The Unwired Planet vs. Huawei FRAND judgement – shortest version

Earlier this month, a UK court made a judgement in a Standard Essential Patent (SEP) dispute between Unwired Planet and Huawei. Briefly, the dispute concerns abuse of dominant position (in this case Huawei accuses Unwired Planet of abusing their position) and what is considered to be FRAND terms. FRAND is the acronym for fair, reasonable and non-discriminatory. It generally arises in disputes in which an owner of intellectual property rights refuses to grant a license, or refuses to grant a license on FRAND terms.

The judgement is long; a shortest possible overview is given here. Please read the full ruling for further details.

Mr Justice Birss of the UK court found that Unwired Planet (now acquired by PanOptis) does not abuse a dominant position.

Interestingly enough, the judgement deals with actual FRAND issues, such as pinning down a royalty rate, while taking commercial considerations into account. The judgement confirms an often used scheme for setting the royalty rate. The scheme uses a ratio between a licensor’s number of relevant SEPs and a total number of SEPs for the standard to be licenced to find the licensor’s share. Unwired Planet’s share was found to be 0.75 %. The royalty rate is then given as the licensor’s share of the total aggregate royalty burden, being almost 9 % for this standard. In view of expected future license negotiations relating to e.g. Internet-Of-Things, this judgement does however not give any guidance whether a per device or per chip approach shall be applied.

Another FRAND issue often debated is that of the territorial scope of the license. In this dispute, Huawei held that the scope ought to be limited to the UK, but the court ruled in favour of Unwired Planet. Again, it is seen that the court takes a commercial approach while a local license would be seen as “madness”, using the judge’s wording. This is favourable for patent proprietors, since a worldwide license clearly has a higher value than a local, or per jurisdiction, license.

Moreover, in case FRAND negotiations collapse, the present judgement is an important landmark, since judge Birss stresses that if a license under FRAND terms is presented and the potential licensee still is unwilling to sign, an injunction to restrain infringement should be granted. So far, Unwired Planet has not yet presented an agreement under FRAND terms. Thus, it remains to be seen whether or not Huawei will be banned from the market in view of products falling within the scope of the disputed SEPs.

Furthermore, the judge held that there is only one set of licence terms which are FRAND in a given set of circumstances based on the conclusion that FRAND is a process used to reach an agreement between parties. The agreement stipulates rights and obligations of the involved parties.

Judge Birss made a thorough analysis of previous rulings of courts in different countries, such as Germany, the United States, Japan, China etc. and references these rulings in his judgement. The judgement will thus most likely have a considerable effect on future negotiations between parties.

// Johan Ståhlberg & Stefan Dufva