Unwired Planet International Ltd v Huawei Technologies Co. Ltd & Ors

Unwired Planet’s business is licensing. It holds a portfolio of patents related to telecommunications. Most of them were acquired from Ericsson. Many of the patents in Unwired Planet’s portfolio are declared essential to various telecommunications standards including 2G standards (such as GSM/GPRS), 3G standards (such as UMTS) and 4G standards (such as LTE). I will refer to patents which have been declared as essential to a standard as SEPs.

The defendants are companies forming part of three major telecommunications equipment businesses: Huawei, Samsung and Google. All three groups of defendants sell mobile devices. Huawei and Samsung also sell infrastructure equipment such as base stations.

On 10^th March 2014 Unwired Planet brought proceedings for patent infringement in this jurisdiction. It contends that the products sold by the defendants which are compliant with the standards infringe its SEPs. The proceedings involve five SEPs. They are EP (UK) 1 230 818, EP (UK) 2 229 744, EP (UK) 2 119 287, EP (UK) 2 485 514, and EP (UK) 1 105 991. The 514 patent is a divisional of 287. All five SEPs in this case were acquired from Ericsson.

The infringement claim also involves an allegation that some of the defendants’ products infringe one of Unwired Planet’s patents which is not a SEP. That is EP (UK) 0 989,712. This 712 patent was not acquired from Ericsson. It arises from work done by engineers in Unwired Planet.

In addition to the conventional allegations of patent infringement, the Particulars of Claim also state, for each of Huawei, Samsung and Google, that Unwired Planet has pursued negotiations to license the patents on FRAND terms but thus far has been unsuccessful. In the prayer for relief at paragraph (5) Unwired Planet sets out its claim for injunctive and other similar remedies as follows:

“The claimant claims:

[…]

(5)

Save insofar as the defendants and each of them are entitled to and take a licence to the Declared Essential Patents on FRAND terms (in accordance with the claimant’s undertakings and the ETSI IPR Policy) and insofar as the claimant is and remains required to grant such a licence:

a.

[injunction]

b.

[removal from channels of commerce]

c.

[delivery up]”

The undertakings referred to are undertakings to ETSI, pursuant to ETSI’s IPR Policy, to grant licences on FRAND terms. I will return to this below.

There is a dispute about the nature and extent of any negotiations which took place before the proceedings were issued. However that can be put into perspective given that the various parties have been negotiating behind the scenes and the case has now been on foot for over a year. No agreement has been reached.

Irrespective of negotiations behind the scenes, Unwired Planet has made two open licensing proposals to the defendants, one on 22^nd April 2014 and the second on different dates in June and July 2014. They can be referred to as the April proposal and the July proposal:

The defendants’ position as explained in their Defences is that none of the patents in suit are valid or infringed. This includes (where relevant) a denial that any given SEP is in fact essential to the relevant standard. The defendants have all stated expressly that they are willing licensees. They are prepared to take a licence under any Unwired Planet patent which has been found to be valid and infringed.

Further key aspects of the defendants’ position in these proceedings involve allegations about competition law and FRAND. The detailed positions of the defendants vary but at this stage the matter can be summarised broadly. Ericsson participated in the standard setting process in Europe involving ETSI. Ericsson therefore declared its SEPs to ETSI as essential under the ETSI IPR Policy and gave a FRAND undertaking. It is argued that in transferring patents to Unwired Planet, there was a failure to ensure the transfer of an enforceable FRAND obligation. It is also argued that in splitting Ericsson’s SEP portfolio into two parts (Ericsson retains some SEPs itself and transferred some to Unwired Planet) a breach of competition law has taken place in that unfair higher royalties will be earned. There is a point that the agreement and assignment arrangements by which Ericsson transferred patents to Unwired Planet contained terms which were in breach of competition law (Article 101(1) TFEU). On that basis the transfer is said to be void and Unwired Planet has no title to sue. There is also a point referred to as the ‘Ericsson control defence’. The allegation is that, even if Unwired Planet is the legal owner of the patents, Ericsson retains control over those patents so that Samsung has a licence to those patents under its licence agreement with Ericsson, or is entitled to procure from Ericsson the grant of a licence. There are allegations of a breach of Art 102 TFEU (abuse of a dominant position). Here it is alleged that the terms offered by Unwired Planet are not FRAND. Another allegation is that in seeking an injunction in these proceedings Unwired Planet has acted contrary to Art 102 TFEU.

Since the competition law arguments involve more parties than the claimant company, Ericsson and two other Unwired Planet companies have been joined into the proceedings. Ericsson and Unwired Planet deny any breaches of competition law and any breach of a FRAND obligation. Unwired Planet denies its April and July proposals are not FRAND.

This is a complex and multi faceted dispute and at an early stage the parties considered that it would help the orderly case management of the proceedings if it was docketed to a single judge. I was designated to undertake that task. The first CMC was in July 2014, a second CMC took place in October 2014 and there have been subsequent case management hearings as well. As a result of these directions hearings, the case has been divided into five technical trials and a single non-technical trial. Technical Trial A starts on 5^th October 2015 and deals with 744. Technical Trial B starts in 30^th November and deals with 514/287. The last technical trial, trial E, will deal with the non-SEP 712. It starts on 27^th June 2016. The non-technical trial will deal with competition law and FRAND. It is due to start in October 2016. It is scheduled for 10 weeks but in the course of this hearing the time was increased to 13 weeks.

