FRAND with benefits

In the recent Unwired Planet v Huawei decision, renowned High Court judge Sir Colin Birss stepped into the standards patents fray and knocked some heads together.

It seems that everyone wants a piece of the standards patents action in relation to telecoms patents. Standardisation and cooperation between the big players is absolutely necessary for the interoperability of the telecoms system to work. The patent system has been used to underpin this, where players submit ‘standard essential patents’ relating to their improvements to the standards body and then royalties flow based on the contribution. This has created a huge patent landscape, and a fruitful area for innovators and lawyers alike.

The catastrophic power of a well invoked patent has been very problematic in this area. In theory one party holding a patent for an essential component of mobile phones would be able to seek an injunction from all players and bring the entire system to a grinding halt.

Luckily this hasn’t happened, not least because actually breaking the phone system isn’t particularly profitable – who could you phone to boast about it? One of the keys to avoiding this outcome has been the introduction of FRAND licensing – fair, reasonable, and non-discriminatory.

While most of the major players have now shaken down to accept this (at one level or another) an extra aspect of the problem manifests itself with non-assertion entities – groups who don’t make phones but just hold patents, often bought as large portfolios from previous operators. There is nothing illegal about this but it does rather change the game when they have no phones to lose.

In the Unwired Planet case, the parties failed to reach an agreement on what constituted FRAND terms. Unwired Planet therefore instituted court action in the English courts for an injunction and the judge had to consider what FRAND terms might have been, as well as whether there was a competition law angle.

In the end he held that although Unwired Planet did have a dominant position they had not abused it, and that as Huawei had not accepted an offer of what he felt were FRAND terms for licence, an injunction was allowed.

On the other hand the judge confirmed that no more than FRAND terms could be imposed, and in particular that any back damages from infringement would be at FRAND rates. The fact that Unwired Planet hold patents but don’t make phones was not determinative.

Here we see a judge trying to get the commercial situation in line with public policy rather neatly, by putting pressure on all parties to negotiate at FRAND rates – and accept them.

The moral question of whether patent assertion entities with intellectual property rights but no product should be entitled to this type of remedy is perhaps a separate discussion, but at least imposition of FRAND dilutes it. In the meantime, FRAND is safeguarded and enhanced and we would hope that the mobile phone-using public is the one with the benefits.

Gwilym Roberts is chairman of Kilburn & Strode

@KilburnStrode www.kilburnstrode.com