In Unwired Planet v Huawei Mr Justice Birss has created a new type of injunction – the FRAND injunction.
This case forms part of a long-running dispute between Unwired Planet and Huawei relating to the determination of FRAND (Fair, Reasonable and Non-Discriminatory) licensing terms for a portfolio of standard essential (SEPs) telecoms patents.
In April this year, Mr Justice Birss handed down the main FRAND judgement in this dispute, in which he determined, for the first time by a UK Court, the FRAND royalty rate and terms of a licence between the parties (the Settled Licence). In the April judgment Birss J also found that, in principle, an injunction ought to be granted to prevent Huawei from infringing the two standard essential patents that were found valid and infringed. As at the date of the April decision Huawei was willing to enter into a UK portfolio licence, but refused to enter into a worldwide licence. The Court found that a worldwide, and not UK, licence is FRAND, and therefore Huawei was unlicensed, yet had the means to become licensed open to it. However, the grant of an injunction was stood over for consideration at this later hearing.
(Co-authored with George Bentall)
Revised undertakings from Huawei
Since the April judgment, Huawei offered revised undertakings to the Court that Huawei would now enter into any form of licence that the UK Court settles as FRAND. Huawei argued the Court should accept these undertakings and refuse to grant an injunction, not least because the term of the Settled Licence is shorter than the life of the patents found to be valid and infringed. Consequently, re-negotiating a licence under the spectre of an injunction would weaken Huawei’s negotiating position.
Birss J refused to accept these undertakings and granted the injunction (stayed pending appeal). In the usual course, where an IP rights holder has been forced to come to Court and vindicate its claim, an offer of undertakings made after judgment is usually regarded as too late. Whilst the FRAND undertaking does make the situation different from a normal IP case, Birss J’s view was that as Huawei had refused to offer an unqualified undertaking before trial, and before judgment, its change in stance after judgment was too little too late.
The FRAND injunction
Birss J considered the correct form a final injunction should take in respect of patents subject to a FRAND undertaking when the court has settled a FRAND licence but the defendant has not entered into it.
Birss J recognised that a standard form of injunction would not be appropriate in the context. In addition to the issue raised regarding re-negotiation, he noted that if, for example, a dispute arose about an alleged repudiatory breach of the Settled Licence Huawei could find itself in contempt of Court if it continued to sell products during a period where there was an argument that the licence had terminated.
With an eye to these issues, the “FRAND injunction” was created.
The FRAND injunction is essentially a normal injunction to restrain infringement of the relevant patents, with two added features. Firstly, the injunction will cease to have effect if the defendant enters into that FRAND licence. Secondly, if the licence term is shorter than the life of the relevant patent(s) the injunction is subject to an express liberty to either party to return to court in the future to address the position at the end of the term. In any event, the injunction should be subject to an express liberty to apply in the event the FRAND licence ceases to have effect.
The net effect of the FRAND injunction is that as long as the defendant enters into the Court determined FRAND licence, there should be no injunction at all.
Further, if, from the outset, Huawei had given an unqualified undertaking to enter into whatever licence the Court (including final appeals) decided to be FRAND, an injunction would not have been granted. Accordingly, prospective SEP licensees can protect themselves from the risk of a FRAND injunction by offering an unconditional undertaking at the outset of any proceedings, and behaving in accordance with the CJEU guidelines in Huawei v ZTE. In essence, acting as a willing licensee.
FRAND Licence Agreement
Annexed to the judgement is the Court determined FRAND licence. This licence provides useful benchmark royalty rates for 2G, 3G and 4G SEPs, and the terms generally should prove to be an invaluable point of reference, particularly for telecoms SEP licence negotiations. However, over-reliance on extrapolating its terms in subsequent negotiations should be exercised with caution – it represents FRAND terms applicable between these parties in these particular circumstances.