This hearing was scheduled to deal with the non-technical trial. The major dispute relates to two applications which are closely interrelated. There is an application by Unwired Planet to amend the prayer for relief in its Particulars of Claim to include at paragraph (5A) a claim for a declaration that its licensing proposals are FRAND. There is also an application by Huawei to strike out parts of Unwired Planet’s pleaded case relating to the FRAND status of Unwired Planet’s proposals and for summary judgment on related issues.

The hearing also involved some other case management issues related to the non-technical trial. Having heard the major dispute I explained that I would give a reserved judgment in due course but in the meantime I would tell the parties in summary form what I had decided to do and give very compressed reasons for it. The reason for doing this was to facilitate the orderly management of the case. If judgment had simply been reserved, that would not allow the case to be managed at all until it was available. If I had simply stated bare conclusions with no reasons, that would not have made it easy to take the case forward at the hearing either.

This is the reserved judgment.

Originally Samsung and to a lesser extent Google made all the running in the context of FRAND and competition law. Huawei made clear that it also advanced related defences but a major amendment to Huawei’s case occurred in February 2015. In its Re-Amended Defence and Counterclaim Huawei developed its competition law and FRAND allegations in detail. Key to the strike out/ summary judgment application is that Huawei’s pleading expressly distinguishes between allegations of breach of competition law and, separately, allegations that Unwired Planet has not complied with a FRAND obligation. The former is not the subject of the strike out/ summary judgment application. Huawei recognises that the competition law points in this case are not suitable for striking out or summary judgment. However it contends that the FRAND obligation points are capable of being dealt with summarily and should be. Essentially Huawei’s case is that the April and July 2014 proposals are not compliant with Unwired Planet’s FRAND obligation and that this can be decided as a matter of summary judgment. Allegations in Unwired Planet’s Particulars of Claim that these offers are compliant with its FRAND obligation can therefore be struck out. By parity of reasoning Unwired Planet’s application to amend to include a claim for a declaration that its offers are FRAND should be refused because I can decide now that they are not.

The parties argued this issue on the footing that in this case the test for summary judgment and the test for striking out were the same and could be summarised as the existence or not (as appropriate) of a real prospect of success. Counsel for Huawei reminded me of the judgment of Moore-Bick LJ in ICI Chemicals v TTE Training [2007] EWCA Civ 725 at paragraph 12 that on applications of this kind sometimes a short point of construction or law arises which can properly be decided at that stage. If so the court should grasp the nettle and decide it.

Telecommunications standards in Europe are formulated and set by the European Telecommunications Standards Institute (ETSI). ETSI has Rules of Procedure and within them is an ETSI IPR Policy. The policy and the rules have been adjusted over time but nothing in the applications before me turns on any differences. (Certain of the amendments to the ETSI IPR Policy over time amy be relevant to the aspects of the case, e.g., Samsung’s first breach of Article 101). Article 4.1 of the ETSI IPR Policy requires members of ETSI to inform ETSI of “ESSENTIAL IPRs” in a timely fashion. ESSENTIAL and IPR are defined terms. A patent which would inevitably be infringed by operating in accordance with a standard is an example of an ESSENTIAL IPR. By definition a SEP is an ESSENTIAL IPR. Informing ETSI of the existence of ESSENTIAL IPRs is obviously particularly important if, for example, in the course of a standard setting exercise a member is submitting a technical proposal and has a SEP covering that proposal. Once an ESSENTIAL IPR has been declared by its owner to ETSI, the owner will be requested by ETSI (Article 6.1 of the ETSI IPR Policy) to give an irrevocable undertaking in writing that it is prepared to grant irrevocable licences on fair, reasonable and non-discriminatory (FRAND) terms. This is what is referred to as a FRAND obligation, i.e. an obligation to grant licences on FRAND terms. Article 12 of the ETSI IPR Policy provides that it is governed by French law.

Article 6.1bis of the policy provides that such an undertaking shall be interpreted as an encumbrance that binds all successors-in-interest. In other words the FRAND obligation is supposed to apply to successors in title. In fact not only did Ericsson declare the SEPs in this case to ETSI as ESSENTIAL IPR and give a FRAND undertaking, Unwired Planet itself (strictly the first claimant) has declared to ETSI that it is prepared to grant FRAND licences for its SEPs. An example of such a declaration on 6^th March 2014 was in evidence.

The question of whether any given licence terms are FRAND is not simply a freestanding issue. It is closely connected to the question of injunctions; see for example the conditional claim for an injunction in paragraph (5) of Unwired Planet’s unamended prayer for relief, quoted above.

