Large telecommunications and automotive companies have told Managing IP that they are pleased by the recent Unwired Planet v Huawei judgement because it will streamline licensing and give price certainty in negotiating licences for standard essential patents (SEPs).
In-house sources in telecoms companies argue that while it has not solved every problem around licensing SEPs by fair, reasonable and non-discriminatory (FRAND) terms, the UK Court of Appeal’s decision that global licences are FRAND will help stifle licensee delay tactics.
“The decision is a practical solution rather than a legal one and will be a massive time and money saver that will make life so much easier,” says the head of IP at a Germany-based telecoms company.
An end to “stalling tactics”?
The head of litigation at a European telecoms company adds: “We have seen too many stalling tactics by the potential licensees and it was good that the court put down a price stamp and said if that is not accepted then the company would be faced with an injunction.”
”The decision is a practical solution rather than a legal one and will be a massive time and money saver that will make life so much easier”
He adds that his firm has many SEPs that are used by numerous companies and this judgment puts another weapon in their arsenal to give them the best chance of getting a licence sorted quickly and securing royalties.
“We think about approaches such as dragging infringers into global FRAND arbitration or suing them in Germany where we can get injunctions in the hopes that that brings them to the table,” he says. “This UK ruling gives us another good option.”
Sources from automotive companies say the decision has helped give them price certainty in the market by setting a benchmark on how much communications components should costs. The chief licensing officer at a Germany-based car manufacturer points out that however the Court of Appeal’s decision is interpreted, a similar figure is reached.
“We still do not know what the stack will cost in the end for a car or for the communications components, but this provides a good benchmark from where you can start and we have good arguments that it can never be higher,” he says.
He adds that if you take the Avanci proposal, the Unwired Planet judgment and Judge Selna’s FRAND decision from the US courts – which value communications components at below of equal to $15, $20 and $18 respectively – you see a picture developing.
“Whether it ends up being $12 or $18 can now be decided by an arbitration panel or court,” he says.
These reactions come after the Court of Appeal ruled that FRAND obligations can be met if an SEP owner offers a worldwide licence, and that an implementer that refuses to take such a licence could be subject to an injunction to prevent further patent infringement.
“This UK ruling gives us another good option”
The judgment also confirmed that a UK judge can set a global FRAND rate when two parties cannot agree on one and set a clear methodology for establishing such a rate.
Lord Kitchin said it would be "wholly impractical" and not fair or reasonable for SEP owners to have to negotiate patent licences country by country, confirming Mr Justice Birss’s opinion that such an expectation would be "madness".
Huawei has requested to appeal the decision to the Supreme Court, which will likely accept, but telecoms sources are confident that the same outcome will be reached. The head of IP adds that his company is looking forward to seeing whether the ruling will gain international acceptance.
Further to go
The head of IP adds that there are finer details from this judgment that may need to be discussed and resolved, such as different scopes of protection in different countries.
“How is that factored into the international arrangement?” he asks. The UK, for example, may have a narrower scope of protection than other jurisdictions, and it is uncertain whether its courts might calculate that fact into licence fees.
He adds that an argument could be made for national licences from other types of business that do not have a global reach and their licensing strategies may be incompatible with worldwide agreements.
“For a small telecoms company, this kind of agreement is only good if our suppliers have signed global licences for the technologies”
The counsel for a France-based telecoms company agrees, and adds that a global licence would make matters complicated for his business.
“For a small telecoms company, this kind of agreement is only good if our suppliers have signed global licences for the technologies - but at the moment, they’re missing patents and the SEP owners are choosing to sue us instead of our suppliers.”
He adds that some organisations, including patent trolls, will force companies to sign global agreements on the basis of patents that the company is unaware have been used in off-the-shelf products.
The chief licensing officer at a Germany-based car manufacturer also argues that when it comes to connected technologies, such as driverless cars or the Internet of Things (IoT), the decision will make life harder because supply chain levels in the automotive industry are very different to those telecommunications industry.
“We have three of four levels of suppliers in our chain, which is not the case with smartphones where you have the sim set and smartphone manufacturer and not much in between,” he says.
The understanding, he adds, is that exhaustion issues and other rights mean the value of a licence needs to cover the value of the entire supply chain. But that raises the question of who in the supply chain should take a global licence and how you value the licence for that entire supply chain.
“If you think about 5G when we will have larger spread of tech, there will be many more modules with different capabilities and need different patents and royalties will be different,” he says.
Furthermore, hundreds or thousands of SMEs will be producing products for the IoT and few will have the technical expertise, patent or IPR knowledge to really negotiate these licence agreements - and it is going to be a nightmare if we do not find a way of streamlining these licensing costs.”
Clearly, the Unwired Planet decision has done a lot to calm some company’s nerves when it comes to licensing and tech prices – but there’s still some way to go before all the kinks are ironed out and companies have accepted the changes.