UK Court of Appeal Rules that English Courts May Hear SEP Disputes – Even About Non-English Patents

by | Feb 7, 2019

High Court of Justice (UK); Huawei China, Huawei UK, ZTE China and ZTE UK v Conversant wireless licensing SARL, uk-2019-ewca-civ-38 (Darts-ip reference: darts-044-392-G-en-2) – 30 January 2019

Last week, the UK Court of Appeal has reaffirmed that English courts may hear disputes over standard essential patent (SEP) licensing. The court held that the UK was the most convenient forum for an ongoing lawsuit filed by an NPE (Conversant wireless licensing SARL) against Huawei and ZTE over their refusal to take a global license to the NPE’s portfolio based on allegedly fair, reasonable, and non-discriminatory (FRAND) terms.

Request of the appellants

The appellants (“Huawei China”, “Huawei UK”, “ZTE China” and “ZTE UK”) disputed the jurisdiction of the English court to determine an action brought against them by Conversant wireless licensing SARL concerning UK patents belonging to the latter (EP1031192(B1) ; EP1797659(B1) ; EP1878177(B1) ; EP0978210(B1)).

The appellants challenged jurisdiction on two grounds.

First, they said that the claim brought against them was not justiciable in the English court, because the dispute, in addition to raising issues concerning the validity and infringement of UK patents in suit, also relates to the validity of foreign patents, and the validity of foreign patents is not justiciable subject matter in the English court.

Secondly, they said that the English court was not the natural or an appropriate forum for the claims against them.

They contended that the Chinese court was the natural and appropriate forum and that the English court ought to refuse service out of the jurisdiction on Huawei China and ZTE China and stayed the proceedings against Huawei UK and ZTE UK on the ground of forum non-conveniens.

Context

What makes this case particularly interesting is that the UK patents in the suit are said by Conversant wireless licensing to be essential to certain telecommunications standards, such that it is not possible to sell equipment, such as a mobile phone compliant with those standards without infringing the patents. In other words, the patents are “standard essential patents” or “SEPs”.

Conversant wireless licensing accepts that, because its patents are claimed to be SEPs, it is under an obligation to offer to grant licenses to implementers such as Huawei and ZTE on terms which are fair, reasonable and non-discriminatory (“FRAND”).

Thus, although it seeks all the relief appropriate to an action for infringement of a UK patent, including an injunction and damages, Conversant wireless licensing seeks notably declarations from the court that the offers which it has made in the course of the negotiations with the two sets of parties are FRAND and, in addition, as to the terms on which it must offer to license its portfolio of patents.

Conclusion of the Court

The UK Court of Appeal refused to stay the proceedings on the ground of forum non-conveniens.

The Court argued that although the English court would be deciding the royalty for China, it would be doing so without precluding the Chinese court from deciding on the validity and essentiality of the Chinese patents and having that court’s decision considered in the context of fixing the royalty, if any, for China.

The Court saw no basis for a case management stay, so as to allow the patent issues to be determined up to but not including the grant of an injunction. Such a stay would only work if there were some proceedings on foot elsewhere which will result in an adjudication on the offers made by the parties and determine the terms of a global FRAND license, or at least some license which would extend to the UK.

The Court added that, at present, the proceedings in China only seek a FRAND determination in respect of the Chinese patents. A FRAND license under the Chinese patents determined by the Chinese courts would not clear away the obstacles to the enforcement of the UK patents or provide Huawei with an answer to the claim for infringement of the UK SEPs.

According to the Court, the age of the Conversant wireless licensing Portfolio is also a factor which weighs against the grant of such a stay.

It is important to note that this court’s ruling came despite new evidence offered by the defendants suggesting that China would also be an appropriate forum for the dispute.

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