As far as the researches of the legal teams in this case have revealed, there are no decisions anywhere dealing with the legal status of this ETSI FRAND obligation. The parties referred me to an article by The Rt. Hon. Sir Robin Jacob entitled “FRAND: A Legal Analysis” published in October 2014 in which the learned judge considered what happens when a patentee sues on a SEP and when the court comes to decide whether an injunction should be granted. He considered that the contractual commitment given to ETSI would be enforceable by third parties. Therefore the defendant would be entitled to rely on a FRAND defence as a matter of contract law, irrespective of competition law. The defendant would be contractually entitled to a FRAND licence. I will return to this article below.

One of the allegations in this case is that Unwired Planet has breached competition law by commencing proceedings including a claim for injunctive relief. Both sides have referred to the recent opinion of Advocate General Wathelet delivered on 20^th November 2014 in Huawei v ZTE Corp Case C-170/13. There the AG considered FRAND and claims for injunctions under SEPs in the context of Art 102 TFEU and also the IP Enforcement Directive 2004/48/EC. In that opinion (see esp. paragraphs 83-88) the AG emphasises the importance of a SEP holder presenting an alleged infringer with a licence on FRAND terms and if the alleged infringer does not accept that offer, in making a prompt and reasonable counter offer. In this context the AG expresses the view that an action for an injunction by a patentee would not constitute an abuse of dominance if the infringer’s conduct was purely tactical, dilatory and/or not serious.

At this stage I should refer to two case management judgments of my own. On 6^th June 2013, in Vringo v ZTE [2013] EWHC 1591 (Pat) (“Vringo I”), I decided that in that case the technical trials should be scheduled before a FRAND trial. One of the issues in that case was that Vringo, another holder of a portfolio of patents said to be SEPs and seeking to license them to companies selling mobile devices and telecoms infrastructure, wanted to contend that its worldwide portfolio licence was FRAND and wanted the court not only to rule on whether that was so, but to set a FRAND royalty rate (and other terms) if the parties could not agree. This was by analogy with what had happened in the USA in Microsoft v Motorola [Case No. C10-1823JLR, 2013 U.S. Dist. LEXIS. 60233 (W.D. Wash. April 25, 2013)] - (see judgment at paragraph 18).

Counsel for Huawei referred to paragraphs 44-46 of the judgment in Vringo I, submitting it was correct. The paragraphs are as follows:

44.

This case is a long way from having to consider whether to grant injunctive relief; after all, according to ZTE, the patents are all invalid and/or not infringed. However, in any case I reject the idea that the stance being taken by ZTE in this jurisdiction can fairly be said to mean that ZTE is not a willing licensee. ZTE has said it is willing to take a FRAND licence on any patent found valid and infringed. In my judgment, a defendant accused of patent infringement by a patentee who claims to have a standards essential patent is and must be entitled to say, "I wish to know if this patent is valid or infringed or not before I take a licence". Such a stance cannot fairly be described as unwillingness.

45.

So here the defendant is entitled, in my judgment, to adopt a contingent position. In a contingent case like this, there is no basis on which the court could compel the defendants to accept a licence arrived at by approaching the matter as if the licensee was willing to take a licence without having a judicial determination of validity and/or infringement.

46.

Looking at it the other way, if, once the patent trials are heard, for example, say Vringo's alleged SEPs were found invalid, it would be absurd for Vringo to say it still wanted to have a trial to determine a FRAND royalty rate applicable in the United Kingdom. The rate would be zero. Equally, say Vringo won all the patent trials hands down and then conducted a FRAND trial, it would equally be absurd for ZTE at that trial to say, "Oh but these are weak patents likely to be invalid or not infringed and the royalty should correspondingly be less".

I remain of the same view as expressed in those paragraphs.

One of the debates in Vringo v ZTE is and was whether a patentee is entitled to refuse to offer or refuse to accept per patent licences and to offer a global deal only, i.e. a worldwide offer for the whole of its portfolio. This question arose again in Vringo v ZTE on 30^th January 2015 [2015] EWHC 214 (Pat) (“Vringo II”). By this later stage at least one of Vringo’s patents had been confirmed to be a valid SEP at a technical trial. Vringo was seeking an injunction to restrain infringement of that SEP. This highlighted a difficulty. An injunction to restrain infringement of a single SEP may well preclude the defendant from making or selling any products in accordance with the standard at all. Even though the SEP only relates to one very small part of the overall highly complex product, at least in general terms one can take it that it is not possible to remove the patented element while leaving behind a functioning product (in fact this is not always the case but for present purposes it can be assumed). However the only licence on offer from the patentee is a worldwide portfolio licence which it alleges is FRAND. Does the defendant in that situation have only two choices: take a worldwide portfolio licence or submit to an injunction? I am not convinced it is that simple. Counsel for Huawei referred to paragraphs 107-109 of my judgment in Vringo II, submitting it was correct. The paragraphs are as follows:

107.

[…] I suspect the fallacy in the reasoning of Vringo at this stage may be that just because it may be so that the global portfolio offer is a FRAND offer, it does not follow that the global portfolio licence on offer is the only set of terms which could be FRAND. It seems to me that there is likely to be a FRAND rate for [the patent in suit]. I can see that the aggregate of individual FRAND rates for patents taken alone and on a territorial basis may well be far more than global portfolio rates and so a rational defendant may well prefer to take a global portfolio licence rather than a series of individual ones. Moreover I accept, as Vringo urges on me, that global portfolio licences are the kinds of licences industry normally enters into.

