Intellectual Property implications: Unwired Planet v Huawei and Conversant Wireless Licensing v Huawei & ZTE [2020]

Friday 4th September 2020

In a landmark intellectual property ruling last Wednesday, the Supreme Court held that English courts have the jurisdiction to set the terms for global FRAND licences of multi-national patent portfolios. The long-awaited judgment upheld the decision that Huawei Technologies would have to pay American patent holders Unwired Planet a global licence rate determined by the court, or risk facing an injunction restricting UK sales. The Chinese tech giant losing their six-year legal battle comes as yet another blow to the company in the Western market, following Washington and Westminster expressing security concerns over alleged links with the Chinese government earlier in the year.

The case began in 2014, following accusations that Huawei (advised by Allen & Overy) had infringed wireless connectivity standard-essential patents (SEPs) belonging to Unwired Planet (advised by Osborne Clarke), which had been acquired from Ericsson the previous year. A standard-essential patent is vital for implementing standardised technology, as it is the innovation that the industry builds upon, and SEP holders must grant licences on fair, reasonable and non-discriminatory (FRAND) terms.

The lower courts ruled that two of the patents were valid and essential, and that FRAND terms would be a global licence including their entire SEP portfolio. Therefore, Huawei had to pay a global licensing fee for infringing the UK patents or face an injunction and hefty fines. Huawei appealed this decision on the basis that the courts were exceeding their jurisdiction and that they should only have to pay licence fees for UK sales, considering the majority of its sales are in China. This was dismissed by the Supreme Court, which upheld the earlier decision.

In an appeal heard alongside the case, the court dismissed Huawei and ZTE Corp’s argument that English courts were not the ‘appropriate forum’ to determine the validity of foreign patents. This means that courts have the jurisdiction to grant an injunction to prevent a company infringing a UK patent if they refuse to take out a global licence of a patent portfolio.

The global standardised telecommunications requirements and the nature of national patent enforcement have caused commercial uncertainty, with courts and regulators facing the issue of how SEPs should be valued. This judgment means that patent holders can seek the value of a patent portfolio without going through the lengthy procedure of country-by-country licensing, and disputes can be resolved in one court, which the court believes to be a rational and commercially consistent solution. This is advantageous to patent holders; if an implementer of standardised technology enforces the SEP holder’s obligation to licence on FRAND terms, English courts can value its patent portfolio to set the rates for manufacturers. This ensures that patent holders get a fair price for licensing their technology on a global basis, without having to enter litigation all over the world. It may also force some companies to withdraw from the UK market in order to avoid being subject to global licensing fees.

The judgment will force any tech company operating in the UK market to strike global deals with patent holders or fear facing injunctions. The aftermath of this judgment has the potential to turn the UK into a hub for global licensing litigation, with patent owners flocking to English courts for favourable judgments. It will allow firms with strong IP practices to thrive under an increase in litigation and it has the potential to reshape the future of technology licensing deals.

This defeat is another blow for the Chinese tech giant; earlier this year, nations both sides of the Atlantic expressed their security concerns about the Chinese technology. The US Commerce Department’s further restrictions on the firm’s access to commercially available chips have been seen as a ‘death sentence’ for Huawei. Following these sanctions by Washington, the company’s 5G equipment has been banned in the UK and it must all be removed by 2027. These licensing fees may act as yet another disincentive for Huawei to conduct business in the UK market.