HomeInsightsHigh Court rules that injunction for infringement of telecoms Standard Essential Patent can be granted pending determination by the court of FRAND licence terms

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Facts

In this ongoing litigation, Optis alleges that Apple has infringed eight telecommunications Standard Essential Patents (SEPs) by Apple’s 3G and 4G connected devices.

Four technical patent trials (Trials A – D) have been listed in the High Court between October 2020 and January 2022. Two of those have been determined (A and B), with two more pending at the time of writing.

In Trial A the court found one of the patents, which subsequently expired, to be valid, essential and infringed. In Trial B, the court found a second patent, which has not expired, to be valid, essential and infringed. The further technical trials will determine whether there are other patents in the portfolio that are valid, essential and infringed.

Trial E will determine the terms of a global  FRAND licence (following the Supreme Court decision in Unwired Planet v Huawei [207] EWHC 711 (Pat)) and rule on various allegations made by Apple of anti-competitive behaviour by Optis. This has been listed for trial in June and July 2022. The parties are far apart on what licence terms would be FRAND.

In this Trial F, Optis said that Apple was an “unwilling licensee” because it was not prepared unconditionally to commit to taking a licence on FRAND terms determined by the court, and that it was therefore disentitled from relying on Optis’ FRAND commitments to the European Telecommunications Standard Institute (ETSI), in particular under clause 6.1 of the ETSI IPR policy, as: (i) a defence to an injunction in relation to its infringement of the Trial B patent; or (ii) in the context of any competition law issues. In Optis’ view, Apple was seeking to take the benefit of Optis’ FRAND undertakings without accepting the burden. Optis argued that if Apple wished to obtain the benefit of the FRAND undertaking then it should also accept the burden and commit now to taking whatever licence the Court determines to be FRAND in Trial E.

Apple argued that the breaches of competition law by Optis that Apple had alleged precluded the court from granting the injunction in relation to the Trial B patent, either because those allegations would ultimately prove to be well-founded or because the allegations must be assumed to be well-founded pending their determination at Trial E.

Decision

Clause 6.1

Apple said it was unfair to make it commit to FRAND terms without knowing what they are and that clause 6.1 of the ETSI IPR policy, which is subject to French law, did not explicitly state any obligation by the implementer to agree to take a FRAND licence.

Optis interpreted clause 6.1 as meaning that an implementer that wants to take advantage of a SEP holder’s FRAND undertaking must engage constructively in negotiations and if no agreement is reached must commit to take a licence on terms decided by a court. The implementer’s commitment must be given either when the SEP holder unequivocally commits to give a FRAND licence, or, alternatively, when there is a finding of validity and infringement. Optis therefore contended that an implementer must commit to a court-determined FRAND licence in advance of knowing its terms.

Apple said that clause 6.1 contains no limitation other than that the implementer seeks a licence. Accordingly, an implementer can meet that minimal requirement at any time and is entitled to wait until the court’s decision about what FRAND terms are, and then decide.

Mr Justice Meade interpreted Apple’s position as wanting a licence, but only if it liked the terms in due course, and that it was reserving the right to reject the licence on offer. In other words, it was not seeking a licence, but an option on a licence or a mere determination of what licence terms would be. Alternatively, it was not seeking a licence but merely expressing a conditional interest in one. This approach would in fact provide it with a tool that could be used to support “hold out”, which case law made clear should be avoided.

In Meade J’s view, the right interpretation of Clause 6.1 was that any person interested in implementing an ETSI standard must be entitled to have a licence on FRAND terms on demand to a patentee that has given the relevant undertaking.

However, Meade J said, that person must be entitled to have and take a licence, and to operate under a licence. Whether or not this might be fact sensitive in some cases, it was not in the present case, since Apple intended, unless the court stopped it, to work without a licence for a period from now until Trial E. It would also not be fact sensitive in any case where the implementer declined to commit to a licence on FRAND terms but wanted to work the technology of a patent that it had been found to infringe.

Meade J also found that clause 6.1. did not change the position that a party without a licence may potentially be injuncted. Therefore, he accepted Optis’ argument that it was not right, and not the intention of Clause 6.1, for a party using the technology of a SEP to have the benefit of the patentee’s FRAND undertaking in terms of immunity from being sued, without the corresponding burden of taking a licence. In Meade J’s view, it was obvious that ensuring there was not the ability for implementers to work the standard without a licence was the intention of ETSI.