108.

However this is very different from saying that somehow the fact that a global licence on a portfolio of patents is FRAND necessarily means that a defendant in one jurisdiction faced with one patent is forced to take a global portfolio licence in order to stave off a national injunction on that one patent.

109.

I could see a very different circumstance if Vringo had made a FRAND offer for the patent [...] itself and that offer had not been accepted. Then an injunction might well follow. In that sort of case, unlike the one based on the global portfolio licence, the threat of the injunction, which is after all a territorial remedy, would not be being used to create some sort of international coercion or coercion about other patent rights.

(Counsel’s emphasis)

I remain of the same view as expressed in those paragraphs.

Also relevant is the judgment of the CJEU in Windsurfing International v Commission Case 193/83 [1986] ECR-0611. There the CJEU considered the terms of a patent licence under competition law. Samsung submitted that the decisions in Vringo were consistent with the jurisprudence of the CJEU in Windsurfing. In particular Samsung (and Huawei) cited paragraph 92 of the judgment of the court, which referred to the public interest in eliminating invalid patents. Huawei also relied on paragraphs 36 and 85 of Windsurfing for a different point about the proper scope of a patent licence for it to be consistent with competition law. Paragraph 85 relates to territory and paragraph 36 to parts of the whole product not covered by the patent. In both cases clauses in the licence which went wider than the scope of the underlying patents were held to be anti-competitive.

This is a developing area of law and practice, with wide ramifications. There are three legally relevant ways of looking at licence terms offered by a patentee or advanced by a defendant in the context of standard essential patents and ETSI. All three contexts involve considerations of fairness, reasonableness, and non-discrimination, i.e. FRAND, but although that expression is used in all three contexts, it is necessary to distinguish between them. One context is compliance with competition law. A second is compliance with the contractually enforceable obligation to ETSI in terms of the ETSI declaration and the IPR policy. The third context is directed to granting and refusing injunctions. One could describe the third context as being concerned with whether licence terms are “equitably refusable”. In other words are the terms on offer such that an injunction would be granted if the defendant refused to accept them? Conversely, are terms proposed by the defendant such that an injunction would be refused if a patentee, obliged to license on FRAND terms, refused to accept them? The third context is not necessarily only concerned with the first two contexts since it will also relate to the exercise of the court’s discretionary power to grant injunctive remedies. Even if a patentee is not contractually obliged by the ETSI IPR Policy to accept FRAND terms offered by a defendant, perhaps a court might refuse to grant an injunction in such a case.

Huawei’s case is based only on contractually enforceable obligations to ETSI. Huawei submitted that the following three propositions could be decided now as a matter of the true construction of the obligation arising from the ETSI declaration and the IPR policy:

Furthermore Huawei submitted that even if these points of construction were arguable and could not be decided now, there were certain characteristics of the April and July Proposals which meant that they could never in fact be FRAND. Insofar as these points involved facts, the facts were undisputed or indisputable. The characteristics relied on are:

Samsung and Google had not brought applications of their own. They supported Huawei’s stance in opposition to Unwired Planet’s application to amend to seek a declaration.

Unwired Planet opposed Huawei’s application, submitting that the true construction of the ETSI IPR Policy and ETSI Declaration was not a simple matter since it was bound up with issues of competition law. Thus it could not and ought not to be decided in this way. Unwired Planet submitted that Huawei was wrong in its submission that the characteristics of the April and July Proposals could be decided now. They involved disputed questions of fact.

single patent licences

Huawei submits that a patentee must offer individual licences for any individual declared essential patent it holds if a putative licensee asks for one. Huawei says it is willing to take a licence under any SEP found to be valid and infringed. A key aspect of this debate is whether Unwired Planet is obliged to offer a licence under one SEP alone and/or whether if Huawei offers to take a licence under that one SEP but Unwired Planet refuses, Unwired Planet could still obtain an injunction.

Huawei submits that it can be seen from the wording of the ETSI IPR Policy and the ETSI Declaration that a declarant is obliged to offer single patent licences. The main argument is that the definition of IPRs is such that it deals with them individually and so the obligation attaches to each IPR (i.e. each patent) individually and so the declarant is obliged to offer a FRAND licence for any given patent individually.

Unwired Planet does not agree. As far as the wording relied on by Huawei is concerned, Unwired Planet submits it is simply drafted so as to cover the case of a patentee with a single SEP, it does not say anything about an obligation to license SEPs individually when a patentee holds a portfolio. Moreover Unwired Planet contends that portfolio licences are entirely standard in this industry and indeed are offered by at least some of the groups of which the defendants are a part. They are the only practical way of conducting business. Portfolio licences are not inherently contrary to competition law. Both these facts need to be taken into account in construing the ETSI IPR Policy and ETSI declarations. Competition considerations and portfolio licensing are a key part of the background against which these instruments must be construed.

