Optis v Apple - Trial F: Whether an Implementor is bound to take a Licence on FRAND Terms before knowing what they are

Author ajay_suresh Licence CC BY 2.0 Source Wikimedia Commons

 

Jane Lambert

Patents Court (Mr Justice Meade) Optis Cellular Technology LLC and others v Apple Retail UK Ltd and others [2021] EWHC 2564 (Pat) (27 Sep 2021)

This was one of a number of trials between Optis Cellular Technologies LLC, Cellular Wireless Technologies LLC and Unwired Planet International Limited ("Optis") of the one part and Apple Retail UK Ltd, Apple Distribution International Ltd and Apple Inc ("Apple") on the other.  Optis has alleged that Apple's iPhone, iPad and other 3G and 4G devices infringe 8 of its standard-essential patents ("SEP") when implementing an ETSI (European Telecommunications Standards Institute) standard.  The litigation addresses the following questions.  The first is whether certain patents that have been granted to Optis are essential for the implementation of the standard.  If they are, the second question is whether the patents are valid.    If they are valid the third question is whether they are infringed by implementing the standard.   If they are infringed, the final question is on what terms can such implementation be licensed.

The ETSI IPR Policy

These questions arise because clause 6.1 of ETSI's IPR Policy provides:

"When an ESSENTIAL IPR relating to a particular STANDARD or TECHNICAL SPECIFICATION is brought to the attention of ETSI, the Director-General of ETSI shall immediately request the owner to give within three months an irrevocable undertaking in writing that it is prepared to grant irrevocable licences on fair, reasonable and non-discriminatory (“FRAND”) terms and conditions under such IPR to at least the following extent:

• MANUFACTURE, including the right to make or have made customized components and sub-systems to the licensee's own design for use in MANUFACTURE;
• sell, lease, or otherwise dispose of EQUIPMENT so MANUFACTURED;
• repair, use, or operate EQUIPMENT; and
• use METHODS.

The above undertaking may be made subject to the condition that those who seek licences agree to reciprocate.”

Reason for this Policy

In Unwired Planet International Ltd v Huawei Technologies Co. Ltd and another [2017] EWHC 711 (Pat) (5 April 2017), Mr Justice Birss as he then was set out the reason for this policy at para [83] of his judgment in that case:

"The point of FRAND in standard setting is fairly easy to understand. Standards exist so that different manufacturers can produce equipment which is interoperable with the result that the manufacturers compete with one another. So the phone makers compete in the market for phones and the public can select a phone from any supplier and be sure (for example) that if it is a 4G phone, it will work with any 4G network. As a society we want the best, most up to date technology to be incorporated into the latest standards and that will involve incorporating patented inventions. While the inventor must be entitled to a fair return for the use of their invention, in order for the standard to permit interoperability the inventor must not be able to prevent others from using the patented invention incorporated in the standard as long as implementers take an appropriate licence and pay a fair royalty. In this way a balance is struck, in the public interest, between the inventor and the implementers. The appropriate licence is one which is fair, reasonable and non-discriminatory. That way a standard can safely incorporate the invention claimed in a patent without giving the inventor or his successors in title unwarranted power over those who implement the standard. Thus the public interest is served because telecommunication standards can be set using the best and most up-to-date technical expedients available and the inventor’s private interest is served because the FRAND undertaking ensures they or their successors will obtain a fair reward for their invention."

In Unwired Planet International Ltd v Huawei Technologies Co Ltd. and another [2017] RPC 20, [2017] EWHC 1304 (Pat), Mr Justice Birss settled a licence on FRAND terms.  He gave the implementors of the standard a choice.  They could either take a worldwide licence from the patentee on those terms or he would injunct them from implementing the standard in the UK.

FRAND Disputes

Mr Justice Birss's judgment was substantially upheld by the Court of Appeal and Supreme Court.  There have been several other FRAND disputes since then.  The court resolves them by ordering "technical trials" on whether each patent is valid, essential to a standard and infringed.  If it finds that at least one patent is valid, essential and infringed, the court will hold a trial to decide the terms of a FRAND licence.  As in the Unwired Planet case, those wishing to implement a standard ("implementors") have to take a licence on those terms or face an injunction in this country.  

