The Court of Appeal reaffirms that English courts may determine global FRAND licences

The Court of Appeal has dismissed Huawei and ZTE’s appeal that the English court did not have jurisdiction and is not the correct forum to hear a dispute concerning the infringement of standard essential patents (SEPs). In doing so, it has confirmed that the English courts remain an attractive forum for determining the terms and royalty rates of global FRAND licences.

Background to the dispute

In July 2017, Conversant brought proceedings against Huawei and ZTE alleging infringement of four of its European standard essential patents (SEPs). Conversant also sought a declaration that their earlier offer of a licence to the defendants had been on terms that were fair, reasonable and non-discriminatory (FRAND), and if they were not, what those FRAND terms should be for its global SEP portfolio. On their part, the defendants had already brought validity actions against the equivalent Chinese patents before the Chinese court.

The defendants sought to stay the action, arguing that the English court had no jurisdiction to decide the claims and that England and Wales is not the proper or appropriate forum (forum non conveniens).

In April 2018, the High Court rejected the defendants’ arguments and held that as the English court has jurisdiction to hear a claim concerning the infringement of a UK patent, it is also able to remedy any infringement found by determining the FRAND licence on a global basis. Our earlier coverage of Mr. Justice Carr’s judgment in the High Court can be read here.

The Court of Appeal’s judgment

The Appellants had challenged jurisdiction on two grounds. Firstly, that Conversant’s claim was not justiciable in the English court because it related not only to the validity and infringement of UK patents, but also to Conversant’s foreign patents. Secondly, that the Chinese court is the natural and appropriate forum as over 50% of Huawei’s global sales are in China, and that as such the English court should have refused service out of the jurisdiction.

The Appellants sought to introduce new evidence in the form of guidelines from the Guangdong Court which had been issued shortly before Mr. Justice Carr’s Order was sealed. The guidelines stated that when the scope of a SEP exceeded the territorial scope of the Guangdong Court, the Court could nevertheless determine a royalty if the other party did not unreasonably object.

Lord Justice Floyd, giving the leading judgment, refused to stay proceedings on the ground of forum non-conveniens. In doing so he argued that although the English Court is setting the worldwide royalty rate, this did not preclude the Chinese Court from ruling on the validity and essentiality of the Chinese patents in question. In relation to the new evidence, while the Court of Appeal held that it was admissible as it could not have been produced at the High Court trial, it was not determinative in this case.

Comment

The judgment of the Court of Appeal in this case further cements the English courts as a venue for global FRAND determinations.

Following the earlier decision in Unwired Planet v Huawei [2018] EWCA Civ 2344, and now this case, it clear that the English courts will accept jurisdiction to determine global FRAND licences in connection with the infringement and validity of UK patents, even in circumstances where UK sales represent only a small fraction of the worldwide sales on which royalties are claimed.

The Court of Appeal’s judgment can be read here.