Unwired Planet – AIPPI Rapid Response Seminar – Part 2

On 13 November 2018 AIPPI held a rapid response seminar on the SEP Litigation and FRAND licensing decision of the Court of Appeal in Huawei v Unwired Planet [2018] EWCA Civ 2344.

This is Part Two of this article. Please see here for Part One. 

Part Two looks at the responses to the Judgment and its wider consequences. We kick off again with Richard Vary and Sir Robin Jacob. 

The Consequences of the Judgment

Whether the FRAND obligation extends to an obligation to license to all parties is currently a hot topic.

Does the Unwired Planet Judgment indicate that FRAND undertakings oblige licensors to licence to other parties at all parts of the supply chain? Car manufacturers are keen on this as it allows them to buy in components from OEM providers in the knowledge all the necessary rights have already been acquired. Manufacturers of high end smartphones are keen as they would prefer their component manufacturers to pay 1% of the cost of a $5 chip than for them to pay 1% of the cost of a $1000 phone.

Paragraphs 53 / 80 / 178 / 196 of the Unwired Planet Judgment have been proposed to support the position of universal licensing in this context. Sir Robin Jacob wasn’t impressed by these citations however and said this was “desperate stuff” and that the statements in those paragraphs should not even be considered to count as obiter statements on the law.

UK (F)RAND Proceedings Summary 

[Ed: I have moved these updates to an independent page at http://cronan.co.uk/uk-frand/ ]

Unwired Planet v Huawei 

Will be heard by the Supreme Court in late 2019.

Conversant v Huawei& ZTE: – Substantive proceedings underway

Ed C: Mr Justice Henry Carr’s decision to grant jurisdiction has gone on appeal (EPLaw) and now been upheld by the Court of Appeal (Judgment). A further appeal is also due to be heard by the Supreme Court in conjunction with the UP v Huawei appeal. 

Apple v Qualcomm – competition dispute: delayed following a successful jurisdiction challenge

Ed C: See coverage by Bird & Bird as to the reasons why Conversant’s claim was able to continue but Apple’s was stayed.

Philips v HTC:- Ongoing

EdC: The technical trials have all now taken place at first instance:

• [2018] EWHC 1826(Pat) (valid and infringed);
• [2018] EWHC 1732(Pat) (invalid);
• [2018] EWHC1224 (Pat) (valid and infringed))

Philips v Tinno: – No reported hearings

Ed C: Tinno are a behind the scenes ODM manufacturer, producing devices on behalf of other companies, much like HTC did when it was first starting out. It’s probably safe to assume this action relates to telecoms patents, potentially including the EP826 and EP224 patents asserted against HTC, which will now benefit from a certificate of contested validity. 

TQ Delta v Zyxel:  – Awaiting Appeal

Having found one patent valid and infringed (Judgment) Henry Carr J went on to order an injunction, despite the patent term being only a few months from expiry, due to hold-out by Zyxel – see Judgment and coverage by Bird & Bird. 

The TQ Delta litigation is of interest as rather than relating to 2G/3G/4G patents it relates to two patents for modem technologies standardised by ITU-T: ADSL2, ADSL2+ and VDSL2, which TQ Delta is willing to license on RAND terms. There will be some important consequences:

• The decision will work off the ITU common patent policy (which also underlies the HEVC/H.265 video codec standard, potentially a major future FRAND battleground) rather than the ETSI undertaking;
• The decision will illustrate the extent to which the Unwired Planet decision is relevant outside of the French law basis for the contract; and
• Considerations about portability of technology between different jurisdictions with different national rights will not be as pressing.

We will see whether these proceedings continue on appeal following the grant of the injunction. 

IPCom v Vodafone

IPCom have recently requested an expedited trial in relation to one 3G SEP and one 4G SEP. The first technical trial is now due for the end of November 2019. 

What’s going on in Other Courts?

The “Guangdong guidelines” have been published in China: these require the Guangdong Court to make no unreasonable objections to determination of overseas license terms. The Japanese patent office is also apparently interested in doing something along those lines.

Amember of the audience pointed out that no official reference has been made tothese guidelines by a court in China and that they may not be formally published. Given the people’s national congress have stated that all firstinstance patent cases will now go to a special court in China, will the GuangdongGuidelines have any relevance going forward?

Kühnen J has hinted that the Dusseldorf court is not as limited as people think – it is willing to adopt a more mediatory approach and provide feedback on the availability of an injunction depending on the license rates proposed by a SEP holder.

How can the UK stay ahead of the pack?

Improve the speed of decisions

TQ Delta is only taking 18 months to go to trial. That could rival the 18 month period for recent ICC arbitrations. The English Court needs to match that. Arbitrations generally cost 2% or less of license value, and part of that is down to the speed of the action.

RV says the UK needs to overcome its reputation as the ‘graveyard of patents’: the old joke about UK Judges continues abroad: if they understand it the patent is obvious, if they don’t then it’s insufficient. This is unfair on the basis of recent decisions.

More sophisticated use of comparable licenses

This requires adaptation for different jurisdictions, relative share of the patent market, differentiation between handset and infrastructure sub-portfolios, and weighting between standards within a portfolio (between 2G and 4G for instance).

RV says that there also needs to be adjustment for risk allocation between parties:risk allocation mainly occurs by upfront payments and ongoing license fees and license fees need to take this into account. Early licensees, front loaded payments, and long licenses will all cost less on a per unit basis as uptake and longevity of the standard is an unknown quantity.

Improved metrics for portfolio strength

Filtered patent counting may be displaced as the go-to methodology. Huawei v Samsung in China and a number of recent arbitrations are using different or hybrid methods. Standards contributions may be relevant; citation analysis may also be relevant (though Sir Robin Jacob says this is complete nonsense:patent examiners have their favourite pieces of prior art and they will always cite it! Economists like any proxy says Sir Robin).

RV says the danger with dismissing measures of portfolio strength out of hand is that you end up with only a single least flawed measure, rather than collating inputs.

Conclusions

RV says the basic questions have now been answered: The UK has become a very real option to unblock the licensing bottleneck.

With thanks to –

Sara Ashby as Honorary Secretary of AIPPI UK, Sir Robin Jacob, and to Richard Vary, both for hosting the event at Bird & Bird, and for kindly allowing publication of this report.

See also: the IPKat Report for further details on some of the questions asked of the hosts at the end of the seminar.