The Optis Litigation

The action that is the subject of this article, Optis Cellular Technology LLC and others v Apple Retail UK Ltd and others [2021] EWHC 2564 (Pat) is known as trial F.  It came on before Mr Justice Meade between 19 and 27 July 2021. His lordship handed down judgment on 27 Sept 2021  There have already been two technical trials.   In Optis Cellular Technology LLC and others s v Apple Retail UK Ltd and others [2020], EWHC 2746 (Pat) (16 Oct 2020) which is known as "trial A", Mr Justice Birss found the patent in suit to be valid, essential and infringed.  However, it expired a few days after judgment.  In trial B. Optis Cellular Technology LLC and others v Apple Retail UK Ltd and others [2021] EWHC 1739 (Pat) (25 June 2021), Mr Justice Meade held that European Patent (UK) No. 2 229 744 B1 was valid, essential and infringed.  I discussed both decisions in Patents - Optis Cellular Technology LLC and others v Apple Retail UK Ltd and others and Patents - Optis Cellular Technology v Apple Retail on 14 Nov 2020 and 23 Oct 2021 respectively.  A trial to determine the terms of a FRAND licence (to be known as "trial E") will take place before Mr Justice Marcus Smith this summer.  

Trial F

In accordance with clause 6.1 of ETSI's IPR Policy, Optis has given an undertaking to grant a licence on FRAND terms in respect of the patent found to be essential, valid and infringed at trial B.  Apple did not agree to take a licence because the terms of the licence are still to be determined at trial E.   In trial F, Optis sought an injunction to restrain Apple from infringing its patent because Applehad not agreed to take a licence.

The Importance of Trial F

At para [49] of his judgment, Mr Justice Meade remarked:

"The question of what is the appropriate course to follow in the period between a SEP patentee’s success in a UK technical trial and a later FRAND trial, in terms of whether the implementer must commit to take a FRAND licence, and whether to grant an injunction if it does not, has not specifically arisen for decision before."

It did not arise in Unwired Planet International Ltd v Huawei Technologies (UK) Ltd and another [2017] EWHC 711 (Pat) because it only became apparent just before the FRAND trial that the implementor had not agreed to take the licence that the court had intended to settle.

The Issues

The question of whether Apple could be compelled to take a licence on terms that are still to be determined raised the following issues:

1. Whether clause 6.1 of ETSI's IPR Policy when properly construed required an implementor that wished to take advantage of a SEP owner's undertaking to commit to taking a licence before those terms had been determined in order to avoid an injunction; 
2. Whether the implementor can rely on competition law?
3. How should the court exercise its discretion when considering whether or not to grant an injunction?
4. Whether an undertaking by Apple to take a licence in certain circumstances made any difference to the issues before the court?

The Judgment

Mr Justice Meade delivered his decision on those issues at para [362] of his judgment in trial F:

"i) As matters stand, Apple is not entitled to rely on Optis’ undertaking to ETSI under clause 6.1. of the ETSI IPR policy.
ii) Apple can only rely on Optis’ undertaking to ETSI if it (Apple) commits to enter into the FRAND licence determined at Trial E.
iii) Apple should be permitted a short time to consider whether it wishes to commit in that way, or offer some other undertaking.
iv) I cannot in the circumstances of this Trial F conclude whether or not Apple’s allegations that Optis has abused a dominant position will succeed. That can only be decided after Trial E.
v) However, I can conclude now that Apple’s allegations of abuse of a dominant position cannot prevent the grant of an injunction to restrain the infringement of Optis’ patent that I found at Trial B.
vi) Apple is liable to be injuncted from infringing the patent that I found valid and infringed in Trial B. I will consider whether in fact to grant an injunction once Apple has had a chance to consider this judgment and decided whether to offer some undertaking.
vii) The proper form of that injunction is a FRAND injunction and I reject Optis’ case that there should be an unqualified injunction."

In the rest of this case note, I shall try to explain how the learned judge reached those conclusions.

Unwilling Licensee

The matter came before the court because Optis applied for permission to amend its particulars of claim to contend that Apple was disentitled to an injunction because it was not prepared to commit to taking a FRAND licence.  It was in that regard an "unwilling licensee". Optis argued that an implementer should not be allowed to take the benefit of Optis's undertaking to grant licences on FRAND terms unless it was also prepared to take the burden. It also submitted that trial E need not take place if it was entitled to an injunction in any event.  Mr Justice Birss accepted Optis's submissions and ordered the issue to be tried in Optis Cellular Technology LLC v Apple Retail UK Ltd and others [2020] EWHC 2033 (Pat) on 27 July 2020.

