Nokia v. Oppo / FRAND Injunctions, 26 July 2023, Mr Justice Meade, Case No. [2023] EWHC 1912 (Pat)

Background
Nokia and Oppo are engaged in a global dispute following the failure to negotiate a new licence after expiry of the previous licence, which ran from 1 July 2018 to 30 June 2021. As part of that dispute, Nokia started two sets of patent infringement proceedings in the UK; the first in relation to standard- essential patents (SEPs) asking the English Court to declare Nokia’s offers are FRAND, and the second in relation to implementation patents (i.e., non-essential patents). Shortly afterwards, Oppo started proceedings in the Chongqing Court in China, seeking determination of a FRAND rate for Nokia’s portfolio.

The English Court has case managed the SEP proceedings into three technical trials that address infringement and validity (Trials A to C), and a FRAND determination (Trial D). At Trial A, Nokia established that one of its SEPs was valid and infringed. This decision is subject to appeal, but following agreement between the parties, all of the technical trials are now stayed.

The decision which is the subject of this headnote relates to an additional Trial E that was added later to address the ‘Effect of the Undertakings’, heard by Mr Justice Meade. With the finding of a valid and infringed SEP, and following the decision of the Court of Appeal in Optis v Apple Trial F ([2022] EWCA Civ 1411. Mr Justice Meade acknowledged that the Supreme Court has given permission to appeal but this had no bearing on his decision here), the time had come when Oppo should be forced to elect between providing an undertaking to take a FRAND licence on terms decided by the English Court at Trial D, or to submit to an injunction (and therefore quit the UK market).

However, Oppo argued that, because it has offered an undertaking to take a licence on terms to be decided by the Chongqing Court in the People’s Republic of China, it is already licensed under the ETSI IPR Policy or is at least a ‘Clause 6.1 Beneficiary’ pursuant to that policy and therefore entitled to a licence in due course and not liable to be injuncted.

Meade J also considered whether Nokia was a willing licensor or had acted anti-competitively by abusing a dominant position. His findings on these points were in line with those in previous FRAND litigation (e.g., Optis v Apple and Interdigital v Lenovo) and are not considered further in this article.

Issue 1: Is Oppo already licensed?
Oppo argued that Clause 6.1 of the ETSI IPR Policy gives rise to a ‘stipulation de contrat pour autrui’ (SCPA), a concept under French law based upon a ‘stipulation pour autri’ (SPA) whereby one party to a contract (here ETSI) requires the other party (Nokia) to grant an option right for the formation of a future contract for the benefit of a third party (Oppo). Put more simply, Oppo argued that Nokia had promised (to ETSI) that it would conclude a future contract with Oppo, and thereby Oppo had been vested with an option right to enter into that future contract with Nokia.

It was previously established in Unwired Planet and Optis v Apple that the ETSI IPR Policy does give rise to an SPA or an SCPA so this basic contention was not controversial. However, Oppo argued that the effect of this SPA was not merely that a patentee had to promise to grant a contract on FRAND terms, but that an implementer can simply invoke its right to a licence and the parties are then, without any further steps, in a contractual relationship.

Meade J was unable to accept this contention, because the resulting contract was not sufficiently determinable. Oppo submitted that in this case, where the parties were simply seeking a renewal and the only contract term to be determined was price, with ready mechanisms to determine that price, the contract was determinable.

However, this was not enough, as Clause 6.1 must have a single meaning to be applied across all situations, including those where the parties have no previous relationship and have not even started negotiations. In those circumstances, all terms such as duration, dispute mechanisms, method of payment (e.g., lump sum or running royalty, etc.) would need to be decided, making any possible contract too uncertain for a court to determine. Although there was no requirement for the contract between the parties to be under French law (unlike the relationship between the patentee and ETSI, which is governed by French law), Meade J considered the position of determinability under French law, and found that the test would not be met.

Nokia’s view of Clause 6.1 was that it simply creates an obligation for a patentee to make an offer which is FRAND and capable of acceptance. Meade J considered this interpretation to be more consistent with the UK case law. Oppo challenged this on the basis that if the obligation on Nokia were to make an offer which is FRAND, where it was not yet known if Nokia had yet done so there should not be an injunction. Meade J disagreed on the basis that the Court of Appeal’s decision in Optis v Apple was made before it was known whether Optis’ offers were FRAND.

