UK Supreme Court's decision in Challenge to Arbitration of Global FRAND Terms

United Kingdom

On 21 October the UK Supreme Court started to consider whether an English court has the jurisdiction to settle the terms worldwide, not just for the UK, of a FRAND licence of Standard Essential Patents.

FRAND Disputes concern Fair, Reasonable and Non-Discriminatory (FRAND) licensing terms applicable to so-called Standard-Essential Patents (SEPs), which support interoperability and therefore competition between devices from different manufacturers. Standards for Wifi, 3G and 4G have necessitated cross-licensing deals between holders of supporting intellectual property. Arriving at a fair fee to use such portfolios has been challenging in the extreme. The volume of such disputes is expected to increase with interoperability and internet connectivity becoming embedded, via the Internet of Things, in an extraordinary array of products from kettles to washing machines, as well as more traditional communications devices.

To date, disputes have mostly been settled via international arbitration, taking advantage not only of confidentiality provisions, but also global enforcement under the New York Convention 1958. The question of court jurisdiction over such disputes has been moot; jurisdiction over a single territory would in any case be of little value for products and technologies sold worldwide.

In Unwired Planet v. Huawei [2017] EWHC 711 (Pat), the first instance judge, Mr Justice Birss, decided he did have the jurisdiction to settle terms worldwide. The English Court of Appeal, fielding a strong panel, had decided he was right.

Now Huawei, the would-be licensee, are having another go, this time to persuade five Supreme Court judges that the lower courts’ decisions were wrong:

  • that the territorial scope of the licence should mirror the UK-only injunction applied for by the patent portfolio owner, Unwired Planet, and
  • that to do otherwise would wrongly presume that all the patents in that portfolio, wherever they had been granted, were valid and infringed.

Huawei furthermore says that it is commercially inappropriate for the English court to settle the terms of a licence covering China, where 85 per cent of the relevant turnover in the mobile phones is generated, whereas the turnover in the UK is just 0.2 per cent.

In another linked case being heard at the same time - between Huawei, ZTE and Conversant - the appellants argue that indeed it is a Chinese court that is the appropriate forum.

There are other side issues as well.

If the Supreme Court upholds the lower courts’ decisions, this opens the way for UK courts to be seen as the pioneers of this global solution and to be the forum of choice in such cases. Equally, other national courts may decide that what is good in the UK can apply to them as well.

It also offers court litigation as a viable alternative to arbitration, hitherto the only means of resolving such licence disputes worldwide. Against that of course the court option is public (unlike the privacy of an arbitration) and that such court cases are likely to take, with potentially three layers of hearings, a lot longer.

A decision is likely in the New Year.