This story concerns the dispute between Unwired Planet (‘Unwired’), mobile technology holder, against Huawei the smartphone maker, that can’t seem to stay away from the headlines. This case started in 2014 and was decided on this week.
For more context, Unwired licenses patents to companies who make and sell telecommunications equipment.
The Break Down
There are patents that need to be licensed to equipment manufacturers looking to access telecommunications standards. These are called Standard Essential Patents (SEPs). Without these patents, it is impossible to make, sell, use or operate mobile phones and any such similar equipment, in a way that is essential to international standards for mobile telephony. The international standards in question are those set by the European Telecommunications Standards Institute (“ETSI”) for 2G (GSM), 3G (UMTS) and 4G (LTE). ETSI has over 800 members from 66 countries across five continents and is recognised as the standard setting organisation in the European Union telecommunications sector. ETSI essentially seeks to achieve a large unified European market for telecommunications, so that mobile phones and other telecommunications equipment can be used internationally.
The owners of these SEPs must grant licenses of their technology on fair, reasonable and non-discriminatory (FRAND) terms. The aim is to ensure that manufacturers of mobile equipment have access to the technology that they need, and is protected by the SEPs, while also providing the SEP owners with a fair reward.
Unwired brought an action against Huawei, for the infringement of five UK patents which Unwired claimed to be SEPs. The SEPs in question form part of the worldwide patent portfolio. There was a technical trial to determine whether those five were indeed infringed, but long story short, it was found that two of the SEPs were valid and essential. So, two of SEPs had been infringed by Huawei.
The UK Supreme Court held that Unwired’s undertaking to license its SEPs on FRAND terms was justiciable and enforceable in the English courts, and Huawei could either enter into a licensing agreement with Unwired for the SEPs or face an injunction for infringing UK patents.
What Does This mean?
Essentially, Huawei cannot sidestep Unwired or any other SEP holder for that matter, if it needs such patents to operate in the UK. As a result, Huawei and any other company like it, needs to take out global licenses from such holders of these SEPs covering the entirety of their portfolios.
Huawei would also need to pay royalties to Unwired on its worldwide sales. This was disputed as Huawei felt that this was not fair due to the fact that the majority of its sales were in China, and so contended for a UK only licence and so preferring royalties to be paid only in respect of UK sales.
It was argued by Huawei that Chinese courts and not English courts should hear FRAND claims concerning foreign patents, and the English courts should not exclude Huawei’s products from the UK market via an injunction. The Supreme court disagreed, ruling that English courts have the jurisdiction to determine the terms of a global license of a multi-national patent portfolio. This seemed to be a major decision, as it now allows the UK courts to grant a global FRAND license and injunctions based on a UK patent.
The idea behind this case is to reinforce protection of SEPs. The inventors of such SEPs are usually small companies. If the decision had gone the other way in Huawei’s favour, this would have implied that licenses needed to be granted on a country-by-country basis. This means that the inventors of such SEPs will benefit/not benefit, depending on the country that the SEP is registered in, but most likely not benefit overall. Meaning that big tech giants such as Huawei would be in a better position to essentially deny these SEP holders what such a patent is really worth in royalties worldwide. As a result, such a case continues to protect these small companies and allows them to continue to license such SEPs to multinational and multiple equipment manufacturers such as Huawei, looking to access telecommunications standards internationally.
If you are interested in disputes and litigation, this is an example of how long cases can take. This case lasted from 2014 – 2020. Additionally, tf you enjoy technical black letter law, in which you are given the opportunity to conduct a lot of research and read multiple precedent cases, this type of work is for you.
This also means that we should expect to see more of such cases crop up, as big tech giants look to take on these small companies that hold SEPs.
However, it does make the UK a more difficult market to break into when looking to implement such essential patents. Companies either enter into licensing agreements with SEP holders and pay royalties on their worldwide sales or face injunctions. In consequence of this, this should promote more innovation and fairer competition in the UK.
For a more detailed analysis of this case, check out this link: https://www.supremecourt.uk/cases/docs/uksc-2018-0214-press-summary.pdf