Factual and Procedural Background
This appeal concerns whether a willing licensor of a portfolio of patents declared essential to European Telecommunications Standards Institute ("ETSI") standards ("standard-essential patents" or "SEPs") would grant an implementer an interim licence on terms to be determined as fair, reasonable, and non-discriminatory ("FRAND") pending that determination. This is the third appeal on this issue following previous decisions involving other parties, including a declaration that a willing licensor would grant an interim licence under similar circumstances.
The dispute involves two companies, hereinafter referred to as Plaintiff and Defendant, both SEP owners and implementers of ETSI 4G and 5G standards. The Plaintiff has undertaken to enter into a global cross-licence on terms determined by the Patents Court to be FRAND, whereas the Defendant has not given such an undertaking. The Plaintiff seeks a declaration that a willing licensor in the Defendant's position would grant an interim cross-licence pending the final FRAND determination.
The background includes numerous parallel proceedings in multiple jurisdictions, including the Federal Court for the Eastern District of North Carolina ("EDNC"), the US International Trade Commission ("ITC"), and courts in Brazil and Colombia, with the Defendant pursuing injunctions against the Plaintiff in those jurisdictions. The Plaintiff has offered to pay royalties on an interim basis pending final determination, but the Defendant has refused to accept such offers.
Within England and Wales, the Plaintiff has initiated several claims, including one seeking determination of FRAND terms for a global cross-licence, and subsequent applications for declarations and expedition of trials. The Defendant challenged jurisdiction and sought stays of proceedings, but these were refused. The Patents Court refused the Plaintiff's application for a declaration that a willing licensor would grant an interim licence, leading to the present appeal.
Legal Issues Presented
- Whether a willing licensor of a portfolio of SEPs would grant an implementer who has undertaken to take a licence on FRAND terms an interim licence pending final determination of those terms.
- Whether the Defendant is acting in breach of its obligation to negotiate and grant licences in good faith under the ETSI IPR Policy.
- Whether granting the requested declaration would serve a useful purpose.
- Whether granting the declaration would be contrary to the principle of comity with foreign courts and tribunals.
- What terms would be FRAND for an interim licence pending final determination.
Arguments of the Parties
Appellant's Arguments
- The Plaintiff has undertaken to enter into a global cross-licence on terms determined to be FRAND and has offered to pay royalties on an interim basis pending final determination.
- The Defendant's pursuit of injunctions and equivalent relief in multiple foreign jurisdictions despite the Plaintiff's undertaking is a breach of the Defendant's obligation of good faith under clause 6.1 of the ETSI IPR Policy.
- The purpose of the Defendant's actions is to coerce the Plaintiff into accepting terms more favorable than those the Patents Court would determine to be FRAND, amounting to hold up.
- Granting the declaration would serve a useful purpose by compelling the Defendant to reconsider its position and potentially avoid burdensome and wasteful litigation abroad.
- The Defendant's accounting arguments against accepting interim payments are unfounded and irrelevant to the legal obligation to negotiate in good faith.
- The principle of comity does not preclude the English court from granting the declaration, particularly as the English courts have jurisdiction over key issues and the Defendant has not invoked their jurisdiction or given undertakings.
- The FRAND terms for the interim licence should be a midpoint between the parties' respective offers, adjustable upon final determination.
Respondent's Arguments
- The Defendant asserts entitlement to enforce its SEPs in any court or tribunal of competent jurisdiction until the Plaintiff actually enters into a cross-licence.
- The Defendant denies acting in bad faith or seeking supra-FRAND terms, relying on an independent and impartial assessment by the US Office of Unfair Import Investigations ("OUII") that its October 2023 offer was within the FRAND range.
- The Defendant contends that the case is distinguishable from previous cases because it has not invoked the English courts' jurisdiction nor undertaken to enter into a licence on terms determined by the Patents Court.
- The Defendant argues that the EDNC, being first seised of the dispute, should determine FRAND terms rather than the English courts.
- The Defendant claims that granting the declaration would offend the principle of comity and promote forum shopping.
