Unwired Planet International Limited v Huawei Technologies Co. Limited et al, High Court of Justice, Patents Court, London, UK, 21 July 2015, Case No. [2015] EWHC 2097 (Pat)

This is an interim judgment in the ongoing dispute between Unwired Planet, Huawei and Samsung relating to various patents which are declared to be standard essential (SEPs) and which were acquired by Unwired Planet from Ericsson.  In this interim judgment, Birss J struck out arguments brought by Samsung that Ericsson had breached Article 101 TFEU by not ensuring the transfer of an effective FRAND obligation to Unwired Planet in relation to these patents.  However, he allowed arguments relating to other alleged breaches of Article 101 to proceed to trial, on the basis that they might have a real prospect of success.

Samsung contended that Ericsson and Unwired Planet had breached Article 101 TFEU in three ways.  First, there was a failure to ensure the complete, proper and effective transfer of an enforceable FRAND obligation.  Second, by dividing Ericsson’s patent portfolio into two parts (some staying with Ericsson, the rest being transferred to Unwired Planet) in the way that it did, a breach of competition law had taken place in that unfair higher royalties would be earned and competition would be restricted or distorted.  Third, certain terms in the sale agreement between Ericsson and Unwired Planet were infringements of Article 101. 

==========

First alleged breach

Birss J held that any suggestion that the arrangement between Ericsson and Unwired Planet failed to compel Unwired Planet to make a FRAND declaration was hopeless and should be struck out.  He also held that the suggestion that the arrangement might realistically permit Unwired Planet to sell on patents without a FRAND obligation was hopeless.  He noted that an analysis of Ericsson’s FRAND obligations would involve consideration of a wider patent portfolio than an analysis of Unwired Planet’s subsequent FRAND obligations would entail, and that Unwired Planet’s commitments were therefore fresh commitments, rather than Ericsson’s commitments transferred.  However, he concluded that there was no real prospect of this difference being shown to have as its object or effect a distortion or restriction of competition contrary to Article 101.  The first alleged breach was therefore struck out. 

Second and third alleged breaches – to be considered at trial

Birss J held that whilst he had concerns about the second alleged breach, he considered the issues did raise a properly arguable case which ought to go to trial.  In particular, he noted that “the relationship between standards essential patents, FRAND, NPEs and competition law is a developing one and an important area in the context of telecommunications technology”.  The lack of case law in this area, and the fact that fact sensitive issues were involved added to his reluctance to strike out.

Birss J also considered that it was arguable that the minimum royalty provision (part of the third alleged breach) could contribute to the creation of an anti-competitive incentive to charge higher royalties and thus this should also go to trial.  Arguments in relation to another clause of the agreement were said to be weaker, but still best dealt with in the context of the other allegations he had held should go to trial. 

Arbitration clause

Ericsson also applied for a stay of claims brought by Samsung for damages or a contractual indemnity for alleged breach of a licence between Samsung and Ericsson.  This was on the basis that the claims fell within the scope of the exclusive arbitration clause in the agreement, and that s9 Arbitration Act 1996 applied.  This section of the Arbitration Act states that a stay should be granted in circumstances where an application for a stay has been made, but not if the applicant has taken any step in those proceedings to answer the substantive claim.  Birss J held that by agreeing to join the ongoing proceedings between Unwired Planet, Huawei and Samsung without reservation, Ericsson had taken a step which affirmed its willingness to go along with a determination by the Court of issues covered by the arbitration clause, and thus no stay should be granted. 

Read the decision here.

Head note:  Rachel Mumby, Bristows.  Samsung is represented by Bristows LLP in the above dispute, but the author has had no involvement.