Patents: UK jurisdiction over global FRAND licence

13 June 2018

Audrey Horton

Summary

The UK Patents Court has jurisdiction to try a claim for infringement of UK patents where the relief sought was a global 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 (IPRs) 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. 

Persons domiciled in an EU member state shall, whatever their nationality, be sued in the courts of that member state (Article 4(1), recast Brussels Regulation (1215/2012/EU)). In proceedings concerning the registration or validity of patents, the courts of the member state in which the registration was applied for have exclusive jurisdiction (Article 22(4)).

The English High Court had jurisdiction to award a licence rate for a global patent portfolio, and also to order an injunction in respect of unlicensed infringements for SEPs (Unwired Planet v Huawei, see Focus "Patent licensing and FRAND: a new approach", www.practicallaw.com/w-011-0614).

Facts

H manufactured and sold in China. C sued UK and Chinese companies (together, H) for infringement of the UK designations of four of its European patents, and sought a determination of FRAND terms for its global SEP portfolio. 

H challenged jurisdiction on the basis that the English courts did not have jurisdiction, and that the UK was forum non conveniens. H argued that as most of its profits were generated in China, if a global portfolio licensing rate was to be determined, the Chinese patents in C’s global portfolio would be disproportionately significant in value compared to the UK elements. By asking for a licence fee for a global portfolio to be determined in the UK, C’s claim amounted to an allegation of infringement and request for relief in respect of foreign patents. As the jurisdiction of the English courts is limited to deciding on validity and infringement of UK patents, there was no jurisdiction to hear this claim.

H also argued that H's Chinese companies had not been validly served.

Decision

The court rejected both challenges to its jurisdiction, and dismissed both the application to dismiss and the application to stay. 

There was nothing to prevent H's Chinese companies from continuing in China with challenges to validity in respect of the Chinese patents. If all the Chinese patents were invalid or not infringed, then any FRAND licence would need to provide that no royalties ought to be payable in respect of them, either for the past or the future. Also, if the Chinese courts determined a FRAND royalty rate for the Chinese patents which were valid and infringed, the English court might decide to include this rate for China in any global FRAND licence that it determined. The Chinese proceedings would be concluded before a global FRAND trial was heard and decided in the UK. So, there was no question of H putting in issue the validity of the Chinese patents in the UK proceedings as this would have been determined before the FRAND proceedings started.

Even in a case where challenges to validity of foreign patents were still pending, as in Unwired Planet, this would not deprive the English court of jurisdiction. If H wished to challenge the validity of patents in other jurisdictions outside the UK and China, H was entitled to do so in the jurisdictions to which those patents applied. Even if those proceedings had not been determined, a global licence which the English court considered to be FRAND would have a mechanism for reflecting the results of these proceedings.

In any global FRAND determination, the English court would not be concerned to determine the validity of any non-UK patent. A global FRAND licence would take account of validity determinations in other jurisdictions. So, H's UK companies had to be sued for infringement of the UK patents in the courts where they were domiciled and there was no room for the doctrine of forum non conveniens to apply.

As the UK court had jurisdiction over these claims and H's UK companies could not obtain a forum non conveniens stay, it followed that the cases would continue in this jurisdiction against H's UK companies, whatever might be the position in respect of H's Chinese companies.

The proceedings were "service out" cases, where C required permission to serve out on H in China. So, the question was whether C had satisfied the court that England was clearly the most appropriate forum for these cases to be tried, having regard to the interests of all parties and to the ends of justice.

C had served on two of H's UK companies, on the basis that they were acting as UK offices for the main head company. H submitted evidence that the main head company was not carrying on business at the UK address and, in the absence of cross-examination, the court held that service on the UK companies was not valid service on the Chinese counterparts.

In considering whether to allow C permission to serve out of the jurisdiction, the important issue was C’s claim to an injunction, which, if accepted, would draw into it all the surrounding issues as being closely related to the main substance. The following issues supported C’s case for an injunction: the length of negotiations (several years) had not led to much progress; no interim royalty payments had been made; H had  refused to take a global portfolio licence; and H had not acknowledged when requested that it was willing to take a licence, or that its willingness was unconditional. On the facts there was a good arguable basis for an injunction. So, the court gave permission to serve out.

Comment

The court made it clear that it will accept jurisdiction of patent portfolio disputes where it is tied to justiciable issues in the UK, such as the infringement of UK patents. Once it has accepted a case, the court will not relinquish jurisdiction lightly without very clear indications that another forum is more appropriate. The decision has also provided helpful guidance for the proper conduct of FRAND negotiations.

Case: Conversant Wireless Licensing SARL v Huawei Technologies Co Ltd & Others [2018] EWHC 808 (Pat).

First published in the June issue of PLC Magazine and reproduced with the kind permission of the publishers.  Subscription enquiries 020 7202 1200.

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