Given that Apple was infringing Optis’ patent rights now, it needed a licence now, Meade J said, and in the absence of a licence there should be an injunction. The way for Apple to remedy the situation was to give an undertaking to take whatever licence was set at Trial E.

As for when, generally speaking, an implementer should commit to taking a licence on FRAND terms, Meade J rejected Optis’ argument that the commitment must be given as soon as the SEP owner indicates that it is willing to grant a FRAND licence on terms settled by the court. In Meade J’s view, the implementer should not have to commit until infringement is found, as until then the implementer may believe that it is not infringing. Looking at Clause 6.1 as not requiring an actual commitment, Meade J said that when there has been a finding of infringement of a valid patent, the implementer should be able to have a licence if it wants one (i.e., if it wants to carry on practising the patent), but only if it intends to do so under a licence, which requires the giving of an undertaking.

Abuse of dominance

As for Apple’s allegations of abuse of dominance by Optis, Meade J rejected Optis’ argument that because it had committed to the court’s FRAND terms, while Apple had not, there could be no finding of abuse. Meade J said that even where the SEP owner was willing to abide by the court’s decision on FRAND, there could still potentially be an abuse. For example, a willing SEP owner might yet perpetrate an abuse by suing without adequate notice or consultation in breach of the hard restriction against doing so. Alternatively, a SEP owner could refuse to negotiate. In both these scenarios the implementer would be put under pressure to agree to pay royalties at too high a rate. If a refusal to negotiate could be an abuse, or a contributing factor to a broader abuse, then it followed that rendering negotiations meaningless by asking for exorbitant terms, as Apple alleged Optis was doing, could be as well. This did not mean that Optis had behaved abusively, but it did mean that it was not possible to conclude in advance of Trial E that it had not so acted.

As for Optis’s argument that any abuse of dominance found at Trial E could not lead to the withholding of an injunction at this stage, only to damages, Meade J noted that in Unwired Planet the Supreme Court had made clear that the normal position was that there should be an injunction against an infringer, particularly where the infringer had the means to get a licence, as Apple did, but did not take it. Apple’s allegations of dominance did not change the fact that it was now able to invoke Optis’ obligation to grant a FRAND licence but did not want to.

As for damages in lieu of an injunction, the Supreme Court had held that damages were not an adequate remedy because in the absence of an injunction there would still be the threat to the SEP owner of a proliferation of litigation internationally and, hence, hold-out.

Therefore, Meade J said, while withholding an injunction would leave the SEP owner with an inadequate remedy, withholding an injunction could also lead to the imposition of excessive royalties by the SEP owner or to a disruption in negotiations. In this case, however, both abuses had been removed from the equation as the court was going to set FRAND rates at Trial E and Optis was going to have to respect them.

Meade J therefore found that it would be wrong to withhold an injunction because: (i) Optis had accepted that it must give a licence and had undertaken to follow the court’s decision on FRAND terms; (ii) Apple had the means to obtain a licence, but had not taken them; (iii) damages were not an adequate remedy in lieu of an injunction; (iv) any effect of the abuses alleged had ceased and/or been prevented by the court’s processes already; and (v) there were alternative financial remedies available to Apple by way of damages, costs or the limitation of Optis’s recovery.

Conclusion

Meade J concluded that:

  • Apple could only rely on Optis’ undertaking to ETSI under clause 6.1 of the ETSI IPR policy if it committed now to entering into the FRAND licence to be determined at Trial E;
  • He could not conclude whether Apple’s allegations that Optis had abused a dominant position would succeed; that could only be decided at Trial E; however, he could conclude that Apple’s allegations of abuse of a dominant position could not prevent the grant of an injunction to restrain the infringement of Optis’ Trial B patent;
  • Apple was liable to be injuncted from infringing the Trial B patent and the court would consider whether in fact to grant an injunction once Apple had had a chance to consider this judgment and decided whether to offer an undertaking; and
  • the proper form of that injunction would be a FRAND injunction, not an unqualified injunction; a FRAND injunction restrains infringement so long as the implementer does not have a FRAND licence but allows for it to accept one later; it also allows for an express liberty to either party to return to court in future to address the position at the end of the term of the FRAND licence.

(Optis Cellular Technology LLC v Apple Retail UK Ltd [2021] EWHC 2564 (Pat) (27 September 2021) — to read the judgment in full, click here).

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