English Court of Appeal dismisses ‘free-standing’ FRAND declaration claim

Vestel manufactures televisions compliant with the H.265 standard for High Efficiency Video Coding (HEVC). It brought a claim in the English Courts against Access Advance, which administers a HEVC patent pool, and Philips, one of the SEP-holders. Vestel did not contest that their products required a licence to the pool but contended that the royalty proposed for the HEVC pool licence was too high, not FRAND. Vestel claimed a FRAND declaration as was granted in Unwired Planet. Vestel pointed to the rules of the ITU, which administered the standard, as supporting its claim for a licence on FRAND terms but did not argue that these had a binding effect on the patentees as the ETSI rules were found to have been in Unwired Planet.

The claim initially made was for abuse of a dominant position, with one of the primary actions said to be abusive being a failure to offer a licence on FRAND terms. Vestel contended its offer for a lower royalty was FRAND and sought a declaration to that effect or that the Court should otherwise declare what FRAND terms should be.

The two defendants, Access Advance and Philips, are based outside the jurisdiction (in the USA and the Netherlands respectively) and disputed the Court’s jurisdiction. This was met with various arguments by Vestel under the Brussels (Recast) Regulation which allocated jurisdiction within the EU and, until 31 December 2020, as between the EU and UK. One of Vestel’s arguments in support of the English Courts’ jurisdiction was its contention that the FRAND declaration would relate to a licence for patents including UK patents. However, the defendants pointed out that the UK proportion of the patent pool was less than 5%, and therefore the claim did not qualify as being “wholly or principally” concerned with property (i.e. patents) in the UK as required under the relevant jurisdictional ‘gateway’.

Jurisdiction was denied by the Court in the first instance. On appeal, Vestel re-formulated its case, abandoning reliance on an abuse of dominant position and re-characterising its position in relation to the FRAND licence for the UK. It now contended that it was entitled to a licence in the UK on FRAND terms in relation to UK patents, albeit that the FRAND licence terms would be global. It therefore sought to overcome the difficulty that the UK portion of the pool was small compared to the rest of the world.

The Court of Appeal found, however, that Vestel’s claim was not based on any identifiable legal claim. Since the claim to abuse of dominant position was abandoned, there was no claim for non-infringement and the ITU rules did not provide a basis for a claim to entitlement to a FRAND licence, the declaration as to FRAND terms did not have an underlying legal claim. Lord Justice Birss (who had been the first instance judge in Unwired Planet before his promotion to the Court of Appeal) held that “There is no such thing as a free standing FRAND claim.” He rejected the appeal. The other two judges agreed with him.

Although this case was decided on the pre-Brexit rules of jurisdiction, it illustrates a limitation of the FRAND declaration jurisprudence in the UK. A claimant for a FRAND declaration must have an underlying basis for its claim, i.e. as to why it is entitled to a licence on FRAND terms, and that must be tied to English jurisdiction.