SPOTLIGHT
16 April 2018 – Huawei’s jurisdictional challenge to Conversant Wireless’ patent infringement and FRAND determination proceedings has been dismissed by the High Court of England and Wales*. Huawei and a second multinational telecommunications defendant had argued that (1) Conversant’s claims were, in substance, claims for the infringement of foreign patents whose validity is in dispute and over which the UK Court does not have jurisdiction; and (2) the High Courts should decline to exercise jurisdiction because China, not the UK, is the forum conveniens for the dispute. The defendants argued that the terms of a global FRAND license could and should be set by the Chinese Courts.
In dismissing the jurisdiction challenge, the High Court followed Unwired Planet v. Huawei in and found that a claim for infringement of a UK SEP is sufficient for the court to determine the terms of a FRAND license, which may, depending on the facts of the case, entail a global license. The defendants’ objection that a global FRAND license determination would entail consideration of the validity of patents outside of the UK could be advanced in any jurisdiction, was incorrect, and would, if accepted, require the holder of a global SEP portfolio to bring proceedings in every relevant jurisdiction. This would be a “hold-out charter” and would fundamentally undermine the rationale of the Unwired Planet judgment, which the High Court refused to do.
The High Court was clear that forum non conveniens did not apply to the claims of UK patent infringement against the UK defendants and, in any event, the High Court were the most appropriate venue for the issues. The court determined this in part on evidence that the Chinese courts do not have jurisdiction to determine essentiality/infringement of foreign patents or to determine the appropriate FRAND rate for a license of foreign patents in the absence of all parties’ agreement (which Conversant would not give).
*Permission to appeal the High Court's judgment on the jurisdiction issues was granted on 8 May 2018.
Global News and Notes
25 April 2018 – During its second quarter earnings call, Qualcomm announced changes to its global patent licensing program as well as reduced projections for its patent licensing revenue. Under its revised licensing plan, Qualcomm said it will continue to license its full portfolio of SEP and non-SEP patents at a rate capped at 5% of the cost of a smartphone or other device. In addition, it said it will offer a license to only its SEP patents at a 3.25% rate globally. Moreover, the top price cap for Qualcomm’s royalty rate calculations was reportedly reduced from $500 down to $400. Qualcomm intends to include its 5G SEP patents within these rates as well.
Qualcomm also announced a new full-portfolio deal with Samsung that includes 5G technologies. The framework is generally based on a 2015 settlement with China’s National Development and Reform Commission and may have an impact on Qualcomm’s antitrust litigation, which includes the phone price cap as a disputed issue. Some question whether the licensing program rates will result in permanently lower licensing rates and revenues, but others speculate that the internet of things could result in more licensees signing up and offset potential losses.
25 May 2018 – SEP licensing pool Avanci announced that royalty fees for its auto patents will not increase beyond its December 2017 announced rate or $3 to $15 per car (based on 2G, 3G, or 4G functionality), no matter how many patent owners join the licensing agreement. The Avanci auto platform was said to be created to streamline wireless SEP licensing for the auto industry, combining patents owned by Qualcomm, Ericsson, Blackberry, and others. As of late 2017, the aggregator estimated its patents encompass around 50% of SEPs covering to 2G, 3G, and 4G technology, and additional SEP-holders have joined the group recently. Avanci indicated it was seeking to clarify its future licensing plans to assuage concerns that licensing fees could become increasingly expensive over time.
China Updates
21 March 2018 – The Shenzhen Intermediate Court has published two detailed decisions in cases filed in 2016 by Huawei, asserting two SEPs against three Chinese affiliates of Samsung Electronics. The court decided that Samsung infringed two Huawei 4G/LTE related SEPs and was an “at fault” implementer during the negotiations with Huawei by not complying with its FRAND obligations. Therefore, the Court awarded Huawei injunctive relief against Samsung, but also noted that Huawei and Samsung may continue to negotiate licensing rates. With respect to FRAND, the court determined that Samsung’s actions led to significant delays in the negotiations; for example, by requiring bundling of both SEPs and non-SEPs; not providing timely feedback to Huawei’s claim charts; ignoring Huawei’s licensing offers and delaying providing counter-offers; rejecting arbitration despite an earlier commitment to arbitrate; and not submitting any proposed settlement terms during court organized mediations. On the other hand, the court found that Huawei had compiled with FRAND terms during negotiations and thus was not an “at fault” SEP holder.
