Some long-running litigation between Huawei and a couple of patent holders has reached its conclusion, thus setting a global precedent.
The cases of Unwired Planet v Huawei and Conversant Wireless v Huawei & ZTE were taken to the UK Supreme Court for appeal after a lower court ruled against the Chinese vendors in 2017. It’s all rather arcane, but the long-and-short of it is that it concerns royalty rates for standard essential patents and where they apply. This ruling seems to give UK courts the ability to set global FRAND rates.
‘Most importantly, this ruling will enable SEP holders to insist that implementers, like Huawei, take out global licences covering all of their portfolios,’ said the announcement from EIP, which represented Unwired and Conversant in the appeal. ‘If they fail to do this, they risk being subject to injunctions restricting their ability to access the UK market.
‘The practical effect is that implementers cannot insist on SEP holders proving their patents in every jurisdiction in the world, something which would be both practically and economically prohibitive for smaller companies. Otherwise, as the Supreme Court observed, “implementers who were infringing the patents would have an incentive to continue infringing”.’
We have no idea whether this ruling is good, bad or neutral for the industry on the whole, so we offer comment from a couple of tech lawyers and an economic advisor in the decision to provide insight.
“The overall feeling between SEP holders and implementers will remain that the UK courts are now pro-SEP holder,” said, Dafydd Bevan, Head of the High Tech group at Marks & Clerk Law. “We can expect to see the UK continue its central role in worldwide SEP litigation, even where the UK connection appears comparatively weaker than elsewhere.
“The UK courts will now determine global FRAND terms knowing that an implementer can still reduce the value of the licence by removing questionable patents through invalidity proceedings in the relevant jurisdictions. There may still be opportunities to avoid the UK courts’ reach, depending upon the circumstances of a given case, in particular whether litigation elsewhere exists and how swiftly an implementer acts in response to a UK claim.”
“Many implementers with small UK markets or market-entry plans may opt to abandon or avoid the UK market for fear of providing the anchor needed for a UK SEP trial with global FRAND licence determination,” John de Rohan-Truba, Managing Associate at Marks & Clerk Law. “Ultimately, consumers may find a much-reduced range of products on sale compared with other countries – this would be especially disappointing when considering the potential technologies which could become prevalent with 5G.”
“This decision bears the potential to turn the UK into a global hub for patent litigation,” said Dr Roya Ghafele, Director of law and economics consultancy OxFirst, who acted as an economic advisor on the decision. “While this is great news for lawyers, operating companies, be they large or small may be significantly less excited about this development. Billions of pounds could see changing hands, as patent disputes may significantly increase in the UK. What impact such a rise in patent litigation could have on consumers remains yet to be seen.
“Technology companies will be carefully considering whether to maintain their market position in the U.K. After all, this will mean exposure to Courts that will sanction a global FRAND licensing rate with an injunction in the UK; meaning that a technology company will be faced with the choice of exposing its international licensing practices to the English Courts or risk being shut down in the U.K.”
So there’s a lot of portentous talk about how this will scare off companies that don’t like paying royalties for patents they use, but it’s hard to feel sad about that. We have no idea how reasonable Unwired and Conversant were being about their royalty claims, but if Huawei and ZTE were using their patents, surely there’s no question that they should pay for them.
Cases like this, then, are about money and it seems unlikely that tech companies would abandon a massive market like the UK rather than pay a bit more than they hoped for some patents that are regulated by the FRAND process anyway.