Court of Appeal rules backs rights holders in Standard Essential Patents (SEP) case

The Court of Appeal handed down judgment in the Unwired Planet v Huawei appeal yesterday (23 October 2018).  The decision has been eagerly anticipated, dealing as it does with important mechanisms for the way technology standards are agreed upon.

Standard Essential Patents (SEP) – those essential to the implementation of certain telecommunications standards, including 2G, 3G and 4G – pose a particular challenge when it comes to balancing the rights of patent holders and those implementing the standards. This is because being critical to the implementation of a standard means that the patent holder could exploit their position to engage in anti-competitive behaviour, such as demanding excessive fees from particular parties to be able to use the technology.

To ensure SEP holders can still generate sufficient revenue, without impeding the implementation of important standards, the Standard Setting Organisations (SSOs) require patent owners to licence their technology on terms which are fair, reasonable and non-discriminatory (FRAND).

However, this arrangement does not entirely negate the challenges that SEPs raise and this is illustrated by the long-running dispute between SEP owner Unwired Planet International and phone maker, Huawei over technology relating to 2G, 3G and 4G.

The dispute centred on whether the technology involved was subject to a SEP and whether the terms offered were FRAND.

The High Court found that the technology was subject to a valid SEP, which had been infringed by Huawei. It ordered that Huawei would be subject to an injunction if it did not enter into a global licence agreement with Unwired Planet International on terms determined by the court to be FRAND.

Huawei appealed this judgement that imposed worldwide terms set by a national court on the basis of a domestic infringement was unjust. It also argued that it should have been offered the same terms as Samsung for the rights to use the technology and that the injunction contravened Article 102 of the Treaty on the Functioning of the European Union.

The Court of Appeal yesterday dismissed all three grounds for appeal in Unwired Planet International Ltd & Anor v Huawei.

Cleveland Scott York comment:

SEPs pose some distinctive challenges when it comes to ensuring that the party that invested in the development of a technology is appropriately rewarded and incentivised to continue developing such technologies, while ensuring this does not impede the implementation of a standard.

The High Court and the Court of Appeal have both ruled in favour of the SEP holder in this case, which will be welcome news for firms investing millions of pounds into research and development.

The case also shows that while determining the validity of a SEP and whether terms are FRAND can be challenging, the courts are prepared to make detailed judgements in relation to the precise terms of a licence.

Posted on: 24th October 2018