England “clearly the most appropriate forum” for FRAND dispute: Carr J in Conversant v ZTE

The Defendants had sought to challenge jurisdiction, arguing that the case should be convened in China and that the UK was an inappropriate forum. They had also argued that the court was wrong to find that there was an arguable case for Conversant to claim an injunction – but on the facts before him, the judge found there was a good arguable case. 

The judge also considered the conduct of parties in negotiations, providing useful guidance for how the conduct of FRAND negotiations will be viewed by the English courts.

Background

This decision comes one year after Mr Justice Birss delivered his judgment in Unwired Planet v Huawei [2017] EWHC 2988. He found that the English High Court did have jurisdiction not only to award a licence rate for a global patent portfolio, but also to order an injunction in respect of unlicensed infringements for standard-essential patents. Awarding Unwired Planet a global royalty rate for its portfolio of 4G, 3G and 2G patents, he paved the way for other patent owners to settle their disputes before the UK courts.

Weeks later, in July 2017 Luxembourg company Conversant Wireless took advantage of the favourable landscape, and issued proceedings against two Chinese Defendants – ZTE and Huawei – for infringement of four standard-essential patents. These four patents represent a selection from a global portfolio, and Conversant later amended its claim to add an Unwired-Planet-style request for injunction.

Jurisdiction challenge

The Defendants challenged jurisdiction on two main heads: that the English Courts did not have jurisdiction; and that the UK was forum non conveniens (i.e. an inappropriate place to hear the case). Both of these challenges were rejected.

Importantly, both Defendants are “China-centric” businesses; that is, they are Chinese companies, and that’s also their major sales market and where they manufacture. Since most profits are generated in China, they said that the Chinese patents in Conversant’s global portfolio are disproportionately significant in value compared to the UK elements. They argued that in asking for a licence fee for a global portfolio, Conversant’s claim amounted to an allegation of infringement of a wide range of foreign patents, and a request for relief in respect of those. But since the jurisdiction of the English courts is limited to deciding on validity and infringement of UK patents, they said that there was no jurisdiction to hear such a claim.

Carr J applied the “simple and compelling” analysis of Birss J at [567] of the Unwired Planet decision, where a similar issue was considered and dispensed with. Moreover, since legal justice is jurisdictional by nature, he considered the same arguments of the Defendants could in practice be raised in any court in the world, which would require Conversant to seek per-country licences in each worldwide market – a consequence that would not be FRAND.

In addressing the jurisdiction challenges, Carr J remarked on the way that the Defendants had presented their arguments. Their applications characterised Conversant’s case as a claim for infringement of foreign patents (and worldwide royalty claims), which the judge found to be inaccurate. He said: 

“In my judgment, the characterisation of these claims as foreign portfolio infringement claims, or worldwide royalty claims, is inaccurate. They are claims for infringement of four United Kingdom patents, and the English court…