Further, the patentee is required to give an undertaking to the Court before trial that it will offer a licence on whatever terms the Court determines to be FRAND. If the patentee did not give such an undertaking, then it would not be entitled to an injunction.

Therefore, Meade J rejected Oppo’s argument that it was already licensed.

Issue 2: Does Oppo’s undertaking to accept the terms of the Chongqing court make it a beneficiary of Clause 6.1?

This was Oppo’s fall-back position. It argued that it was either (i) a beneficiary under Clause 6.1 and therefore entitled to enforce Nokia’s undertakings to ETSI; or (ii) could become a beneficiary by undertaking to the English court to accept a licence on terms decided by the Chongqing court. Meade J accepted that this unqualified willingness to take a licence distinguished this case from Optis v Apple, where Apple refused to provide any undertaking until it knew the terms of the licence. However, the issue to be determined was whether this distinction made a difference.

Nokia responded to this argument with two main points. First, that if the English court accepted this argument, it would be refusing to “determine the content of the contractual limit” on the patentee’s ability to obtain relief, and that the English court cannot refuse that responsibility. Second, Nokia argued that, in light of the decision by the Court of Appeal in Unwired Planet ([2018] EWCA Civ 2344), Nokia can meet its FRAND obligation by offering any set of FRAND terms; it therefore has a choice and has chosen the English, rather than
the Chongqing, court.

Meade J considered the second argument first. He agreed with the proposition that a patentee in Nokia’s position can choose between more than one FRAND alternative, based on the reasoning of the Court of Appeal in Unwired Planet. Oppo argued that this was solely in the context of one court providing two sets of FRAND terms, but Meade J thought a patentee can, in principle, choose between two sets of FRAND terms determined by different courts in different jurisdictions (Though it is worth noting also that the decision in Kigen v Thales (which confirmed an implementer can proactively seek to have global FRAND terms set in the UK) is endorsed in the decision).

However, that does not give a patentee free rein to forum shop, for example finding that the terms from country A were unfavourable, and so turning to country B. Meade J thought that the English court would have suitable mechanisms (such as undertakings) to prevent this kind of behaviour. Meade J also considered whether Nokia were forum shopping in this instance. However, he found that there could be material differences between the findings of the English and Chongqing Courts based on what they had been asked to consider (e.g., standstill periods for non-essential patents and cross-licences), and on that basis Nokia were not forum shopping but making a legitimate choice between the two jurisdictions.

In relation to Nokia’s first argument, Meade J agreed that, given a finding of a valid and infringed patent, the English court does have an obligation to ensure that an effective remedy is given. The hypothetical risk was that Oppo’s position of giving an undertaking to comply with terms set by a foreign court could be a position of hold-out, if the foreign court is unacceptably slow or never sets terms at all (Meade J did however find that the Chongqing court was very likely to set FRAND terms and to do so in a reasonable timeframe).

Further, Meade J found it “shaky and unsatisfactory” that the means of compelling Oppo to take a licence on the Chongqing terms was via an undertaking to the English court. These factors favoured Nokia’s position, but Meade J did not accept that the English court is always obliged to set FRAND terms itself. Meade J observed that these are difficult issues with no clear and satisfactory solution. This situation has arisen due to the lack of a central dispute resolution system for FRAND, a situation previously criticised by Lord Justice Arnold in Optis v Apple.

Nevertheless, his conclusion was that Oppo was not a beneficiary of Clause 6.1 on the facts of this specific case, and that committing to the result of the Chongqing proceedings was not enough to make Oppo one in this case.

The Form of Order hearing is likely to be in September, and Oppo is expected to be in a position to make its election between the undertaking and injunction at that point.

Reflections
At the end of the decision, Meade J makes a number of reflections. In particular he considers the current ordering of trials (technical then FRAND) to be unsatisfactory, given the length of time it takes to reach a FRAND determination. He therefore floats the idea of (near) simultaneous technical and FRAND trials to overcome this problem. This would force earlier disclosure of e.g., comparable licences, potentially encouraging earlier settlement.

A copy of the judgment can be found here.

Headnote and summary: Jonathan Ross, Bristows LLP