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FRAND Licensing of Global Portfolios – Who Gets to Set Worldwide Rates?

A key issue in the licensing of standard essential patents (SEPs) is whether national courts have jurisdiction to determine what constitutes a global fair, reasonable, and non-discriminatory (FRAND) license rate.  The Court of Appeal in England recently held that its patent courts have such jurisdiction.  In Huawei Technologies Co. Ltd. v Conversant Wireless Licensing SARL, the Court of Appeal affirmed the jurisdiction of the High Court of Justice to try a claim for the infringement of UK-designated European SEPs against Chinese as well as English defendants and to issue an injunction for the unauthorized use of the SEPs at issue.  In the process, it also affirmed the High Court’s jurisdiction to determine a worldwide FRAND rate. 

The Huawei Dispute Before the High Court of Justice

Conversant sued Huawei and ZTE (each comprising both Chinese and UK companies) for infringement of the UK designations of four of its European patents.  Conversant also sought a determination of the FRAND licensing terms for its global patent portfolio—a portfolio that comprised a large proportion of Chinese patents.  Huawei and ZTE countered that English courts do not have jurisdiction to determine global licensing terms.  They argued that by asking an English court to determine the licensing rate for a global patent portfolio, Conversant was effectively seeking an infringement determination with respect to foreign patents, over which English courts have no jurisdiction.  They argued that the jurisdiction of the English courts is limited to deciding the validity and infringement of UK patents, and have no authority to determine a worldwide FRAND rate for the use of Conversant’s patents. 

Huawei and ZTE also argued that the UK was a forum non conveniens, and that China was the more appropriate forum for the determination of Conversant’s claims, including the determination of the terms of a global FRAND license.

The High Court rejected both of the jurisdictional challenges brought by Huawei and ZTE.  The defendants appealed, but only on forum non conveniens grounds1 in light of the Court of Appeal’s decision in Unwired Planet v. Huawei, which issued while Conversant’s case against Huawei and ZTE was pending.  Unwired Planet held that the scope of a FRAND license to a global patent portfolio should itself be global.  

The Huawei Appeal

The Court of Appeal dismissed the jurisdictional challenge on the grounds that the dispute between the parties was about questions of the infringement, validity, and essentiality of the patents at issue—all UK patents.  It held that a UK forum was the most appropriate—indeed, the only viable—forum in which the dispute could be heard.  Article 24(2) of the Regulations governing the European Union provides that “[i]n proceedings concerning the registration or validity of patents, the courts of the member state in which the registration was applied for have exclusive jurisdiction.”  As such, the High Court has jurisdiction to adjudicate the infringement and validity of UK patents, and to issue an order providing relief, including by issuing an injunction and awarding damages.

The Court of Appeal went on to explain that Conversant had alleged that its UK patents were essential to the standard set by the European Telecommunications Standards Institute (ETSI), and that it had complied with its obligation under the ETSI standard to make an offer on FRAND terms.   Since the court’s determination of what constitutes a FRAND rate was central to its adjudication of whether Conversant had complied with its obligations under the ETSI standard, that determination necessarily fell under the court’s jurisdiction to hear the infringement action. 

Of course, decisions by English courts regarding the infringement, validity, and essentiality of UK patents cannot and will not preclude the courts in other jurisdictions, such as China, from determining the infringement, validity, and essentiality of patents falling under their own jurisdiction.  Nor can it preclude them from determining a different worldwide FRAND rate for the same global SEP portfolios.  How such disparate outcomes will be addressed and resolved remains an open question.


[1] Huawei and ZTE have preserved their other jurisdictional challenge for a possible later appeal to the Supreme Court.

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About this Author

Michael T. Renaud, IP Litigation Attorney, Mintz Levin Law Firm
Member

Michael’s practice is focused on patent litigation and also includes licensing, patents, copyrights, trademarks or trade secrets, and other intellectual property matters. His work in patent litigation primarily involves technologies such as electromechanical systems, digital cameras, embedded microprocessors, telecommunications and network software, cellular phones, and e-commerce, among others. Michael has also advised clients in regards to patent portfolios and IP diligence, and has counseled venture capital funds on their IP assets and patent value.

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James Wodarski, Mintz Levin Law Firm, Boston, Intellectual Property and Litigation Law Attorney
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James focuses his practice on patent disputes in the International Trade Commission (ITC), the US Court of Appeals for the Federal Circuit, and Federal District Courts. He has also appeared before the First and Second Circuit courts as part of his appellate work at the state and federal levels. A patent litigator with extensive experience, James has handled disputes involving a variety of technologies, including smartphones, core processor circuits, digital imaging software, telecommunications devices, and LED lighting systems.

A trial lawyer with 20 years of complex civil litigation experience, James has also represented clients in complex business litigation, white collar crime, insurance coverage, federal securities actions, trademark ownership of mass media and literary titles, complex insurance coverage, and the First Amendment.

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Associate

Sandra Badin focuses her patent practice on appeals before the Federal Circuit and high-priority motions in the federal district courts and the U.S. International Trade Commission.  She has represented clients in many different technology fields with patents covering radio frequency transceivers, graphics processing units, LCD displays, medical records processing systems, electronic point-of-sale systems, high-density plasma cutting torches, dental materials and processes, specialty fabrics, and financial and business methods.  Sandra crafts winning appellate briefs and...

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