Huawei Faces UK Sales Ban After Judge Sets FRAND Rate
Law360, New York (April 5, 2017, 10:14 PM EDT) -- A British judge has ruled that Huawei may be barred from selling its smartphones in the U.K unless it licenses standard-essential Unwired Planet wireless technology patents at a rate he determined to be reasonable, a decision that sets guidelines for licensing essential patents.
The 163-page opinion by Justice Colin Birss of the High Court of Justice is the first ever issued by a U.K. judge on the closely watched issue of what constitutes a patent royalty rate that is fair, reasonable and nondiscriminatory, or FRAND. Owners of patents that are essential to industry standards often commit to license them on such terms.
The judge found that neither U.S.-based Unwired Planet International Ltd.’s offers to license its standard-essential 3G and 4G wireless patents to Chinese smartphone maker Huawei Technologies Co. Ltd., nor Huawei’s counteroffers, were FRAND, but that Unwired Planet’s offers and its suit seeking an injunction did not violate competition law.
Since he had already found last year that Huawei infringed the patents, the judge proceeded to set a FRAND rate himself and concluded that Huawei must accept it or face an injunction barring U.K. sales of the infringing products.
“Since Unwired Planet have established that Huawei have infringed ... and since Huawei have not been prepared to take a licence on the terms I have found to be FRAND, and since Unwired Planet are not in breach of competition law, a final injunction to restrain infringement of these two patents by Huawei should be granted,” he wrote.
The judge set a hearing on the injunction later this month if Huawei does not agree to license the patents. If an injunction is imposed, Huawei will also have to pay damages in the form of back royalties at the FRAND rate, Judge Birss ruled.
Unwired Planet acquired numerous standard-essential patents from Ericsson and used them to sue Huawei, Google Inc. and Samsung Electronic Co. Ltd. in the U.K., but Google and Samsung have settled. The judge’s decision on Huawei addressed numerous issues of first impression for the U.K. regarding standard-essential patents and FRAND rates.
Judge Birss held that the court has the authority to establish a FRAND rate and is not limited to determining whether offers by the parties were FRAND, and that only one set of licensing terms is FRAND in a given situation.
He also held that a company that infringes standard-essential patents and refuses to take a license on the court's FRAND terms can be subject to an injunction.
He ruled that FRAND rates should be established by setting a benchmark rate governed by the value of the patent owner's portfolio and by reviewing comparable licenses, and that the rate does not vary depending on the size of the licensee.
Based on those principles, he concluded that the Unwired Planet’s licensing offers were too high and Huawei’s counteroffers were too low. Since neither offer was FRAND, he calculated the rate himself.
The judge rejected Huawei's argument that Unwired Planet violated competition law and abused its dominant position in the market for the essential patents by seeking a worldwide license, rather than a license only for sales in the U.K.
He held that "willing and reasonable parties would agree on a worldwide licence" so Unwired Planet is entitled to insist on one. He also said it was not a violation of competition law for Unwired Planet to seek an injunction in its infringement case.
EIP Legal, the law firm that represents Unwired Planet, said in a statement that the decision makes clear that unless Huawei agrees to enter into a worldwide license for Unwired Planet's patents, it could be barred from selling mobile devices in the U.K.
Gary Moss, who led the EIP team, called the ruling an "important contribution to the worldwide body of case law" on standard essential patents and a validation of Unwired Planet's licensing approach.
Moss said that before the ruling, there had been a widespread view that even if an infringer of essential patents were successfully sued, it would only have to pay the rate it would have had to pay anyway, and only in the countries in which it was sued.
"That gave an incentive for implementers to hold out in the hope of achieving a more favorable royalty rate," Moss said. "Today's judgment confirms that this need not be the case, and that the English court will take a commercially sensible, 'real-world' approach to such issues."
Huawei said in a statement that it welcomed the decision that Unwired Planet's royalty rate demands were unreasonable, but is evaluating the entire ruling and considering its next steps.
Unwired Planet is represented by Adrian Speck QC Sarah Ford, Isabel Jamal and Thomas Jones of of 8 New Square, EIP Legal and Enyo Law LLP.
Huawei is represented by Andrew Lykiardopolous QC of 8 New Square and James Segan of Blackstone Chambers and Powell Gilbert LLP.
