelling the SEP holder to accept a level of compensation for the use of its invention which does not reflect the value of the licensed technology and, therefore, harm the technological development of standards. [1000]

Furthermore, the “hard-edged” discrimination approach should be rejected also because its effects would result in the insertion of the “most favoured licensee” clause in the FRAND undertaking. In the view of the Court of Appeal, the industry would most likely have regarded such a clause as inconsistent with the overall objective of the FRAND undertaking. [1001]

Conversely, the Court of Appeal followed the notion described by the High Court as the “general” non-discrimination approach: [1002] the FRAND undertaking prevents the SEP holder from securing rates higher than a “benchmark” rate which mirrors a fair valuation of its patent(s), but it does not prevent the patent holder from granting licences at lower rates. [1002] For determining the benchmark rate, prior licences granted by the SEP holder to third parties will likely form the “best comparables”. [1003]

The Court of Appeal argued that the “general” approach is in line with the objectives of the FRAND undertaking, since it ensures that the SEP holder is not able to “hold-up” implementation of the standard by demanding more than its patent(s) is worth. [1004] However, the FRAND undertaking does not aim at leveling down the royalty owed to the SEP holder to a point where it no longer represents a fair return for its patent(s), or to removing its discretion to agree royalty rates lower than the benchmark rate, if it chooses to do so. [1004]

In this context, the Court of Appeal made clear that it does not consider differential pricing as per se objectionable, since it can in some circumstances be beneficial to consumer welfare. [1005] The court sees no value in mandating equal pricing for its own sake. On the contrary, once the hold-up effect is dealt with by ensuring that licences are available at the benchmark rate, there is no reason for preventing the SEP holder from charging less than the licence is worth. [1005] Should discrimination appear below the benchmark rate, it should be addressed through the application of competition law; as long as granting licences at rates lower than the benchmark rate causes no competitive harm, there is no reason to assume that the FRAND undertaking constrains the ability of the SEP holder to do so. [1006]

3. Abuse of dominant Position / Huawei v ZTE

The Court of Appeal further rejected Defendants’ argument that, by bringing the infringement proceedings prior to fulfilling the obligations arising from the Huawei judgment, the Claimant abused its dominant market position in violation of Article 102 TFEU. [1007]

To begin with, the Court of Appeal confirmed the finding of the High Court that the Claimant held a dominant market position and dismissed the respective challenge by the latter. [1008] It did not find any flaw in the High Court’s view that the SEP holder has a 100% market share with respect to each SEP (since it is “common ground” that the relevant market for the purpose of assessing dominance in the case of each SEP is the market for the licensing of that SEP [1009] ) and that the constrains imposed upon the SEP holder’s market power by the limitations attached to the FRAND undertaking [1010] and the risk of hold-out that is immanent to the structure of the respective market, [1011] can either alone or together rebut the assumption that it most likely holds market power. [1012]

Notwithstanding the above, the Court of Appeal held that the Claimant had not abused its market power in the present case. [1013]

The court agreed with the finding of the High Court that the Huawei judgment did not lay down “mandatory conditions”, in a sense that that non-compliance will per se render the initiation of infringement proceedings a breach of Article 102 TFEU. [1014] The language used in the Huawei judgment implies that the CJEU intended to create a “safe harbor”: if the SEP holder complies with the respective framework, the commencement of an action will not, in and of itself, amount to an abuse. [1015] If the SEP holder steps outside this framework, the question whether its behaviour has been abusive must be assessed in light of all of the circumstances. [1016]

In the court’s eyes, the only mandatory condition that must be satisfied by the SEP holder before proceedings are commenced, is giving notice to the implementer about the infringing use of its patents. [1017] This follows from the clear language used by the CJEU with respect to this obligation. [1018] The precise content of such notice will depend upon all the circumstances of the particular case. [1018] In general, if an alleged infringer is familiar with the technical details of the products it is dealing and the SEP it may be infringing, but has no intention of taking a licence on FRAND terms, it will not be justified to deny the SEP holder an injunction, simply because it had not made a formal notification prior to the commencement of proceedings. [1019]

On the merits, the court accepted the High Court’s assessment that the Claimant had not behaved abusively and particularly the finding, that the Defendants, who were in contact with the Claimant prior to the proceedings, had sufficient notice that the Claimant held SEPs which ought to be licensed, if found infringed and essential. [1020]

Considering further that the respective conduct requirements were not established at the point in time, in which the infringement action was filed (since the present proceedings were initiated before the CJEU delivered the Huawei judgment), the Court of Appeal noted that it would very likely not be fair to accuse the Claimant of abusive behavior. [1021] Insofar the court agreed with the respective approach developed by German courts in co-called “transitional” cases (Pioneer v Acer, [1022] St. Lawrence v Vodafone [1022] and Sisvel v Haier [1023] ) [1024] .

