Are the English courts the right forum for claims of patent infringement when the relief sought is the determination of a global FRAND licence? This was the question that Mr Justice Carr recently had to consider in Conversant Wireless Licensing SARL v Huawei Technologies Co. Ltd & Ors [2018] EWHC 808 (Pat) (16 April 2018).
In this case Conversant, a Luxembourg company, had asserted its patents against four defendants: the Chinese companies Huawei and ZTE (who manufacture and sell mobile phone devices globally) and their respective English subsidiaries. The relief sought by Conversant was the determination of FRAND terms for patents in its global standard-essential patent (SEP) portfolio.
The defendants contended that:-
- As the claims were in substance and effect claims for infringement of foreign patents the validity of which was in dispute, the English court had no jurisdiction.
- Alternatively, the English court should decline jurisdiction as England was not the proper or appropriate forum (forum non conveniens); China was the natural forum.
Fundamental to the defendants' contentions was the China-centric nature of their businesses. Both Huawei and ZTE manufactured the allegedly infringing products in China, and China represented their biggest market: respectively 56% and 60% of worldwide sales, in contrast to respectively 1% and 0.07% in the UK. According to Huawei, if Conversant's Chinese patents were not infringed or were invalid, then 75% of Conversant's worldwide royalty claim under a FRAND licence would fall away. Unsurprisingly, therefore, Huawei and ZTE had commenced proceedings in China seeking to establish invalidity and non-infringement, or determinations of FRAND terms in respect of those Chinese patents. The outcome of the Chinese proceedings was not expected for another year or so.
It is the case that the English court cannot determine the validity of foreign patents, including the Chinese patents. Events in China therefore could have a substantial impact on global FRAND royalties. This did not, however, trouble the judge. In the well-known FRAND case of Unwired Planet v Huawei (about which we have reported previously, here, here and here) the FRAND terms set by the court provided for a variation in royalty rates in the event that patents in other jurisdictions were held to be invalid or not infringed. Mr Justice Carr concluded that with such a mechanism there would be no injustice to Huawei and ZTE if the English proceedings were to continue. Should the Chinese court conclude that some or all of the Chinese patents are invalid or infringed then the worldwide FRAND terms decided upon by the English court would adjust accordingly. Although Huawei and ZTE criticised the adjustment clause in the Unwired FRAND licence (which Conversant had adopted in their proposed worldwide licence) the judge held that was a criticism of the clause and not a basis for depriving the English court of jurisdiction.
The court therefore concluded that the case should continue in the English court. At the heart of the case were allegations relating to infringement and validity of British patents which only could be dealt with by the English court. Against that backdrop, the English Court was as well placed as the Chinese court (and indeed other courts) to reach a determination of a global FRAND licence, it being recognised that such a global FRAND licence would need to include provisions enabling it to flex in light of external events, such as findings of invalidity and non-infringement in China (or elsewhere).
Comment
Given the manufacturing and level of sales in China, superficially the defendants' arguments might have some attraction. However, if it were the case (as the defendants contended) that a court in one jurisdiction should not determine global FRAND terms because the validity of some or all of the underlying SEP patents is in issue in another jurisdiction, then this could operate to prevent the courts in any jurisdiction being able to determine global FRAND terms. From the earliest FRAND/SEP cases, the English courts have shown a flexibility and pragmatism to deal with such cases and this continues with this latest judgment.