Unwired Planet refers to Sir Robin Jacob’s article. It submits that the article supports the view that a portfolio offer of all SEPs held by a patentee is capable of being FRAND. I agree. The article does run counter to Huawei’s submission. All the same it is fair to say that the article was considering a contrast between a portfolio offer bundling SEPs and non-SEPs together and was not, I think, focussing in detail on the difference between an offer bundling all SEPs together as opposed to an offer of licences for individual SEPs. The article does not address in terms the difficulty I referred to in Vringo II in which a patentee seeks a territorial injunction on one patent in order to force a defendant to take a worldwide licence on thousands of patents.

Unwired Planet submits that its portfolio licences are FRAND but as in Vringo II, this may not be the only issue. If Huawei loses on one SEP but wins on the others, it does not want to be forced to choose only between a worldwide portfolio licence or an injunction on that SEP.

Huawei emphasised that its case was based on the scope of Unwired Planet’s contractual obligations to ETSI, not competition law. It submitted that the wording of these obligations was clear and could be decided now. A decision on this point would greatly assist the parties in this case.

I accept that an early decision on this issue would be of assistance in this case. If Unwired Planet is required to offer single patent licences then it cannot use the claim for an injunction to force the defendants to take a global portfolio licence. It may ultimately be able to negotiate portfolio terms but both sides will know that those terms could only arise from negotiation. Such a ruling would have a profound effect on the parties’ negotiations.

However in my judgment this question cannot be decided in this way. It is at least arguable that a key part of the factual matrix against which these terms have to be construed is competition law and policy. No matter how clear the meaning of the words themselves may seem, a final decision about their meaning and scope cannot be made without putting them into their proper factual and competition law context. Counsel for Huawei expressly did not seek to argue points of competition law on this application and so the need to consider competition law undermines the submission that these points of construction can be decided on this application.

Part of the background to the ETSI rules is that a balance has to be struck between the needs of telecommunications standardisation for public use and the rights of owners. That on its own shows that competition considerations have to be taken into account. The ETSI Guide on IPRs (19 Sept 2013) makes that point expressly (para 1.1). The background section of the Guide also expressly mentions that a revision of clause 4.1 of the ETSI IPR Policy was prompted by EC DG Competition in its concern to generate awareness of the risk of patent ambush in the standard setting process.

It may well be that competition law considerations and the wider context actually work in Huawei’s favour on these issues, but that should be decided at trial.

Competition law, the scope of the ETSI obligation and the question of injunctions which I have called equitable refusability all interrelate with each other. That can be seen from AG Wathelet’s opinion. At the point at which the court has to decide whether to grant a final injunction in this case the decision what to do will depend, at least in part, on what licence terms are before the court and on their qualities. The patentee may be advancing only a worldwide portfolio licence while the defendant may be offering to take a licence under only the patents actually found to be valid and infringed. Necessarily an individual patent offer would be territorially limited. Both proposals might be FRAND in terms of the ETSI IPR Policy but each side could be refusing the other’s offer. The obligation owed by a patentee to ETSI may only be to make a FRAND offer such that once a single FRAND offer has been made, the obligation to ETSI is fulfilled. It is an open question whether such a single FRAND offer is determinative of the question of whether the court must grant an injunction. Perhaps a patentee also owes a duty to ETSI to accept a FRAND proposal from a defendant. There is nothing in the wording of the ETSI rules or declaration about that.

Another reason why I will not decide this first construction question at this stage is the following. To rule on the FRAND nature of a given set of proposals it must be relevant to take into account what was asked for. Huawei’s submission about a single patent licence is qualified in that way. That qualification makes sense. Logically if Huawei had asked for a worldwide portfolio offer for all Unwired Planet’s SEPs, it could hardly be a breach of the obligation to ETSI to make such an offer. Unwired Planet points out that its April and July proposals included an express recognition that the proposal was an indivisible worldwide arrangement but that Unwired Planet was willing to discuss individual country or technology licences on request. Before me the extent to which any such request has been made of Unwired Planet is unclear. The court is being asked to rule on a point which will no doubt arise in future but which, at least, may not have arisen yet. I am reluctant to decide a point until it has actually arisen.

particular standards

Huawei submits that Unwired Planet is obliged to offer a licence under all SEPs for a particular standard. A particular standard in this context would mean 2G as opposed to 3G. The licences offered cover all standards together (2G, 3G, 4G) but, Huawei contends, in fact Unwired Planet has no 2G patents in its portfolio. Huawei says that it sells some 2G only products and so that would mean paying a royalty on 2G only products even though they did not need a licence from Unwired Planet.

In the abstract it seems to me that in the context of competition law and following Windsurfing, if the premise is true in fact the conclusion would be likely to follow. In other words if the patentee had no 2G patents then a licence proposal which covered 2G as well as 3G seems unlikely to be legitimate. However Unwired Planet does not accept that Huawei’s submission on the facts is accurate and so I will not consider the question in the abstract but deal with it below. It is also worth noting that although the conclusion seems a likely one as a matter of competition law, Huawei advanced its submission under the ETSI IPR policy.

particular territories

The existing April and July proposals were worldwide. Huawei submits that Unwired Planet is obliged to offer a licence under all relevant SEPs in a particular territory. So if Huawei wants a licence for the UK alone, Huawei should be entitled to ask for and be given a FRAND offer for the UK alone. Put this way the argument is closely connected to the single patent point above. If the former is not suitable for summary determination, then neither is the latter.