The Authorities

Between para [28] and para [40], the judge introduced Case C‑170/13 Huawei Technologies Co. Ltd. v ZTE Corp and another [2015] Bus LR 1261 (16 July 2015) and the decisions of the Supreme Court. the Court of Appeal and Mr Justice Birss in  Unwired Planet International Ltd and another v Huawei Technologies (UK) Co Ltd and another [2020] UKSC 37 (26 August 2020).  He analysed the Supreme Court judgment in Unwired Planet between [72] and [110], the Court of Appeal's between [111] and [113] and Mr Justice Birss's between [114] and [125]. He addressed a few points in Huawei between [126] and [132].   I discussed those cases in FRAND, The Court of Appeal considers FRAND: Unwired Planet v Huawei and Patents: Supreme Court upholds Court of Appeal and Sir Colin Birss on FRAND on 8 Oct 2017, 28 Oct 2018 and 27 Aug 2020 respectively. 

Interpretation of Clause 6.1 of the ETSI IPR Policy

His lordship described the proper interpretation of clause 6.1 as the "first and most fundamental issue" at para 55. As the Policy was governed by French law, clause 6.1 had to be construed in accordance with that law. He had made certain findings in trial B and he referred to these at [136]. He took those into account as well as further findings in [139] that clause 6.1 is a stipulation pour autrui that required a SEP owner to confer a benefit on an implementer. Though he found that the stipulation usually confers a benefit on the autrui or third party it can sometimes impose a burden. Such imposition can be express or implied.   As clause 6.1 has to be construed in context, the judge admitted evidence on economics and licensing. He concluded at [278]  that any person interested in implementing an ETSI standard must be entitled to have a licence on FRAND terms on demand when a SEP owner has given the relevant undertaking. He added at [279] that such a person must be entitled to have and take a licence, and to operate under a licence.

Time for Acceptance

Optis had argued that an implementor must take a licence as soon as a SEP owner offers one or lose the right to accept one forever.  Mr Justice Meade rejected that contention. At that stage, it might not be known whether any of the SEPs was valid, essential or infringed.  Implementors were entitled to a reasonable opportunity to await the outcome of technical trials and other matters.

Competition Law

Apple contended that Optis holds a dominant position in the market for its inventions which it had abused by refusing to grant licences on FRAND terms. The judge said that this was an issue for trial E. Referring to Unwired Planet, acknowledged that competition law and FRAND were different concepts. However, he was able to determine that a SEP owner that had offered a licence on FRAND terms would still be entitled to an injunction to restrain infringement even if it had abused a dominant position.

Discretion

The learned judge agreed with Apple that an injunction is a discretionary remedy but he could see no grounds for withholding it in circumstances such as these. Implementors should, however, be allowed a reasonable time to decide whether to take a FRAND licence or accept an injunction.

Apple's Undertaking

The judge noted at para [19] of his judgment Apple has offered the following conditional undertaking:

"Apple undertakes that, if it is Finally Decided that one or more Asserted Patents is an Established Patent, it will enter into a Court-Determined Licence SAVE THAT:

A. Apple does not undertake to enter into a Court-Determined Licence:
(1) If it is Finally Decided that Apple is entitled (absent this undertaking) to enforce the ETSI Undertaking following the determination of a Court Determined Licence without having given a prior commitment to enter into such a licence; or
(2) If it is Finally Decided that Apple is not entitled to enforce the ETSI Undertaking regardless of whether or not Apple gives this undertaking.

B. In order to provide an upper bound to this undertaking, Apple shall be entitled to discharge this undertaking by offering to enter into a licence on the terms of the 26 February 19 PO Offer; and, if Optis accepts Apple’s offer, Apple shall enter into such a licence.
C. Apple shall not be obliged to enter into a Court-Determined Licence unless and until any dispute as regards the savings set out in paragraph A has been Finally Decided.”

His lordship held at [346] that an implementor has to give a binding undertaking to accept a FRAND licence to avoid an injunction.  This conditional undertaking obviously fell short of that condition but the judge accepted that an appeal court might take a different view.

Form of the Injunction

The judge rejected Optis contention that the injunction should be unconditional on the grounds that Apple had not accepted a FRAND licence as soon as it had been offered.   He called for further argument on the terms of the order but made clear that it would be contingent on Apple's failing to take a licence on FRAND terms.

Further Information

Anyone wishing to discuss this article further may call me on 020 7404 5252 during office hours or send me a message through my contact form.