Concerning determining an appropriate FRAND rate, the court supported Huawei's proposed rate, finding that it was acceptable based on factors, such as the two parties’ global patent portfolio strength and aggregate global royalty rates for 3G and 4G technology. Due to confidentiality concerns, the curt redacted Huawei's royalty offers from the decision. Samsung unsuccessfully argued that it had already received a license to use Huawei’s patents by using Qualcomm’s chips and, therefore, patent exhaustion should apply. This decision appears to follow the “at fault” framework for awarding injunctions to a SEP owner as set out in the 2017 Beijing High Court Guidelines and, more recently, Guangdong High Court Guidelines. The case is also notable in that the court assessed an appropriate global FRAND rate (although the figures are redacted), instead of only royalty rates limited to a Chinese patent portfolio (like Huawei v. IDC).
26 April 2018 – The Higher People’s Court of Guangdong province has issued “Guidelines for Deciding SEP disputes in the Telecommunications Sector” (the “Guidelines”), which are currently in force on a trial basis for SEP-related cases taking place in Guangdong, including at the Shenzhen Intermediate Court and the Guangzhou IP Court. The Guidelines outline a fault-based approach for determining if injunctive relief should be issued in favor of the SEP owner and follow a similar framework set out in the Guidelines for Patent Infringement Determination issued by the Beijing High Court in April 2017. In particular, the Guidelines provide that final injunctive relief may only be available if the implementer violates FRAND terms during negotiations. In cases where both the SEP owner and the implementer are in violation of FRAND, an injunction may be available depending on whether the implementer’s violations were more egregious in leading to a failure to negotiate in accordance with the parties’ FRAND obligations. Moreover, the Guidelines provide factors to assess when evaluating any “at fault” conduct, such as: the process of the negotiations; the time, manner, and content of the negotiations; and reasons for any interruption or stoppage during the negotiations. Examples of SEP owner and implementer conduct that may violate FRAND are also provided in the Guidelines.
While the Guidelines are silent regarding a formula or preferred method for calculating a FRAND royalty rate, they provide that courts may consider any of the following known approaches, including evaluating comparable licenses, the top-down approach, the patent’s technical contribution to the standard implementing product, and corresponding patent pool rates. Perhaps most notably, the Guidelines provide that Guangdong courts can determine the FRAND rate for not only China, but for other jurisdictions provided the requesting party's request is reasonable and the other party does not object or their objection is unreasonable. Please read our LimeGreen IP article for more detailed discussions of the Guidelines.
Germany Update
1 February 2018 – By judgment of 1 February, the German Federal Patent Court revoked Sisvel’s European Patent EP 1 264 504 in its entirety. EP’504 was one of the two (alleged) SEPs underlying the famous Sisvel/Haier decision of the Higher Regional Court of Düsseldorf of 30 March 2017. The Federal Patent Court concluded that the claims of EP’504, as well as Sisvel’s auxiliary requests, included added matter, extended beyond the scope of the claims as granted, are not new, and for other reasons are not patentable. The second patent asserted by Sisvel against Haier expired already a while ago.
For the neutral community, which hoped to get a first landmark decision from the German Federal Supreme Court in the Sisvel/Haier infringement proceedings to answer some open questions, the judgment of the Federal Patent Court is a bit disappointing. Given that one patent has been revoked and that the other patent expired, it is now questionable whether there will be a Federal Supreme Court decision in the Sisvel/Haier infringement proceedings soon or at all.
United Kingdom Updates
26 April 2018 – The Irish Court of Appeal has set a date in July 2019 to hear Intellectual Ventures’ appeal of its jurisdictional challenge in FRAND proceedings brought by Vodafone in the Irish High Court. Vodafone’s case was brought in 2016, in the context of existing proceedings for patent infringement brought by Intellectual Ventures in the German courts. Vodafone seeks various declaratory reliefs, including a declaration as to the terms and conditions which would be FRAND for a license of the German patent portfolio.
