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English court keeps its FRANDS close and its SEPs closer

David Knight
30/11/2021

Locations

United Kingdom

The English High Court has refused to grant a stay in favour of a court in China that was argued to be the more appropriate forum for determining the validity, essentiality, infringement and "fair reasonable and non-discriminatory" (FRAND) terms of a mobile telecommunications Standard Essential Patent (SEP) licence.

Background

In the Unwired Planet case (Unwired Planet International Ltd v Huawei Technologies (UK) Co Ltd and others [2020] UKSC 37), the English Supreme Court last year ruled that the English courts had jurisdiction to settle FRAND terms of a patent licence which covered foreign patents - even in the absence of the parties' consent to the English court setting global terms.  The ruling has been seen as something of a "land grab" by the English courts for these sorts of claims – offering a "one stop shop" for global SEP licence disputes in the telecommunications sector.  (See our blog: FRANDS for the memories – Supreme Court brings Unwired Planet v Huawei to a close | Fieldfisher.)
 
Nevertheless, the Supreme Court was careful to emphasise in that decision that the alternative (Chinese) court in question at the time did not have the jurisdiction needed to determine a global FRAND licence, and that this was part of its reason for refusing to stay the English proceedings in favour of the foreign (Chinese) ones.
 
Since then, however, the Chinese supreme court has handed down a judgment in Oppo v Sharp SEP ((2020) Zui Gao Fa Zhi Min Xia Zhong No. 517) which confirmed that the Chinese courts could also take jurisdiction to determine the terms of a global FRAND licence (even without the parties' consent in some circumstances; and perhaps even without an underlying patent infringement action).
 
The latest development is now a ruling from the English High Court in Nokia v One Plus (Nokia Technologies OY v OnePlus Technology (Shenzhen) Co Ltd [2021] EWHC 2952), in which the English courts contend with the question of what to do if there if there are parallel FRAND actions before the English and Chinese courts.

Key facts

In this case, the claimants (Nokia) were owners of three mobile telecoms SEPs with UK designations.  They alleged that the defendants (seven companies which all had been licensees up until June 2021, and only two of which were domiciled in the UK) had infringed the patents since their original licence had expired.  The claimants had offered them a new licence (which the claimants alleged included FRAND terms) but the defendants had refused to accept this.
 
The defendants denied that the terms of the new licence were FRAND, and in July 2021 the three non-UK-domiciled defendants had filed a claim in China asking for a court there to set the terms of a global FRAND licence. They argued that the proceedings in the UK should be stayed in favour of the Chinese courts, either on the basis of:
 
(1) forum non conveniens; or alternatively
 
(2) the court's discretionary case management powers. 

High Court's ruling

Sitting in the Patent Court, His Honour Judge Hacon heard the application.  In refusing to grant the stay, he rejected the defendant's arguments on both bases.
 
On the first, he concluded that: following the end of the UK's Brexit transition period, the correct principles to apply were those under the common law doctrine of forum non conveniens (rather than the Recast Brussels Regulation, or the related case law in Owusu v Jackson Case C-281/02 EU:C:2005:120).  As such, the domicile of the defendants was not determinative.  However, the characterisation of the action as one of UK patent infringement was nevertheless sufficient to determine that the English courts were the most appropriate forum (forum conveniens).
 
Similarly, in relation to the "case management" stay, the judge noted that the "circumstances will be rare" in which there would be sufficiently compelling reasons to conclude that costs savings/convenience gains would weigh the interests of justice in favour of a stay.  Having considered the parties' various arguments (e.g. on the risk of irreconcilable judgments, the sanctions imposed under Chinese law, the relevant timeframes involved, etc.) the judge concluded that:
 
"none of the factors raised by the parties tips the balance of justice as between the parties in favour of a stay or no stay.
 
That being so, I do not take the view that the circumstances of the present case are of the rare and compelling nature […] such that the balance of justice favours a stay of the FRAND issues before this court. No stay will be granted."

Key takeaways

This case underlines the English court's willingness to adjudicate on these kinds of FRAND licence disputes.  Although ostensibly condemning forum shopping, the ruling appears to accept that the reality of forum choice "cuts both ways"; and that a "race to the top" (to the forum with the most favourable FRAND terms for the SEP owner) would be as distasteful as a "race to the bottom" (to the forum with the most favourable FRAND terms for the implementer).
 
By setting the bar for a stay to proceedings relatively high (although recent decisions like those to grant a stay pending an outcome in US proceedings in Icon Health & Fitness Inc & Or. v Peloton Interactive Inc & Or. [2021] EWHC 2266 (Pat) suggest this bar is not insurmountable), the English courts seem to be advertising themselves as one of the more attractive options on the menu.
 
Whether this will result in further proliferation of national courts accepting jurisdiction (and the unseemly associated forum shopping this might produce); or whether increased competition between courts might lead to legitimate improvements in speed and efficiency for all parties (as other commentators have speculated), however, remains to be seen.
 
With special thanks to James Russell, Trainee, co-author of this blog.

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