Separately Huawei submits that a vice in the worldwide proposals is that they involve paying for sales in countries in which Unwired Planet has no patent rights. The example given is Iran. Unwired Planet submits Huawei’s “Iran” point is mistaken on the facts and rather than decide this at this stage I will consider it below.

It is convenient to group the issues in a different way from that advanced by Huawei. Points (i), (iii) and (v) go together and points (vi) and (viii) do as well.

Both offers demand a royalty for acts and/or territories and/or standards in respect of which the claimant does not even claim to enjoy any relevant patent protection.

The April and July Proposals both bundle all telecommunications standards together.

The April and July Proposals both bundle all territories of the world together.

It is true that both proposals cover sales all over the world including countries in which Unwired Planet has no patents and cover all standards, i.e. 2G, 3G and 4G.

As regards non-patent countries like Iran, Unwired Planet submits its offers are unexceptional and that Huawei has misunderstood a key distinction which commonly arises in intellectual property licensing. The distinction is between the scope of rights licensed and the royalty bearing event. Clearly with no patents in Iran, Huawei does not need a licence from Unwired Planet to sell phones lawfully in Iran. However Unwired Planet points out that Huawei phones sold in Iran will be made in countries in which Unwired Planet has patents and therefore (on Unwired Planet’s case) making them will need a licence. One example is China. The July licence defines the royalty due by reference to the selling price. The royalty bearing event is sale and whether the products made under licence in China are sold in Iran or in the UK does not matter. The products all need a licence to be manufactured but the royalty is calculated by the selling price. That makes sense and I am bound to say is a pretty conventional form of IP licence.

Huawei wishes to argue that this structure with royalties calculated this way is a breach of the ETSI obligation. It can do so at trial but I cannot decide either this factual point or the construction issue related to it in Huawei’s favour at this stage.

The point on particular standards is that the two proposals bundle together all standards. As I have said, Huawei complains that it sells products which are 2G only (GSM/GPRS) but that Unwired Planet has no patents even declared essential to 2G standards. If this was right in fact it would appear to be a good point but during the hearing Unwired Planet showed that it does possess a family of patents, including patents granted by the EPO, which are declared essential to 2G standards (GPRS). Huawei had made a mistake.

Moreover counsel for Unwired Planet also showed me that the two proposals do draw distinctions between different standards in the relevant sense. I have mentioned the royalty terms above. The July proposal seeks a higher royalty in relation to LTE (i.e. 4G) than it does for 2G or 3G. Counsel also submitted that the royalty rates sought in the April proposal, although they did not expressly distinguish between different standards, may do so implicitly as a matter of fact because they are in terms of absolute sums of money ($0.75 per phone etc.) and the profit margins and pricing for 4G phones are very different from the equivalent for 2G only phones. Counsel’s point was simply to show that these issues are highly fact dependent.

In my judgment none of the issues can be decided by summary judgment as to the facts. Moreover and even bearing in mind ICI Chemicals, I do not think it would be sensible to try and decide these issues of construction summarily. The issues are too closely connected with the underlying facts and those facts are in dispute.

The April Proposal bundles non-SEPs together with SEPs.

The April proposal undoubtedly does bundle together SEPs and non-SEPs. Sir Robin Jacob’s article addresses this. Paragraph 10 states

“Next there is the important question of whether a patentee can comply with his FRAND obligation by offering his entire portfolio of patents or just his entire portfolio of SEPs for licence as a package. I think the answer here is that he can do the latter (all SEPs) but not the former (all SEPs with all non-SEPs):

[…] ”

Following this passage supporting reasons are given: that it would oblige a party to take more than the FRAND obligation (and duty) requires; considerations of competition law; and industry standard practice to offer portfolios.

Like Sir Robin I think the answer may well be that making an offer which bundles non-SEPs and SEPs together is not compliant with the ETSI obligation. The submission that the April 2014 proposal cannot have been compliant with Unwired Planet’s ETSI obligations seems to me to be Huawei’s best point. However I have decided that it would be wrong to rule out the possibility that the conclusion might be different once all the facts are found at trial. For one thing, within weeks of making the April proposal, Unwired Planet made a second, SEPs only proposal. That was in response to being asked for such terms by the defendants. It seems to me that this shows that one may not be able to look at the April proposal in isolation. If, after making the SEPs plus non-SEPs offer, the defendants had asked for an offer limited to SEPs and the patentee had refused to provide any then the position would be very different, but that is not what happened. Conversely if a defendant asked the patentee for an offer covering all its patents, SEPs and non-SEPs then it is hardly fair to say that a proposal made in response to that express request is somehow non-compliant. All this goes to show that the factual context has a role to play in deciding this issue. If the April proposal was the only proposal available then it would be strongly arguable that it was not in accordance with Unwired Planet’s ETSI obligation but those are not the facts.

The April and July Proposals both fail to offer a FRAND rate of the five alleged SEPs in suit and each of them.

This is the same per-patent licence point as the construction question which I have already decided should not be determined in summary fashion.

