The UK Patents Court has heard another new form of dispute in relation to FRAND proceedings concerning Standard Essential Patents (SEPs), this time in relation to the requirement for an implementer to provide a FRAND undertaking in this jurisdiction, when it has provided undertakings in a different jurisdiction. In Nokia v Oppo, the Judge concluded that (i) Oppo was not already "licensed" as a result of Nokia's undertakings to ETSI, (ii) OPPO was not an ETSI Clause 6.1 Beneficiary and (iii) Nokia had not abused its dominant position. As a result, Oppo's willingness to accept a licence determined by the courts in the People's Republic of China did not go far enough to make it a willing licensee.
Background
In July last year, the Court of Appeal upheld the first instance decision of HHJ Hacon permitting Nokia's claim for infringement of UK SEPs to proceed in the English Court, notwithstanding the existence of concurrent proceedings in Chonqing, China. We discussed the Court of Appeal's decision in this article.
Since then, proceedings have been progressing, both before the English courts and throughout the world (Nokia has issued actions in Germany, France, Spain, India, Indonesia and Russia, and further patent infringement actions in China, Brazil, Finland, the Netherlands and Sweden.) The German proceedings resulted in Nokia being awarded injunctions; as a result Oppo left the German market in June 2022.
In the UK, the first technical trial (Trial A) on infringement and validity took place in November 2022, with the relevant Nokia patent held to be valid and infringed. Although permission to appeal was granted, the appeal, along with the remaining listed technical trials, has since been stayed, with Oppo conceding that a FRAND licence is required.
However, Oppo maintained that the Chinese courts was the appropriate forum to set a FRAND rate. This resulted in the usual jurisdictional jostling – following Oppo's application for a stay of the UK action on the grounds of forum non conveniens¸ or alternatively for a stay on case management grounds, Nokia applied for a dismissal of the Chongqing proceedings for a lack of jurisdiction. Both proceedings are (or indeed, were) progressing and were expected to reach their conclusions at roughly the same time.
"HOTEOTU"
Further to the finding of validity and infringement in Trial A, Oppo was required – consistent with the approach adopted by the Court in Optis v. Apple (a decision upheld on appeal) - to choose either to undertake to take a licence on the terms decided at the relevant FRAND trial, or submit to an injunction in the UK in relation to the infringed patent. We discussed the Court of Appeal's decision in Optis v Apple here.
However, because it had offered to take a licence on the terms to be decided in the Chongqing proceedings, Oppo did not consider that the election required in Optis applied. Nokia, for its part, has applied for a dismissal of the Chongqing proceedings on the basis of a lack of jurisdiction.
As a result, Oppo initiated what became 'Trial E' (or the 'Hearing on the Effect of the Undertakings ("HOTEOTU")), seeking a declaration that its undertakings to take a licence as determined by the Chongqing proceedings precluded the award of an injunction in the UK proceedings which might would otherwise be granted.
The subsequent judgment of Mr Justice Meade undertakes a helpful and detailed review of the relevant case law. It also discusses, briefly, the value of "standstill" agreements (an agreement that a patent or patents will not be asserted for a period of time).
Instead, the Judge focussed on three primary questions:
Whether Oppo was licensed pursuant to the ETSI IPR Policy
Oppo's primary proposition was that it was already "licensed".
It is accepted law that the ETSI undertaking creates a stipulation pour autrui (a legal mechanism whereby the parties to a contract, immediately vest a third-party (the beneficiary) with a right against one of them even though that third-party is defined in the abstract, is not aware of the benefit of that right, and has not accepted it.)
Oppo's position was that, under the stipulation pour autrui, an implementer can simply invoke its right to a licence, and this forms a contractual relationship under Clause 6.1 of the ETSI IPR Policy.
The Court disagreed. Under Oppo's approach, a contractual relationship could be formed between two parties who had no relationship, and every term of the contract – duration, price, applicable law – would not be determined. Such a contract would be void for uncertainty. Instead, the judge agreed with Nokia's interpretation of the ETSI IPR Policy, namely that it is simply the patentee's obligation to make an offer which is in fact FRAND and capable of acceptance.
