Summer FRAND developments: some big antitrust news to come

Back in May this year, the Court of Appeal sat for five days to hear Huawei’s appeal of Birss J’s judgment in Unwired Planet.  The bench included two of the Court’s most experienced patents judges in Lord Justices Kitchin and Floyd (and Kitchin LJ has now been appointed to the Supreme Court, see here). Although rumours circulated that the Court of Appeal’s judgment might be forthcoming before the summer vacation, nothing materialised, and the expectation now is that the judgment will be published at the start of the Michaelmas term, which begins on 1 October. (A reminder of the issues being appealed can be found here.)

That judgment will be hugely significant for the conduct of FRAND negotiations, licensing and litigation both in the UK and elsewhere. This is not least because there are now several FRAND cases before the High Court, including Apple v Qualcomm, Conversant v ZTE & Huawei, Philips v ASUS & HTC and TQ Delta v Zyxel (the latter on ASDL, rather than ETSI telecoms standards). All of these are likely to be affected by the Court of Appeal’s decision.

However, the upcoming judgment isn’t the only relevant FRAND news. FRAND is a global concern, and recently there have been other FRAND developments around the world that are worth noting.

Delay to German Supreme Court ruling in Sisvel v Haier 

Back in 2015, the Düsseldorf Regional Court granted Sisvel an injunction against Haier for infringement of two its SEPs. However, on appeal, the OLG Düsseldorf held that Sisvel had failed to offer Haier FRAND terms as per Huawei v ZTE because Sisvel’s offer was discriminatory (there was a significant difference between Sisvel’s treatment of Haier and its competitors). Sisvel appealed to Germany’s Supreme Court, the Bundesgerichtshof.

In parallel, Haier had brought proceedings challenging the validity of the two Sisvel SEPs. One has now expired, and the other was declared invalid at first instance. Sisvel has appealed this decision.

The Supreme Court has now suspended its decision on the FRAND side of the case until the patent proceedings are completed, to avoid the risk of conflicting judgments (the decision is here, in German).  

It seems likely that if the invalidity decision is upheld, the Supreme Court will decline to make a final determination on the FRAND issues. Given the limited case law available on the discrimination aspect of FRAND (see here for some discussion of this), as well as the lack of consensus on the approach to FRAND in the German regional courts, this will mean that uncertainty continues at least as regards the German position for the foreseeable future.

Haier fails to convince US Court to take up digital TV case

Meanwhile, over in the USA, Haier had sought to turn the tables on other holders of declared SEPs, having brought a case in the Northern District of New York alleging a conspiracy by the holders of SEPs reading onto the ATSC standard.  Haier claimed that a patent pool established by companies including LG and Panasonic and administered by MPEG LA was artificially inflating prices above a FRAND level, and that licensors were refusing to license individually.

The Court rejected the claim on limitation grounds earlier this month (September 2018) and did not engage with the substance of the allegations (see here). 

FTC moves for summary judgment on Qualcomm’s obligation to license competitors 

In the Northern District of California, the FTC is engaged in proceedings against Qualcomm, alleging that Qualcomm has excluded competitors and harmed competition by withholding its baseband processors unless a customer accepts a licence on terms favourable to Qualcomm (including disproportionately high royalties). The trial is scheduled for early January 2019.

However, at the end of August, the FTC filed a motion for partial summary judgment regarding a key aspect of the case. It has asked for a declaration that under its FRAND obligations, Qualcomm must license its SEPs to its chipset competitors such as Intel.

Whether FRAND requires SEP holders to grant a licence to any company that asks for one (known as licensing to all) is a hotly debated topic.  The answer is potentially of wide significance, because it could fundamentally affect the licensing model that has applied in the sector for the past 20 years. For example, if all chipset manufacturers were licensed (potentially at royalties based on the chipset price rather than on the price of a smartphone) the manufacturers of smartphones may not require licences at all (depending on laws relating to pass-through and exhaustion) which would have a major impact on how SEP licensing currently operates.  Alternatively, the price of chipsets themselves might need to rise significantly to account for the increased IPR costs.  Or manufacturers may start to seek to tailor licences to different uses, splitting value along different parts of the supply and distribution chain. 

Examples of any judicial authority considering this topic are rare. The Commission dodged the issue in preparing its 2017 Communication on SEP Licensing (see here), although the Korea Fair Trade Commission has found Qualcomm’s refusal to license its SEPs to competing chipset manufacturers abusive (the decision is here, but note that Qualcomm is appealing). Although the California Court’s judgment will relate to the ATIS and TIA standards interpreted on the basis of US law (rather than ETSI FRAND interpreted on the basis of French law), it is still likely to be influential in Europe.

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