UK Supreme Court Says English Courts May Enjoin Infringing Activity Upon Refusal of Alleged Infringer to Enter a Global License of an International SEP Portfolio (Short Summary)

Written by: Shayne D. Rasay & Jonathan H. Spadt

Editor’s Note: This Summary addresses only 1 of 5 holdings in the case. For a thorough review of the complete decision, click here. The Court’s decision can be found here: https://www.supremecourt.uk/cases/uksc-2018-0214.html

In Unwired Planet International Ltd. v. Huawei Technologies Co Ltd. [2020] UKSC 37, the UK Supreme Court addressed three appeals, which collectively raised issues concerning the infringement of standard essential patents (SEP) and the obligation of SEP owners bound under the European Telecommunications Standards Institute (ETSI), a telecommunications Standard Setting Organization (SSO), to grant a license to manufacturers of equipment using the SEP technology on “fair, reasonable, and non-discriminatory” (FRAND) terms. Specifically, the Court analyzed five overarching issues raised by the three appeals: (1) jurisdiction, (2) forum choice, (3) the “non-discriminatory” prong of FRAND, (4) whether injunctive relief is a breach of European Union competition law, and (5) the appropriate remedy (injunctive relief vs. monetary damages).

In all appeals, the Court considered the issue of remedies. Huawei argued that the proper and proportionate remedy to infringement is monetary damages, as opposed to injunctive relief. The UK Supreme Court found no persuasive basis to award damages in lieu of an injunction.

The Court held that the award of an injunction in these cases was proper because (1) concerns regarding the threat of an injunction creating “undue leverage in negotiations” were not well placed given the ETSI IPR Policy regime, and (2) monetary damages would be an inadequate substitute. In both lines of reasoning, the “critical feature” was the recognition that SEPs are “designed to operate on a global basis.” First, the Court noted that the IPR Policy concerning SEPs eliminates the concern of an injunction as a “means of charging exorbitant fees,” because FRAND terms (to the satisfaction of the courts) are prerequisites to an SEP owner’s enforcement of patent rights. Notably, the Court expressly differentiated the situation from the U.S. Supreme Court decision in eBay Inc. v. Mercexchange LLC 547 U.S. 388 (2006), writing that there were “no grounds in this case for a concern of the kind expressed by Kennedy J in the eBay case. The threat of an injunction cannot be employed by the claimants as a means of charging exorbitant fees . . . since they cannot enforce their rights unless they have offered to license their patents on terms which the court is satisfied are fair, reasonable and non- discriminatory.”

Second, the Court noted that withholding an injunction would negate the incentives for parties to enter FRAND licenses because infringers would continue to infringe until “patent by patent, and country by country,” they are “compelled to pay royalties,” an undertaking that would be too cost-prohibitive for SEP owners having a worldwide patent portfolio. Simply put, an injunction was deemed proper because the infringer/implementer (Huawei) “stand[s]…without a license but [has] the means to become licensed open to them.” Thus, the UK Supreme Court dismissed this basis of appeal.

In general, the UK Supreme Court issued a favorable decision for SEP owners on the grounds of (1) jurisdiction, (2) forum choice, (3) the “non-discriminatory” prong of FRAND, (4) no breach of European Union competition law for SEP holder to sue for injunctive relief, and (5) that the appropriate remedy is injunctive relief over monetary damages. Additionally, in reaching this decision, the UK Supreme Court predominantly considered the underlying principles of the ETSI IPR Policy and analyzed the issues in the context of industry practices.