Optis Puts Apple’s Feet to the UK Fire: Commit to FRAND or Be Snuffed Out
Recent developments indicate that the UK is a favorable jurisdiction that owners of standard essential patents (“SEP”) can leverage to obtain appropriate SEP rates from what would otherwise be unwilling licensees. Demonstrating the point, a recent order from Justice Meade of the High Court in the sprawling Pan Optis/Unwired Planet SEP dispute with Apple provides an outline to the UK’s approach to handling SEP implementers who are unwilling to commit to court-determined FRAND licenses. In a lengthy decision, issued September 27, 2021, Justice Meade essentially gave Apple two choices: (1) commit, now, to taking a FRAND license with terms to be decided at a subsequent trial taking place in 2022; or (2) be enjoined from the UK market until resolution of the FRAND trial and acceptance of the terms that issue. Importantly, Justice Meade issued this ultimatum even though Apple has threatened to abandon the UK market rather than agree to any global FRAND rate set by the UK courts.
Optis and Apple have long been engaged in a global dispute over Optis’ SEP patent portfolio related to the Long-term Evolution (LTE) standard for wireless telecommunications. This past August, a jury from the Eastern District of Texas awarded Optis $300 million in damages after Apple was found to infringe Optis’ SEP patents. This award was the result of a retrial ordered by U.S. District Judge Rodney Gilstrap, after finding the jury’s previous award of $506 million may not have been in line with Optis’ responsibility to license the patents on FRAND terms. Apple will certainly appeal this second seven figure jury award.
Meanwhile, across the pond in the UK, the parties have been embroiled in four technical trials to determine the validity of Optis’ asserted patents and Apple’s infringement. (The UK system typically deals with issues of validity and infringement on a patent-by-patent basis in technical trials, while issues such as FRAND terms and competition law are dealt with separately).
In June of 2021, at the conclusion of one of technical trials, one of Optis’ patents was found to be valid, essential, and infringed by Apple. A FRAND trial is slated to commence in June 2022 to determine the terms of global FRAND license, but Optis sought an injunction in the interim because of Apple’s unwillingness to commit to the resulting license to be determined by the court. As such, the UK judge, Justice Meade, held a hearing on whether Apple was a willing or unwilling licensee.
Optis argued that Apple’s refusal to commit to accepting the court’s FRAND license determination made Apple an unwilling licensee and therefore not entitled to the benefits of ETSI protection. Optis argued that Apple’s refusal meant that it lost the right to ultimately take a FRAND license and alternatively that a FRAND injunction should issue in the interim until Apple did accept the terms. On the other hand, Apple argued that it should be able to see the terms of FRAND license prior to committing to them.
The court found that Apple’s refusal to undertake any commitment to the FRAND license on the terms decided at a subsequent trial made it an unwilling licensee. The court was unmoved by Apple’s argument that mere “happenstance” created the gap between the technical trials and the FRAND trial and stated that “If [Apple] wanted earlier certainty about FRAND terms it could have argued for something else.” The court, however, rejected Optis’ request for an unqualified injunction finding that Apple did not permanently foreclose its right to take a FRAND license.
The court concluded that “Apple can only rely on Optis’ undertaking to ETSI if it (Apple) commits to enter into the FRAND licence determined at [at the FRAND trial]” and gave Apple “a short time to consider whether it wishes to commit in that way, or offer some other undertaking.”
Of particular note in this decision is the court’s detailed description of the SEP and FRAND legal landscape in the UK and abroad, which will provide fodder for analysis for quite a while.
Apple is facing down an injunction for all LTE-compliant products in the UK unless it commits, blindly, to the FRAND rate to be set in 2022. While Apple has stated that it may abandon the UK market rather than pay what it considers to be a commercially unreasonable FRAND rate, Apple’s feet are now being put to the fire. The UK’s approach to Apple here is instructive, in that Justice Meade is signaling to SEP implementers that they must agree to FRAND terms (and by implication demonstrate conclusively their status as a willing licensee) or face severe consequences. Failure to agree in advance to FRAND terms may further demonstrate how an implementer is an unwilling licensee. While other jurisdictions such as Germany already have demonstrated a willingness to enjoin SEP infringers, recent developments have indicated that patent injunctions in Germany may be restricted in the future, though that is still to be seen. This decision may leave the UK as a prime destination in Europe for SEP holders to leverage their best patents against implementers. We will see what the United States courts do in the wake of the UK decision, especially in light of the HTC v. Ericsson Fifth Circuit decision finding that Ericsson complied with FRAND. Right now though, both the United States and the UK look like they are clarifying the law and, at least as recent cases indicate, are moving to be favorable jurisdictions for SEP holders to vindicate their rights when faced with unwilling licensees.
*The case is Optis Cellular Technology, LLC, et al. v. Apple Retail UK Limited, et al. 2021 EWHC 2564 (Pat) Case No. HP-2019-000006.