Kigen v Thales – UK High Court confirms that SEP implementers have the legal right to claim for a ‘free-standing’ FRAND licence relating to SEPs

United Kingdom

Overview

In a significant High Court decision[1], Fancourt J has taken a step towards confirming the UK Courts’ acceptance that ‘free-standing’ FRAND claims (i.e. those brought not by way of a defence to infringement) can be brought by implementers of standard-essential patents (“SEPs”). You can read our summary of the Court of Appeal’s previous consideration of the issue of free-standing FRAND claims in our 2021 SEP/FRAND Litigation Round Up. On its pleaded case, the claimant (an implementer) claimed a FRAND licence with respect to all of the defendant’s portfolio of essential patents, but in later correspondence and at the hearing was only prepared to undertake to accept a licence with respect to the patents in issue (assuming they were found essential and valid). Due to the inconsistency between the case as pleaded, and in order to avoid an abuse of process, the High Court stayed the proceedings until either: the claimant amends its pleaded case to match the undertaking it argued it was willing to make; or gives the undertaking that reflects its originally pleaded case.

Background

The litigation concerns two parties whose businesses relate to SIM technology, standardised by, inter alia, the GSM Association. Thales, the patentee, owns a portfolio of patents in this technology. It wrote to Kigen, an implementer, claiming that four of its patents were standard-essential (two of which were the UK patents in suit), were being used by Kigen and invited Kigen to respond in relation to granting a licence of those SEPs. Although negotiations took place, no licence was agreed. Kigen then brought a claim, seeking:

  1. Declarations that the two UK Thales patents were invalid and orders for revocations; or

  2. Alternatively:

    1. Declarations that the patents were not essential to the relevant standards (i.e., not SEPs); and

    2. A declaration that it was entitled to licences of Thales’ patents which were SEPs on FRAND terms, and a determination of those terms.

The claim was based on the GSM’s IPR Regulations, which stated that a member of the GSM Association (of which both parties are members) will give an undertaking that it is prepared to grant licences to all its SEPs on FRAND terms.

The Parties’ Arguments

Thales’ application notice for a stay of proceedings stated that since Kigen’s claim was one of invalidity, there were no issues requiring a determination of FRAND terms by the Court and further that in any event, there was no allegation of infringement if the patents were found to be valid. Thales also asserted that there was no jurisdiction to grant declaratory relief in respect of Thales’ SEPs, as there was no jurisdiction asserted in relation to patents other than the two UK patents in suit. Alternatively, Thales argued the UK courts were not forum conveniens, given that Thales had offered to mediate the dispute through WIPO[2].

Finally (and key to the ultimate conclusion), Thales amended its pleadings to the following: “Further or alternatively, unless and until the Claimant gives an unqualified commitment and undertaking to enter into any licence determined by this court to be FRAND, no further steps should be taken in these proceedings which should be stayed pursuant to CPR Part 3, any further progress in the action being a disproportionate use of the Court's and the Defendant's resources and otherwise contrary to the Overriding Objective.”

The Court’s Decision

Fancourt J noted that following the Supreme Court’s decision in Unwired Planet v Huawei[3], the UK courts have jurisdiction to set global FRAND terms for a global portfolio of related patents, even if they do not have jurisdiction to decide on the validity of foreign patents. In this case, the pleaded claim was a contractual claim for a FRAND licence, not a defence to an infringement action.

However, Kigen changed its position from that in its pleaded declarations for relief. By the time of the hearing Kigen was only willing to take a FRAND licence from Thales for any patent found valid and essential by the English courts in these proceedings (and after all appeals), on whatever terms were determined FRAND. This was further caveated with Kigen saying it was entitled to consider the position at the time when infringement is established and when it is put to its election (i.e. licence or injunction). This was because, Kigen said, a situation might arise whereby the essentiality of the patents was not established at trial. In such a case, Kigen might decide to not take a licence (for example, if the bottom fell out of the market) and leave the market. However, if the patents were held to be valid and essential, then it would be prudent for FRAND proceedings to have already commenced, which is why, Kigen said, these proceedings had been brought.

Dealing first with the question of jurisdiction, the Court did not accept the arguments made by Thales. A claim on a free-standing contractual basis to a licence on FRAND terms was a proper one and the terms of the licence must be determined by the national court if the parties cannot agree otherwise.  However, the Court felt the question should more properly be framed as whether there was any abuse of the jurisdiction given the inconsistencies surrounding the undertakings to be given by Kigen and, second, if there was no abuse, whether the Court ought nevertheless to stay the FRAND claim until an undertaking is given.

The Court found that Kigen’s case had clearly changed from that of a claimant seeking a licence of all SEPs, to the equivalent of “an unwilling licensee defendant,” a course which, following the Court of Appeal’s decision in Optis[4] (read our Law-Now on that decision here), was not open to it. Therefore, it ordered a stay of the proceedings until either Kigen amended its pleadings to match the undertaking it was willing to give, or gave a FRAND undertaking reflecting its pleaded case.

The choice Kigen makes is likely to influence the procedural order of the Trials. Fancourt J noted that amendment of the claim may mean the trial of the patent issues will precede the FRAND trial. This presumably indicates the opposite will be true should Kigen instead elect to give the undertakings as originally pleaded. Interestingly, Fancourt J did note that, “The judge hearing the CMC can consider whether, as I provisionally think, the ability of the parties to determine the commercial issues in this claim by agreement will be assisted by pleadings and disclosure on the FRAND claim, even if the patent issues are to be tried first.

Given this case represents another endorsement of the premise that free-standing FRAND is acceptable, it will be interesting to see how this issue develops, and in particular whether more implementers choose to bring such free-standing FRAND claims.



[1] [2022] EWHC 2846 (Pat)

[2] The jurisdictional argument was predictably dismissed, on the basis that WIPO mediation is not itself a forum.

[3] [2020] UKSC 37

[4] [2022] EWCA Civ 1411