Patents: requirement to participate in FRAND trial

Summary 

The Patents Court has held that defendants must participate in a FRAND trial even if they consented to a permanent injunction and did not seek a FRAND licence.

Background

The European Telecommunications Standards Institute (ETSI) sets standards for mobile telephones. Members are obliged to inform ETSI about any essential intellectual property rights (IPR) which they own, known as standard essential patents (SEPs). They must agree to license these rights to users of the standard on fair, reasonable and non-discriminatory (FRAND) terms.

In TQ Delta, LLC v Zyxel Communications UK Ltd & another, the Court of Appeal cancelled a FRAND trial because it would serve no useful purpose where an undertaking was given not to enforce the right to a FRAND licence in respect of a UK patent which had been held valid and enforceable (www.practicallaw.com/w-021-8140).

Facts 

P sued A for patent infringement in relation to certain devices (infringing devices). 

The Patents Court held that P's patents were valid SEPs and that A had infringed the patents. A appealed. 

The Court of Appeal dismissed the appeal.

The Patents Court scheduled a FRAND trial to address the issues relating to a FRAND licence for the portfolio of P's SEPs (P's portfolio). 

Relying on TQ Delta v ZyXel, A applied to be exempted from the FRAND trial on the grounds this would be a waste of time and costs, because A was not seeking a FRAND licence and would consent to a permanent injunction against infringing P's portfolio in the UK. 

A also argued that damages for its past infringement should be calculated on the basis of a royalty rate for the UK market, multiplied by the number of devices held to infringe valid P's patents in the UK. 

P argued that, unlike TQ Delta v ZyXel, A had to remain as defendants in the FRAND trial because the amount of the damages was in dispute. P challenged A's calculation of damages for past infringements on two levels:

• The volume of sales which needed to be taken into account in order to compensate P. Although the patents were territorially limited to the UK, P argued that the measure should be a global royalty on the basis that any licence awarded by the court would have been a worldwide FRAND licence covering all companies in P's group and all devices covered by P's patents worldwide, not just the infringing devices sold in the UK.
  
  
• The royalty rate for each infringing device that should be paid by A.

Decision

The court dismissed A's application.

There is a critical distinction between a FRAND licence whose terms are declared by the court for the purposes of a FRAND dispute, known as the declared licence, and a counterfactual licence where damages are assessed on the basis of what would have been received had a licence been taken. The declared licence settles the terms of the FRAND licence which the SEP owner has to offer to those wishing to implement the related…