Intellectual Ventures challenges the jurisdiction of the Irish courts under Article 29 and Article 30 of the recast Brussels Regulation (and other bases) that the Irish courts must, or should exercise their discretion to, decline jurisdiction in favor of the German courts, or at least stay the proceedings pending the outcome of related German proceedings (as well as setting aside service out of jurisdiction). In January 2017, the Irish High Court granted a stay of proceedings under Article 30(1) but declined to grant the other reliefs sought. If Intellectual Ventures’ appeal is rejected, the Irish High Court may ultimately have to rule on the terms of a FRAND license, and if Brexit takes place when expected, will do so as the only English-speaking, common law jurisdiction in the European Union.
17 May 2018 – The appeal hearing in the Unwired Planet v. Huawei dispute commenced on 17 May. This is the first dispute in the UK where the court set a FRAND rate, or settled the terms of a FRAND license between the parties. Huawei is appealing the court’s imposition of a global FRAND license of Unwired’s portfolio, enforced by a UK “FRAND injunction.” (The injunction has been stayed pending the outcome of the appeal.) Huawei’s position on appeal is that while global license offers can be FRAND, it is inappropriate for the UK Court to force an unwilling party to take a global license in principle, and on the particular facts of the case, considering the status of the parties’ litigation in Germany and China. Huawei also takes issue with the FRAND rate set, alleging it is discriminatory in comparison to Unwired’s license with Samsung. Huawei also protests the imposition of an injunction on the basis of Unwired’s conduct in negotiations.
Unwired resists the appeal on the basis that: (1) the ETSI undertaking is global in scope and the UK Court was right to conclude a national alternative unworkable (the judges in the Court of Appeal were quick to put questions to Huawei about the technicalities of matters such as grey-market imports and handset roaming); (2) Huawei’s interpretation of ”non-discriminatory” would amount to a “most-favored licensee” clause; and (iii) the Huawei v. ZTE negotiation obligations issue does not arise, as the injunction sought is conditional on Huawei’s refusal to enter into a FRAND licence.
United States Updates
11 April 2018 – U.S. Department of Justice antitrust chief Makan Delrahim outlined that the DOJ’s increased scrutiny on SEP-implementers, rather than SEP-holders, is designed to be a change in advocacy rather than an affirmative change in enforcement. In recent months, Delrahim’s public comments critical of standard-setting organizations and SEP-impelements have been received with concern by some companies that are highly reliant on SEPs, sparking industry members and Federal Trade Commission Commissioner McSweeney to issue letters against the perceived threat of a more aggressive DOJ. Delrahim asserts that the DOJ seeks to encourage participation in the standard setting process and to close enforcement gaps between Europe and the U.S. to better facilitate trade and innovation. This distinction between advocacy and enforcement may partly assuage concerns of SEP-implementers, but Delrahim also noted that the antitrust division “will not hesitate to enforce against anticompetitive collusive conduct,” so some uncertainty on the degree of SEP enforcement remains.
13 April 2018 – Soon after the decision by the People’s Court of Shenzhen ordering an injunction against Samsung for infringing Huawei’s 4G SEPs (discussed above), Judge Orrick of the Northern District of California issued an anti-suit injunction order against Huawei preventing the Chinese injunction from being enforced. Although the Chinese injunction was stayed pending appeal to the Guangdong Higher People’s Court, Judge Orrick’s ruling may prevent Huawei from enforcing it until a U.S. case dealing with similar SEP infringement issues is resolved as well. The ruling by Judge Orrick was based on a variety of factual distinctions in the case.
First, while the two cases were filed simultaneously, suggesting Huawei was not filing the Chinese case as an end-run around the U.S. case, Judge Orrick credited the U.S. case as being filed earlier, based on the time zone difference between the U.S. and China. Next, because the Chinese court only considered negotiations under two Chinese SEPs, Judge Orrick reasoned that his decision regarding Huawei’s overall global FRAND commitment would entail a broader issue than the one decided by the Chinese court. Moreover, because the U.S. case is set for trial in December and the Chinese case was based on only the two SEPs, the anti-suit injunction would be of a limited scope—only impacting the enforcement of a small number of patents for a few months. Since the ruling, Huawei filed a motion to alter the anti-suit injunction judgment, as well as an appeal to the Federal Circuit, so the anti-suit injunction decision may yet be lifted in the coming months.
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