- The Defendant disputes the Plaintiff's accounting and procedural claims concerning interim payments and licence terms.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Panasonic Holdings Corp v Xiaomi Technology UK Ltd [2024] EWCA Civ 1143 |
Willing licensor would grant an interim licence pending FRAND determination; breach of good faith by SEP owner pursuing injunctions despite undertaking. |
Used as a leading authority for granting interim licences and analyzing good faith obligations; court considered whether its reasoning was confined to its facts or applicable more widely. |
| Alcatel Lucent SAS v Amazon Digital UK Ltd [2025] EWCA Civ 43 |
Granting interim licences and amendments to statements of case regarding FRAND licensing. |
Supported the proposition that a willing licensor would grant an interim licence; court referred to it in assessing willingness and FRAND terms. |
| Unwired Planet International Ltd v Huawei Technologies Co Ltd [2020] UKSC 37 |
Binding authority on ETSI IPR Policy interpretation; FRAND obligation as contractual and requiring good faith negotiation; global FRAND licence jurisdiction. |
Formed the legal foundation for the court's analysis of FRAND obligations, good faith, and jurisdiction in SEP licensing disputes. |
| InterDigital Technology Corp v Lenovo Group Ltd [2024] EWCA Civ 743 |
Definition of FRAND terms; willingness of hypothetical licensor and licensee; no role for limitation periods in FRAND determinations; payment of interest on royalties. |
Clarified principles on willingness, FRAND ranges, and interest, which were applied in assessing parties' positions and interim licence terms. |
| Optis Cellular Technology LLC v Apple Retail UK Ltd [2022] EWCA Civ 1411 |
National courts' limited powers to enforce FRAND determinations; importance of negotiation; enforcement through injunctions or withholding injunctions. |
Used to explain the enforcement mechanisms available to national courts in SEP disputes and the limits of such enforcement. |
| Teva UK Ltd v Novartis AG [2022] EWCA Civ 1617 |
Limits on English courts making declarations solely to influence foreign courts; principle against jurisdictional imperialism. |
Applied in assessing whether granting declarations would be contrary to comity and appropriate use of English court jurisdiction. |
| Huawei Technologies Co Ltd v ZTE Corp (Case C-170/13) [EU:C:2015:477] |
FRAND obligation extends to negotiation process; good faith required on both sides. |
Supported the court's understanding of FRAND as involving procedural obligations, not just substantive terms. |
| Hilton v Guyot 159 U.S. 113 (1895) |
Definition and scope of the principle of comity between nations' courts. |
Referenced in assessing comity concerns related to parallel foreign proceedings and injunctions. |
| Credit Suisse Fides Trust v Cuoghi [1998] QB 818 |
Comity requires mutual respect for territorial jurisdiction of foreign courts. |
Supported the court's analysis of comity and respect for foreign jurisdictions in SEP disputes. |
| Phoenix Marine Inc v China Ocean Shipping Co [1991] 1 All ER (Comm) 138 |
Standard and burden of proof in relation to foreign law evidence. |
Discussed in relation to procedural issues on proving French law applicable to ETSI IPR Policy. |
Court's Reasoning and Analysis
The court began by reaffirming the legal framework governing SEPs and FRAND licensing, primarily derived from the ETSI IPR Policy and the binding Supreme Court decision in Unwired Planet v Huawei. It emphasised that FRAND terms are those that would be agreed by a hypothetical willing licensor and licensee, neither intent on hold up or hold out, and that a range of terms may be FRAND.
The court noted the territorial nature of patents but acknowledged the global nature of the FRAND obligation and the lack of a global dispute resolution mechanism, leading to jurisdictional complexities.
Turning to the facts, the court observed that the Plaintiff had undertaken to enter into a global cross-licence on FRAND terms as determined by the Patents Court, while the Defendant had not given such an undertaking and was pursuing injunctions and enforcement proceedings in multiple jurisdictions without seeking to resolve FRAND terms globally.
The court analysed the Defendant's conduct in light of the obligation of good faith under French law (governing the ETSI IPR Policy), concluding that pursuing injunctions and enforcement actions despite the Plaintiff's undertaking and offers to pay royalties on an interim basis was inconsistent with good faith and amounted to coercion or hold up.
The court dismissed the Defendant's accounting-based arguments against interim payments as irrelevant to the legal obligation to negotiate and grant licences in good faith.
Regarding the utility of granting the declaration sought, the court found that such a declaration would serve a useful purpose by compelling the Defendant to reconsider its position and potentially avoid burdensome litigation abroad, with a real prospect of compliance despite no guarantee.
On comity, the court held that granting the declaration would not offend principles of mutual respect for foreign courts, especially as the English courts have jurisdiction over key issues and the Defendant had not challenged this jurisdiction. The court rejected arguments that the declaration would interfere improperly with foreign proceedings or promote forum shopping.
The court determined that FRAND terms for the interim licence should be a midpoint between the parties' respective offers, adjustable upon final determination by the Patents Court.
Finally, the court allowed the appeal, concluding that the Defendant was in breach of its good faith obligation, a willing licensor would grant an interim licence, the declaration would serve a useful purpose, and comity did not preclude granting the declaration.
Holding and Implications
The court's final decision was to ALLOW THE APPEAL.
This means that the court overturned the lower court's refusal and declared that a willing licensor in the Defendant's position would grant an interim cross-licence on FRAND terms pending final determination by the Patents Court. The FRAND terms for the interim licence should be the midpoint between the parties' offers, subject to adjustment after the final FRAND determination.
The decision requires the Defendant to reconsider its enforcement strategy and conduct negotiations in good faith, potentially reducing parallel litigation and injunctions in foreign jurisdictions. However, the court did not set new precedent beyond applying existing principles to the facts, and the ruling is specific to the circumstances where the implementer has undertaken to enter into a licence on FRAND terms.