The April and July Proposals both fail to [address certain points of detail]

The April and July Proposals were not offers capable of acceptance, rather merely invitations to commence negotiations

These two points relate to each other. Most of the points of detail referred to in (vi) relate to information from the patentee which one would expect to be produced at a fairly early stage in negotiations. No doubt if the patentee refused to comply with a request for that sort of information then it might well be acting contrary to its obligations, particularly the first four points in sub-paragraph (vi), but that is not what the submission is directed to. Huawei’s submission must be that even if all the information was provided promptly on request, the mere fact that the proposals did not include it in the first place means that, as proposals, they cannot amount to compliance with a FRAND obligation. I very much doubt that submission is correct. Negotiations have to start somewhere. Both proposals cover the vital terms which a licensor and licensee would wish to know – territorial scope, standards scope and royalty rates. If a patentee makes proposals which cover those terms and the putative licensee makes it clear that it is not interested, I do not see why a patentee should be obliged nevertheless to produce a draft contractual document, capable of being accepted. There is no point in doing so. If such a full set of terms was asked for and refused, that would be different but that is not the allegation. This point cannot be decided on summary judgment.

The April Proposal [sought attorney fees, costs and 8% interest]

The April proposal contained a demand for costs and interest. In the context of English patent ligation that demand appears odd and aggressive because litigation costs (including lawyers’ fees) are recoverable subject to assessment and the judgment rate for orders to pay money is already 8%. When asked for a SEPs only offer, Unwired Planet produced the July proposal. It did not repeat this demand. Like the much more significant question about bundling SEPs and non-SEPs, it seems to me that the April proposal should not be seen in isolation. Huawei may well be right that this term is not compliant with the ETSI obligation. However I do not believe the point can be decided summarily given the July proposal which came closely afterwards. Moreover although neither side pointed it out in this context, I note that Sir Robin Jacob’s article (paragraph 8(b)) expressly contemplates that a FRAND offer made after litigation is completed may legitimately be at a higher rate than one concluded beforehand. This is not the same point but it is related to it.

For these reasons I find that Unwired Planet has a real prospect of defending all the various points arising on Huawei’s summary judgment application and I will refuse that application.

Unwired Planet’s Particulars of Claim refer to the April and July proposals and assert that they are FRAND. The defendants denied that the proposals are FRAND. Unwired Planet wants to amend the prayer to include a claim for two declarations at paragraph (5A). The first is simply a declaration that the proposals are FRAND. It is the counterpart to the defendants’ stance in this case. Huawei’s strike out application is also closely related to the first declaration since it seeks to strike out the passages in the Particulars of Claim in which Unwired Planet asserts these proposals are FRAND.

Huawei submits that in its current form Unwired Planet’s Particulars of Claim could be understood as though the April and July proposals only fall to be considered in terms of their compliance with the letter of the ETSI IPR Policy and not in terms of competition law nor in terms of equitable refusability and injunctions. On that basis the declaration is similarly limited. There is some force in that submission but Unwired Planet argued that one reason for seeking the declaration was to have its case that it had breached competition law publicly vindicated. It is fair to note again that Unwired Planet has not yet responded to Huawei’s pleaded case on ETSI. Samsung and Google also submitted that the first declaration has to be seen in the context of the existing claim in the prayer for an injunction. The two are obviously related. Indeed this was one of Samsung and Google’s main objections to the declaration.

Unwired Planet submitted that one of the matters already in issue between the parties was whether the royalty fees charged in the April and July proposals were or were not excessive. In the course of argument at least Samsung and Google submitted that their pleaded case on excessive pricing was limited to an argument about bundling but was no more general than that. They submitted that the non-technical trial was not going to be required to value Unwired Planet’s portfolio as a whole, which would be a mammoth undertaking. So if Unwired Planet was allowed to seek this declaration it would mean that wide questions of this kind would be put in issue.

I reject the defendants’ stance about the scope of the points already in issue. The defendants’ existing pleas about excessive pricing are not narrowly confined. They are broadly stated. The non-technical trial was already going to have to consider the value of Unwired Planet’s portfolio as part of the cases advanced by the defendants. Indeed the case has already been managed on the basis that the pricing of the April and July proposals was an issue which was going to be addressed as a matter of substance and, subject to further case management, the existing size of the trial is already capable of dealing with it. No doubt the issue will require careful management. It is plain that the trial will never involve trawling through 2000 different patents and having a mini trial on the value of each one. That is not sensible and is not going to happen. But it will not be necessary. The patents can be broken down into families and by territory and the numbers instantly become much more manageable. Patents which were not in families considered at the technical trials will not merit extensive technical consideration while those that were will already have been analysed.

I have refused Huawei’s application for summary judgment in part because I am not prepared to interpret the ETSI IPR Policy and ETSI Declaration without considering the wider background and in part on the facts. On that basis I will also refuse to strike out the elements of the Particulars of Claim which relate to the FRAND nature of the April and July proposals. It is not clear to me whether Unwired Planet’s case on FRAND is limited to the ETSI obligation or goes wider into competition law and injunctions but that may be clarified once it has responded to Huawei’s pleadings. In any event I am satisfied that Unwired Planet’s allegation that its proposals comply with the ETSI obligation has a real prospect of success. I will also allow the amendment to include the first declaration but I will impose a condition which I will explain below after dealing with the second proposed amendment.