• [954] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, Case-No. A3/2017/1784, [2018] EWCA Civ 2344, para. 233.
• [955] Ibid, para. 6 et seqq.
• [956] Ibid, para. 233.
• [957] Ibid, para. 7.
• [958] Ibid, paras. 8 and 137 et seqq.
• [959] Ibid, para. 8.
• [960] Ibid, para. 9 et seqq.; para. 31 et seqq.
• [961] Ibid, para 17.
• [962] Ibid, para 130.
• [963] Ibid, para 18.
• [964] Ibid, para 112.
• [965] Ibid, para 291.
• [966] Ibid, paras. 19 and 45 et seqq.
• [967] Ibid, paras. 20 and 132 et seqq.
• [968] Huawei v ZTE, Court of Justice of the European Union, judgement dated 16 July 2015, Case No. C-170/13.
• [969] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 21, paras. 211 et seqq and para. 251.
• [970] Ibid, para. 17.
• [971] Ibid, paras. 74 and 77 et seq.
• [972] Ibid, para. 82.
• [973] Ibid, para. 80.
• [974] Ibid, para. 79 et seq.
• [975] Ibid, para. 26.
• [976] Ibid, para. 53.
• [977] Ibid, para. 54 et seq., para. 59.
• [978] Ibid, para. 56.
• [979] Pioneer v Acer, District Court of Mannheim, judgement dated 8 January 2016, Case No. 7 O 96/14.
• [980] St. Lawrence v Vodafone, District Court of Düsseldorf, judgement dated 31 March 2016, Case No. 4a O 73/14.
• [981] Communication From the Commission to the European Parliament, the Council and the European Economic and Social Committee, “Setting out the EU Approach to Standard Essential Patents”, 29 November 2017, COM(2017) 712 final.
• [982] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 74.
• [983] Ibid, para. 111.
• [984] Ibid, para. 128.
• [985] Ibid, para. 121.
• [986] Ibid, para. 125.
• [987] Ibid, para. 75.
• [988] Ibid, para. 92
• [989] Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights (Official Journal of the EU L 195, 02/06/2004, p. 16)
• [990] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 94.
• [991] Ibid, para. 96.
• [992] Ibid, para. 98.
• [993] Ibid, para. 20 and 132 et seqq.
• [994] Ibid, paras. 207 and 210.
• [995] Ibid, para. 176.
• [996] Ibid, para. 173.
• [997] Ibid, para. 169 et seq.
• [998] Ibid, paras. 194 et seqq.
• [999] Ibid, para. 198.
• [1000] Ibid, para. 198.
• [1001] Ibid, para. 199.
• [1002] Ibid, para. 195.
• [1003] Ibid, para. 202.
• [1004] Ibid, para. 196.
• [1005] Ibid, para. 197.
• [1006] Ibid, para. 200.
• [1007] Ibid, para. 21, paras. 211 et seqq and para. 251.
• [1008] Ibid, para. 212.
• [1009] Ibid, para. 216.
• [1010] Ibid, para. 219.
• [1011] Ibid, para. 220.
• [1012] Ibid, para. 229.
• [1013] Ibid, para. 284.
• [1014] Ibid, para. 269.
• [1015] Ibid, para. 270.
• [1016] Ibid, para. 269 and 282.
• [1017] Ibid, para. 253 and 281.
• [1018] Ibid, para. 271.
• [1019] Ibid, para. 273.
• [1020] Ibid, para. 284
• [1021] Ibid, para. 275
• [1022] See above
• [1023] Sisvel v Haier, Higher District Court of Düsseldorf, judgement dated 30 March 2017, Case No. 15 U 66-15.
• [1024] Unwired Planet v Huawei, UK Court of Appeal, 23 October 2018, para. 279.