FRAND in the UK – updates from the Court of Appeal

The Court of Appeal has recently handed down two significant decisions on FRAND litigation in the UK.

In the case of Panasonic Holdings Corporation v Xiaomi Technology UK Limited [2024] EWCA Civ 1143 the Court of Appeal, led by Lord Justice Arnold, overturned the first instance judgment and ruled in favour of Xiaomi, granting them the first ever 'interim' FRAND licence.

The case of Motorola Mobility LLC & Lenovo (United States) Inc v Ericsson Limited [2024] EWCA Civ 1100, decided a few days before Panasonic by the same Court of Appeal panel, also related to an SEP dispute. In this case Lenovo's appeal was rejected and the Court of Appeal upheld an earlier decision not to order a preliminary injunction Lenovo had sought in relation to its SEPs.

The Panasonic decision demonstrates that the UK courts can and will step in to address perceived unfair behaviour on the part of SEPs holders where they seek to circumvent a UK court determined FRAND licence by putting in place an interim licensing arrangement. Of particular significance in this case was that Panasonic had provided an undertaking to the court to be bound by a licence determined by the UK court and the Court of Appeal felt that it was seeking to get around this promise through parallel German and UPC proceedings (although there was no suggestion it had breached its undertaking).

Balanced against this, the Lenovo decision makes clear that parties must formulate the relief they are seeking within the existing English law framework – the courts will not make an exception simply on the basis that the case involves FRAND issues. Arnold LJ recognised that there remains an open question as to how to regulate parties' behaviour between commencement of proceedings and a court determining FRAND terms and that "[t]here may be a role for the court in addressing that question". However, he was clear that "Lenovo’s present application does not invoke any relevant jurisdiction on the part of the court" that would allow the UK courts to resolve the issue in this case. In other words, preliminary injunctions remain off the table in UK FRAND disputes.

The UK remains a key jurisdiction for determining FRAND disputes and these latest decisions from the Court of Appeal demonstrate that the tug of war between parties over the preferred venue for their global licensing disputes to be determined remains hard fought.

Panasonic v Xiaomi

Background

Panasonic sued Xiaomi for infringement of its SEP and Xiaomi raised a FRAND defence in the usual way.

A trial for the UK court to determine FRAND licence terms was set for late 2024/early 2025 (later expedited). Both Panasonic and Xiaomi unconditionally undertook to be bound by the terms set at this trial. However, in parallel, Panasonic continued to pursue infringement proceedings against Xiaomi in Germany and the UPC. Importantly, Panasonic did not commit to holding off on enforcement of any injunctions awarded in those foreign proceedings pending the UK FRAND determination. Instead, it accepted that it would seek to use any injunction awarded to leverage a greater financial settlement out of Xiaomi than it might expect from the UK court.

In response, Xiaomi took the unusual step of seeking an interim licence from Panasonic in late 2023. This was refused in July of this year and Xiaomi appealed that decision.

Decision

The court found that Panasonic’s pursuit of injunctions in foreign courts, despite having provided an undertaking to be bound by FRAND licence terms determined by the English courts, was inconsistent with its obligation to negotiate in good faith. In particular, Arnold LJ was concerned that Panasonic would seek to use enforcement of a German injunction to force Xiaomi to settle for an amount greater than that determined by the English court – i.e. a 'supra-FRAND rate'. The court declared that a willing licensor in Panasonic’s position would agree to an interim licence on terms that are fair and reasonable. Somewhat unusually for an appellate court, the court also outlined the terms for such an interim license, which would apply retrospectively for past infringing acts and last until the final FRAND determination by the first instance court later in the year.

The Court of Appeal was split in this decision, with Lord Justice Phillips expressing his agreement that Panasonic's conduct was indefensible but suggesting that the "more conventional" remedy of an anti-suit injunction to prevent enforcement overseas may be the more appropriate remedy.

Lenovo v Ericsson

Background

The Lenovo case involved the cross-licensing of the parties' respective SEP portfolios.

Ericsson initiated legal proceedings in the Eastern District of North Carolina and the US ITC in 2023. Lenovo then issued three claims in England and Wales, seeking declarations of essentiality, infringement, invalidity, non-essentiality of various Ericsson patents, and the determination of FRAND terms for a global cross-license.

Legal proceedings are also ongoing in Brazil and Colombia, with Ericsson obtaining preliminary injunctions against Lenovo in both countries.

In the UK, Lenovo took the unusual step of seeking a conditional interim injunction against Ericsson, in essence seeking to prevent Ericsson enforcing its SEP portfolio against Lenovo in other jurisdictions with the threat of an injunction in relation to Lenovo's SEP portfolio in the UK. This was refused at first instance.

Decision

Lenovo's application for an interim injunction against Ericsson was based on infringement of Lenovo's SEPs. The court noted that the purpose of interim relief is to protect the claimant against injury by a violation of its right for which it could not be adequately compensated in damages if the claimant were to succeed at trial.

However, the court found that the damage Lenovo relied upon as the basis for its injunction application was not caused by Ericsson’s infringement of Lenovo’s patents in the UK, but rather by Ericsson’s enforcement of its own separate patent rights in Brazil and Colombia. Applying the standard test for a preliminary injunction in the UK, the court held that Lenovo had not met the burden of establishing it should be entitled to preliminary relief, nor had it met the alternative test proposed by Lenovo of "unconscionability" on the part of Ericsson.