Finally I should address the scope of the issue raised by the first declaration. Unless the parties agree otherwise, the court can only adjudicate on the characteristics of licence terms which are actually before it. Nevertheless in adjudicating on the qualities of a given set of licence terms, the court is capable of ruling that, for example, but for one term, the licence would be FRAND. That will be within the scope of the first declaration. This works for the benefit of both sides. It allows for the possibility that a declaration will be given on an offer which is not in precise terms to one before the court but differs in some specific respect arising out of the case. However this is a very different thing from the court conducting in effect a tariff setting exercise such as in the Copyright Tribunal, in which terms can be set by the court.

The second declaration sought is:

“A declaration … as to the terms or range of terms that would be FRAND for a licence to use (i) the claimant’s portfolio of Standard Essential Patents and/or (ii) the claimant’s portfolio of patents.”

The objection to this amendment from the defendants was that it is open ended and invites the court to conduct a Copyright Tribunal style exercise. Unwired Planet’s counsel submitted it was not but was simply there to cater for the possibility I have discussed already that the court might hold that but for specific points the terms were FRAND. I do not accept that submission. In my judgment the declaration sought is completely open ended. I remain of the view I came to in Vringo I that the court's jurisdiction simply does not stretch to that, without the consent of the parties.

I agree with the submission of Samsung and Google that the first declaration is closely tied into the question of injunctions and equitable refusability. The non-technical trial is the occasion on which this question should be decided. I am not arranging a second non-technical trial in these proceedings. There will need to be thought about how to manage this case with all these things in mind. It is manifest that at some stage in these proceedings more licence terms are likely to be placed before the court. At the latest this will happen at the point at which an injunction is sought by Unwired Planet if one of the patents is found valid and infringed. These licence terms need to be brought out and placed before the court in an orderly fashion so all sides can properly prepare.

The only licence terms about which either side has made submissions are the April and July proposals. In statements of case the claimant has pleaded that it has made the April and July proposals. Correspondingly the defendants have pleaded openly that they are willing licensees under the five SEPs in issue. In those circumstances I will direct that the parties must put before the court the proposals which they wish the court to adjudicate upon.

I am well aware that negotiations are going on behind the scenes. That is appropriate but it can cause difficulties in a case like this which involves licensing. For example an issue, now resolved, was whether a particular letter was covered by without prejudice privilege or not. The direction I will give is not concerned with whatever commercial negotiations go on behind the scenes. There is no reason why they should not continue; indeed, if I can I should encourage them. Assuming the parties are willing then those commercial negotiations should continue under a well organised scheme of without prejudice privilege in order to facilitate discussion. However the fact that those commercial negotiations are going on does not absolve the parties of putting forward their concrete cases in these proceedings.

As I have said, the only licence terms discussed in argument so far are the April and July proposals. I cannot imagine that the April proposal has the necessary characteristics to mean that if the defendants refused to accept it, an injunction to restrain infringement of any or all five SEPs would be granted. That is because the April proposal bundles SEPs and non-SEPs together. As a result it seems to be very likely to be equitably refusable.

Although Unwired Planet’s position is stronger in relation to the SEPs only July proposal, I remain very doubtful that this proposal alone will be sufficient to determine the question of whether Unwired Planet can obtain an injunction on any of the five SEPs in this case. That is because the defendants have made clear they are willing to accept FRAND licences under any patents found valid and infringed and I refer to the passage from Vringo II above. The issue is likely to turn on patent specific licence terms advanced by either party. The problem is that at the moment neither side has explained what it says those terms should be.

As a condition to allowing the first declaration to be advanced by amendment I will require the claimant to state whether it is prepared to make an offer to the defendants for a territorial licence for the five patents in suit on the assumption that they are valid and essential. Then once the claimant has answered that question I will require the claimant, if the answer is no, to say why not; and if the answer is yes, to set out what its terms would be. Those terms should be set out at the same level of generality as the April and July 2014 proposals already in evidence. At the same time I will require the defendants, since they have expressly pleaded that they are willing licensees, to set out the terms that they would accept for a licence of these five patents, assuming that they are valid and essential. The terms should be at the same level of generality. It may be the best way to address that is to deal with all five together but to allow for dealing with individual patents as well. No doubt that sort of thing can be kept under review, if patents fall by the wayside at the technical trials.

I will discuss the timing of these steps with the parties. I propose that once the claimant has answered the question, the claimant’s proposals, if any, can be exchanged simultaneously with the defendants’ proposals.

This is an unusual way to proceed but it arises from the fact that this action is concerned with standards essential patents and licensing. The direction is not aimed at forcing the parties to negotiate in public, it is intended to identify the issues at an early stage and ensure that all sides can understand the nature of the case they have to meet. It is likely to facilitate the orderly resolution of this dispute and is in accordance with the overriding objective CPR r1.1 to deal with cases justly and at proportionate cost.