UK FRAND – home or away?

Another Country

Jurisdictional challenges before the Patents Court are not common – IP rights are inherently national by nature and the issue doesn’t usually arise. But May 2018 saw two such decisions, which reached different results within a few days of each other. Both cases concern telecoms standard-essential patents (SEPs) for the 4G (LTE) standard; both concern global licensing disputes; and the ETSI FRAND obligation is at the heart of both cases.

In Conversant v Huawei, ZTE, Carr J found that England was clearly the most appropriate jurisdiction for the claim and allowed the action to continue. But in Apple v Qualcomm, Morgan J found jurisdictional deficiencies in the claim, and granted summary judgment in favour of the anchor defendant. 

So why the difference? Are the results inconsistent – and if not, what lessons can be learned?

FRAND and the global perspective 

The background to both cases is the FRAND promise. SEPs will normally arise out of the standard-setting process conducted in technical standard-setting organisations like ETSI. To take part in the process, SEP owners make declarations that anyone who wants to implement the standard can have a licence to those essential patents on “Fair, Reasonable and Non-Discriminatory” terms – or ‘FRAND’ terms. 

This limits the scope for normal enforcement. For example, unlike a normal patent, a SEP owner cannot simply exclude his competitors. To obtain an injunction he may need to establish a FRAND record: to demonstrate that he has offered a FRAND licence. Also, appropriate licensing rates balance the reward to the inventor against the right of third parties to access the standard technology. 

Today both standards and companies are international, and when litigation in relation to a company headquartered overseas it is necessary to consider how to make sure they are properly served. English procedure (Practice Direction 6B of the CPR) provides various ‘gateways’ through which service can be achieved. The following are relevant:

Gateway 3: the "necessary and proper party"

This gateway applies where a claim is made against a person within the jurisdiction (an "anchor defendant") and –

(a) there is between the claimant and the anchor defendant a real issue which it is reasonable for the court to try; and

(b) the claimant wishes to serve the claim form on another person who is a necessary or proper party to that claim.

Gateway 4A: "similar facts".

This gateway applies where one claim is validly made against a defendant who is outside the jurisdiction in reliance on certain other gateways. A further claim may be made against the same defendant if it arises out of the same or closely connected facts.

Gateway 9: "damage within the jurisdiction".

This gateway applies where a claim is made in tort against a person outside the jurisdiction, where  –

(a) damage was sustained, or will be sustained, within the UK¹; or

(b) damage which has been or will be sustained results from an act committed, or likely to be committed, within the UK.

Gateway 11: property within the jurisdiction. 

Property includes patents. So a foreign owner of a UK patent can be sued in relation to that patent in the UK, and the court will give permission for the claim to be served outside the jurisdiction.

There is another way to serve a foreign patent owner. Every owner of a UK patent must give an address for service in the UK. That is usually his patent agent. Under CPR 63.14 proceedings in relation to that patent may be served at that address. Keep that in mind: it becomes relevant shortly.

Conversant v ZTE

Conversant is the simpler of the two cases because it started as a simple patent action. Conversant, the patentee, brought patent infringement claims against the two defendants who were selling mobile phones within the UK. Because these were standards-essential patents, Conversant requested that a global FRAND rate be determined; and an injunction granted if the patents were infringed but the infringer refused a global license at that rate. 

This follows the same approach as Unwired Planet – which awarded a global licence rate for infringement of a patent portfolio, based on more limited infringement findings that concerned only UK patents. The Defendants in Conversant challenged jurisdiction, chiefly on the basis that the overwhelming majority of their business (72% in the case of Huawei) was in China, whereas the UK accounted for a much smaller proportion of the business (approximately 2%). Accordingly, the defendants said, the UK Court would effectively be awarding damages that were mostly related to patents of other countries and sales in other countries.  

Carr J had no trouble in rejecting the jurisdiction challenge and allowing the claims to proceed. He agreed with the view of Mr Justice Birss: this was not a claim for damages under foreign patents. This was a claim for an injunction in the UK, under UK patents. 

Carr J did however hand down permission to appeal that point (18 May: [2018] EWHC 1216 (Ch)), noting that although appeals on forum conveniens should be rare, there were grounds on which the Court of Appeal may disagree with the exercise of his discretion; and that the Unwired Planet appeal was underway at the same time.  

Bird & Bird has reported the details of the Conversant decision in detail here and of the underlying Unwired Planet decision here.

Apple v Qualcomm – the issues 

Apple v Qualcomm has some facts in common. Apple brought a UK action against Qualcomm UK and Qualcomm Inc (USA). The heart of the matter concerned UK-designated SEPs and the patent owner's  FRAND conduct. But the action was brought by the implementer Apple, and not the patentee Qualcomm. It was not a claim for patent infringement. The claim has multiple elements:

• Apple selected five EP(UK)s  from Qualcomm Inc’s SEP portfolio, and requested:
  • a declaration that the patents were invalid and/or should be revoked
  …