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1 May, 2015

In a recent judgment from the English Patents Court, the scene has been set for what is expected to be an important case for the telecommunications industry. The outcome of the case, which is scheduled to run over the next 18 months, could significantly change the way in which Patent licensing is handled for Standard Essential Patents.

In an action before the English Patents Court, Unwired Planet has alleged infringement by Huawei, Samsung and Google (the defendants) of six European (UK) Patents. The Patents are all in field of telecommunications, five being Standard Essential Patents (SEPs) and one being a non-SEP.

The most recent judgement of Mr Justice Birss, Unwired Planet International v Huawei Technologies Co., Ltd & Ors [2015] EWHC 1029 (Pat), is likely to be of little general interest. However, six trials are now scheduled for this case in which a number of issues relating to SEP licensing obligations, particularly when handled by Patent Assertion Entities (sometimes pejoratively called Patent Trolls), may arise.

Standard Essential Patents (SEPs)
To ensure interoperability of telecommunications equipment, industry stakeholders often work together to set standards for their operation in standardisation bodies such as the European Telecommunications Standards Institute (ETSI). For example, in mobile telecommunications, standards ensure that, regardless of which mobile telephone you own, it will operate correctly on the network of your mobile network operator.

Some Patents in the field of telecommunications relate to standards in such a way that the Patents would inevitably be infringed by a technology operating in accordance with standards. Such Patents are referred to as Standard Essential Patents (SEPs).

There is a clear conflict between SEPs and the requirement for all telecommunications equipment manufacturers and operators to adhere to standards. For example, a company manufacturing a new smartphone for operation on the 4G network must adhere to the 4G standards, but cannot do so without infringing the SEPs relating to 4G standards.

To address this conflict, standardisation bodies have set policies that require all owners of SEPs to declare their SEPs. The owner of the SEPs must then give an undertaking in writing that it is prepared to grant irrevocable licences on Fair, Reasonable And Non-Discriminatory (FRAND) terms. This is referred to as a FRAND obligation and ensures that any company operating according to telecommunications standards can obtain licences from SEP owners on FRAND terms.

Facts of the case so far
Unwired Planet has alleged infringement of five SEPs and one non-SEP. They have made two different licensing offers to the defendants:

i) a worldwide licence for all of Unwired Planet’s Patents, including all SEPs and non-SEPs
ii) a worldwide licence for all of Unwired Planet’s SEPs.

Proposition i) was made first. Proposition ii) was made at the request of the defendants for a licensing offer relating only to SEPs. Offering to license a portfolio of different Patents, rather than offering licences on a Patent-by-Patent basis, is a common industry practice for Patent Licensing Entities.

The defendants’ position is that none of the Patents are valid or infringed, but that they are willing to take a licence under any Unwired Planet Patent that is found to be valid and infringed. However, they would not like to take a worldwide licence for a Patent portfolio that also includes other Patents (for example, a portfolio that includes SEPs relating to a different set of standards, unrelated to the defendants’ activities).

Furthermore, the defendants contend that offering only to license an entire worldwide Patent portfolio, rather than offering licences on a Patent-by-Patent basis, breaches FRAND obligations. Questions have also been raised as to whether or not Unwired Planet’s earlier acquisition of the SEPs from Ericsson breaches competition law.

The judgement recently handed down by Mr Justice Birss related to the defendants’ application to terminate the case quickly. Both strike out and summary judgement were refused.

As a result, the case will now proceed to full trial. In order to deal with the complex and multi-dimensional issues, Mr Justice Birss has divided the case into six trials – five technical trials and one non-technical trial. The five technical trials are scheduled to take place between October 2015 and June 2016 and will deal with the infringement and validity of the Patents. The non-technical trial is scheduled to start in October 2016 and will deal with competition law and FRAND.

Points of interest for the future
It is likely that over the course of the scheduled trials, a number of important aspects of FRAND obligations and competition law in the area of SEPs will be considered. In particular, the Court is likely to consider:

i) under what circumstances a transfer of SEPs from one entity to another might breach competition law
ii) whether an offer to license an entire worldwide Patent portfolio having SEPs and non-SEPs fulfils FRAND obligations, especially when a potential licensee requires a licence to some, but not all, of the Patent portfolio
iii) whether an offer to license an entire worldwide Patent portfolio having only SEPs fulfils FRAND obligations, especially when a potential licensee requires a licence to some, but not all, of the Patent portfolio
iv) whether FRAND obligations require SEP owners to offer licences on a Patent-by-Patent basis

The outcome of this case could have a major impact on how SEPs and FRAND licences are handled, particularly by Patent Assertion Entities offering to license worldwide Patent portfolios. This case, along with another similar case currently before Mr Justice Birss (Vringo v ZTE), is therefore likely to be watched with keen interest by the telecommunications industry as a whole.

If you need further information please contact Simon Kahn or your usual Boult Wade Tennant adviser.