Whether OPPO was an ETSI Clause 6.1 Beneficiary
The second argument for consideration was whether Oppo was a beneficiary under Clause 6.1 of the ETSI IPR Policy (or that it would be if it undertook to the English Court to accept a licence on the terms decided by the Chongqing court).
Nokia raised two arguments in defence of its position. The first was that, in light of the decision in Court of Appeal in Unwired Planet, Nokia can fulfil its FRAND obligation by offering any set of FRAND terms. It has selected the terms to be set by the English Court. This contrasts with the obligations of an implementer, who must undertake to enter into any set of FRAND terms offered to it.
In this case, the licences to be set by the two jurisdictions had key differences, including:
- While the English proceedings would cover Oppo and its group companies (OnePlus and Realme), the Chongqing proceedings were only set to determine terms in relation to Oppo.
- The Chongqing court would not consider a cross-licence as part of its FRAND determination.
- The English proceedings would value the FRAND amount as a lump sum, whereas the Chongqing proceedings were progressing on a running royalty basis.
- Differences in the terms of the standstill.
The second argument raised by Nokia related to the responsibility of the English Court to set FRAND terms. It argued it was possible that the Chongqing court would not go on to set FRAND terms. Although the risk of this was small, the Judge agreed that the English court does have an obligation to ensure that an effective remedy is given – although also accepting that the English Court is not always obliged to set FRAND terms itself.
The Judge concluded that "these are difficult issues and that there is no clear or fully satisfactory solution", but concluded that Nokia's approach "makes better practical sense and is fairer". Accordingly, Oppo was not found to be an ETSI Clause 6.1 Beneficiary.
Whether Nokia's conduct amounted to an abuse of a dominant position
Oppo contended that Nokia's conduct in seeking injunctive relief amounted to an abuse of a dominant position in breach of Article 102 of the Treaty on the Functioning of the European Union ("TFEU"). It relied upon Nokia threatening to exclude Oppo from the UK market, disrupting negotiations, seeking an unfair advantage in the process of rate setting, and seeking a FRAND rate to be set regardless of the decision of the Chongqing court.
The judge dealt with this contention briefly, finding that none of Oppo's allegations of abuse could succeed and that Oppo had "simply failed to show anything amounting to an abuse."
Conclusion
The Judge concluded that Oppo's willingness to accept a licence determined by the courts in Chongqing did not go far enough to make it a willing licensee. On the other hand, Nokia's unwillingness to assent to terms set in Chongqing did not make it an unwilling licensor. In other words, it is the patent-holder, not the implementer, who has the power to elect the appropriate FRAND terms.
Commentary
As is becoming common in FRAND decisions, the judgment includes a postscript, and is also replete with commentary about FRAND proceedings generally (in the judgment Mr Justice Meade observed that the current system for determining FRAND disputes is "dysfunctional").
One point of dysfunction specifically identified by the Judge is the case management of FRAND proceedings. It has historically been the case that the FRAND proceedings can only be grounded in a finding of a valid and infringed UK Patent, and cases have been case-manged accordingly – with a series of technical trials preceding a FRAND determination. In the body of his decision, the Judge questioned if that was appropriate given Oppo's acceptance that it required a licence, noting that "it always seemed to me that the technical trials were pointless given that Oppo said it wanted a licence and effectively admitted that it needed one". The Judge further reflected that "technical trials are not about what is really in issue" and suggested that cases could be case managed accordingly, such that the FRAND issues are heard at the same time as a technical trial.
Following this judgment, the global dispute between the two parties has continued, most notably in India. It has been reported that Nokia has since agreed to an expedited trial before the Delhi High Court and to withdraw its UK proceedings – although it must also consent to its combined SEP and non-SEP actions proceeding to trial. If agreement is reached between the parties that the Delhi High Court should set global FRAND terms, the UK proceedings may fall away.