Industry standards play a key role in promoting the adoption of new technologies and in guaranteeing the compatibility of products manufactured by different manufacturers. Over the years Standard Setting Organizations (SSO) have been established at national and international level to develop, produce and police standards. For example in the UK, standards are regulated by the Department for Business, Energy and Industrial Strategy (BEIS) in conjunction with other organisations such as the British Standard Institution (BSI) [1].
The implementation of a standard in a product may require the use of patent‑protected technology. When the technology in question must be used to comply with the standard, the corresponding patents are called Standard Essential Patents (SEPs). In this case, the patent owner can potentially obstruct the utilisation of the standard by refusing to grant a licence or by requesting excessive royalties. For this reason, many Standard Setting Organizations require the patentee to grant a licence under so‑called fair reasonable and non‑discriminatory (FRAND) terms [2].
Modern telecommunication devices implement several communications standards. In Europe, the recognized body dealing with electronic communications network and services is the European Telecommunications Standards Institute (ETSI) [3]. The ETSI has an Intellectual Property Rights (IPR) policy that requires the holder of an invention that appears to be essential to give an irrevocable undertaking to grant a licence of the IPR on FRAND terms. The ETSI IPR Policy has been at the heart of a recent decision held by the UK supreme court involving the Chinese communication company Huawei Technologies Co Ltd, and two patents holders Unwired and Conversant [4].
Unwired and Conversant are so called non‑practising entities that license patents to companies who make and sell telecommunications equipment. Unwired and Conversant had launched separate legal actions against Huawei for the alleged infringement of their UK patents relating to international communication standards for 2G, 3G and 4G protocols. Some of these patents form part of a portfolio of many applications covering several countries.
In this case, a key question regarded whether “a court in the United Kingdom has jurisdiction … to (a) grant an injunction to restrain the infringement of a UK patent where the patented invention is an essential component in an international standard of telecommunications equipment, which is marketed, sold and used worldwide, unless the implementer of the patented invention enters into a global licence of a multinational patent portfolio, and (b) determine royalty rates and other disputed terms of such a global licence.”
Huawei argued that the ETSI IPR Policy would not allow a national court to determine a global licence, submitting that the Policy did not “overturn the legal right of an implementer to challenge the validity of a patent or to seek to establish that the patent was not infringed”. From Huawei’s point of view the ETSI IPR Policy “is not focussing on an international portfolio of patents but addresses particular SEPs, the validity and infringement of which, if challenged, would have to be established in national courts”.
The UK supreme court recognised that questions as to the validity and infringement of a national patent are within the exclusive jurisdiction of the courts of the state which has granted the patent and that in the absence of the IPR Policy an English court could not determine a FRAND licence of a portfolio of patents which included foreign patents.
Nonetheless, the court held that “it is the contractual arrangement which ETSI has created in its IPR Policy which gives the court jurisdiction to determine a FRAND licence and which lies at the heart of these appeals.”
The judgment referred to the usual way of doing business in the telecommunication industry reminding that operators may hold large patent portfolios and that parties accept that SEP owners and implementers cannot feasibly test the validity and infringement of all of the patents involved in a standard. It was considered that “by taking out a licence of an international portfolio of generally untested patents the implementer buys access to the new standard. It does so at a price which ought to reflect the untested nature of many patents in the portfolio; in so doing it purchases certainty”.
The court explained that the IPR Policy did not limit the rights of SEP owners to be paid for the right to use technology in patents which have been established as valid and infringed. The court held that “the IPR Policy encourages parties to reach agreement on the terms of a licence and avoid litigation which might involve injunctions that would exclude an implementer from a national market, thereby undermining the effect of what is intended to be an international standard.”
To conclude, in this case the court confirmed that the contractual arrangements that ETSI has created under its IPR Policy give the English Courts jurisdiction to determine the terms of a global license of a multi-national patent portfolio. Although this decision is clearly in favour of SEP owners, it also provides further clarity to implementers of standards who may seek to define the terms of any future licencing agreements in the light of this decision. For additional information on this case the supreme court has provided a press article summarising the key issues of the case [5].
The value of standard patents cannot be underestimated. If your technology is likely to become part of a future standard you should actively seek protection. Our team of technical and legal experts is here to help. You can reach out to us via hello[@] scintilla-ip[.]com or via LinkedIn at linkedin.com/company/scintilla-ip/
References:
[1] https://www.gov.uk/guidance/standardisation#why-standards-are-important
[2] https://www.wipo.int/patent-law/en/developments/standards.html
[3] https://www.etsi.org/about
[4] https://www.supremecourt.uk/cases/docs/uksc-2018-0214-judgment.pdf
[5] https://www.supremecourt.uk/cases/docs/uksc-2018-0214-press-summary.pdf