The case is Unwired Planet International Ltd. v. Huawei Technologies Co. Ltd., case number 2017EWHC711, in the U.K. High Court of Justice.
--Editing by Jill Coffey.
The 163-page opinion by Justice Colin Birss of the High Court of Justice is the first ever issued by a U.K. judge on the closely watched issue of what constitutes a patent royalty rate that is fair, reasonable and nondiscriminatory, or FRAND. Owners of patents that are essential to industry standards often commit to license them on such terms.
The judge found that neither U.S.-based Unwired Planet International Ltd.’s offers to license its standard-essential 3G and 4G wireless patents to Chinese smartphone maker Huawei Technologies Co. Ltd., nor Huawei’s counteroffers, were FRAND, but that Unwired Planet’s offers and its suit seeking an injunction did not violate competition law.
Since he had already found last year that Huawei infringed the patents, the judge proceeded to set a FRAND rate himself and concluded that Huawei must accept it or face an injunction barring U.K. sales of the infringing products.
“Since Unwired Planet have established that Huawei have infringed ... and since Huawei have not been prepared to take a licence on the terms I have found to be FRAND, and since Unwired Planet are not in breach of competition law, a final injunction to restrain infringement of these two patents by Huawei should be granted,” he wrote.
The judge set a hearing on the injunction later this month if Huawei does not agree to license the patents. If an injunction is imposed, Huawei will also have to pay damages in the form of back royalties at the FRAND rate, Judge Birss ruled.
Unwired Planet acquired numerous standard-essential patents from Ericsson and used them to sue Huawei, Google Inc. and Samsung Electronic Co. Ltd. in the U.K., but Google and Samsung have settled. The judge’s decision on Huawei addressed numerous issues of first impression for the U.K. regarding standard-essential patents and FRAND rates.
Judge Birss held that the court has the authority to establish a FRAND rate and is not limited to determining whether offers by the parties were FRAND, and that only one set of licensing terms is FRAND in a given situation.
He also held that a company that infringes standard-essential patents and refuses to take a license on the court's FRAND terms can be subject to an injunction.
He ruled that FRAND rates should be established by setting a benchmark rate governed by the value of the patent owner's portfolio and by reviewing comparable licenses, and that the rate does not vary depending on the size of the licensee.
Based on those principles, he concluded that the Unwired Planet’s licensing offers were too high and Huawei’s counteroffers were too low. Since neither offer was FRAND, he calculated the rate himself.
The judge rejected Huawei's argument that Unwired Planet violated competition law and abused its dominant position in the market for the essential patents by seeking a worldwide license, rather than a license only for sales in the U.K.
He held that "willing and reasonable parties would agree on a worldwide licence" so Unwired Planet is entitled to insist on one. He also said it was not a violation of competition law for Unwired Planet to seek an injunction in its infringement case.
EIP Legal, the law firm that represents Unwired Planet, said in a statement that the decision makes clear that unless Huawei agrees to enter into a worldwide license for Unwired Planet's patents, it could be barred from selling mobile devices in the U.K.
Gary Moss, who led the EIP team, called the ruling an "important contribution to the worldwide body of case law" on standard essential patents and a validation of Unwired Planet's licensing approach.
Moss said that before the ruling, there had been a widespread view that even if an infringer of essential patents were successfully sued, it would only have to pay the rate it would have had to pay anyway, and only in the countries in which it was sued.
"That gave an incentive for implementers to hold out in the hope of achieving a more favorable royalty rate," Moss said. "Today's judgment confirms that this need not be the case, and that the English court will take a commercially sensible, 'real-world' approach to such issues."
Huawei said in a statement that it welcomed the decision that Unwired Planet's royalty rate demands were unreasonable, but is evaluating the entire ruling and considering its next steps.
Unwired Planet is represented by Adrian Speck QC Sarah Ford, Isabel Jamal and Thomas Jones of of 8 New Square, EIP Legal and Enyo Law LLP.
Huawei is represented by Andrew Lykiardopolous QC of 8 New Square and James Segan of Blackstone Chambers and Powell Gilbert LLP.
The case is Unwired Planet International Ltd. v. Huawei Technologies Co. Ltd., case number 2017EWHC711, in the U.K. High Court of Justice.
--Editing by Jill Coffey.
No comments:
Post a Comment