InterDigital vs. Lenovo: High Court cements UK as centre for FRAND-rate setting

For over a year, the patent community in the UK and Europe has awaited the outcome of the FRAND trial between InterDigital and Lenovo. Now the court has ordered Lenovo to pay a FRAND rate of $138.7 million while also declaring both parties' previous offers as non-FRAND. Furthermore, as the first FRAND decision since the landmark Supreme Court judgment in Unwired Planet vs. Huawei, this helps secure the UK's reputation as a hub for global FRAND-rate setting.

16 March 2023 by Amy Sandys

InterDigital, Lenovo London is once again a hotspot for FRAND disputes, after the High Court handed down its much-anticipated decision in the case between InterDigital and Lenovo. ©John/ADOBE STOCK

Finally, the High Court in London has handed down its much-anticipated decision in the dispute between InterDigital and mobile device manufacturer Lenovo over FRAND licensing and terms. InterDigital’s portfolio of patents have been declared essential to the 3G, 4G and 5G standards; the judge has now determined that neither InterDigital’s so-called 5G Extended Offer, nor Lenovo’s so-called Lump Sum Offer, are FRAND. Neither, says the judge, do the offers fall within what the court determines as the ‘FRAND range’.

Into the patent portfolio

Despite presenting Lenovo with a FRAND rate, however, the decision is not entirely in the NPE’s favour. The court found that “for the most part, Lenovo did conduct themselves as a willing licensee.” James Mellor also notes, “In large part, I reject InterDigital’s case on conduct. Ultimately, however, Lenovo will be put to their election, at which point they will demonstrate whether they are a willing licensee or not.”

In doing so, the court has taken jurisdiction to determine a FRAND offer for Lenovo to accept. This follows case law previously laid out by Colin Birss in the case between Unwired Planet and Huawei (case ID: HP-2014-000005), which the Supreme Court eventually upheld in 2021. Both decisions cement the London patent courts as being patent-holder-friendly, potentially opening the door for future global FRAND disputes.

Lenovo found willing

In a press release, John Mulgrew, vice president, deputy general counsel and chief intellectual property officer at Lenovo, says, “We see this as a major win for the technology industry and the customers we serve, as it underscores both the importance of fair, reasonable, and non-discriminatory terms for patent licensing and the requirement of transparency by patent holders engaged in licensing practices.

With this judgment, the court has confirmed that Lenovo is, and always has been, a willing licensee – even in the face of InterDigital’s supra-FRAND offers and behavior as an unwilling licensor.”

At the very beginning of proceedings, InterDigital initially alleged that Lenovo infringed five SEPs in the UK. The NPE claimed that all patents were essential to the 3G and 4G UMTS and LTE standards. The patents, EP 24 85 558EP 23 63 008, EP 25 57 714EP 24 21 318 and EP 33 55 537 are part of InterDigital’s portfolio and are regulated by the France-based European Telecommunications Standards Institute (ETSI). The portfolio also contains patents granted in the US and China. So far, China is the only other jurisdiction to set global FRAND rates for implementers in cases involving SEPs.

Lenovo licence is court-determined

Since parties could not conclude a licence agreement, presiding judge James Mellor has instead determined a FRAND rate of $138.7 million. The court dictates Lenovo must pay InterDigital this as a lump sum. According to the judgment, how Lenovo responds to the UK court setting this rate will determine whether or not the company is a willing licensee. While Lenovo and InterDigital have been negotiating licensing rates since 2008, the court-determined FRAND rate extends back to 2007 and extends to 31 December 2023.

During the trial, the parties requested firstly that the High Court examine whether InterDigital’s so-called 5G Extended Offer was FRAND. If the court found the offer not to be FRAND, the parties then sought clarification on what would constitute FRAND terms for a potential licence.

The second aspect covered whether, during negotiations, Lenovo was a willing licensee and InterDigital a willing licensor; and the outcome for Lenovo, should it refuse a FRAND licence. The court also considered whether InterDigital is entitled to an injunction in respect of the valid and essential patents contained in its portfolio.

Despite the court’s licence determination, however, InterDigital is set to appeal. Josh Schmidt, chief legal officer, says, “We welcome the court’s decision as the first major SEP FRAND judgment that recognises that a licensee should pay in full for the past infringement of standard essential patents and we agree with the court that this could be a powerful way of guarding against patent holdout in the future. However, we plan to appeal, as we believe that certain aspects of the decision do not accurately reflect our licensing program.”

FRAND trial commences

While the parties have awaited the judgment for one year, the lead up to FRAND proceedings lasted somewhat longer. The main issues began in summer 2021, when the High Court found InterDigital’s EP 558 valid and essential to the 4G communications standard. This decision provided a springboard from which the parties commenced the FRAND trial, after judge Richard Hacon denied the NPE’s injunction request against Lenovo the following December.

In the decision, Hacon referred to a previous judgment in the case between Apple and Optis, whereby the court determined that Apple must take a licence on as-yet-undecided FRAND terms or face an injunction. In November 2022, the Court of Appeal upheld this decision,  while a FRAND determination in this case is also pending.

However, in the case between InterDigital and Lenovo, the latter party stipulated that the Apple vs. Optis case does not consider the same points of French law regarding ETSI as under its application. As such, the FRAND trial aimed to clarify the licensing terms between the parties. InterDigital accused Lenovo of hold-out, while Lenovo accused the NPE of being an unwilling licensor.

Alexandra Brodie, partner, Gowling

Alexandra Brodie

On the technical background

The case’s technical trials, however, have seen more action. Since the beginning of 2023, the Court of Appeal has handed down two decisions in favour of InterDigital, while the High Court has handed down one.

In January, the second-instance court upheld the first technical judgment in litigation between the parties (case ID: CA-2021-003431), ruling that Lenovo infringes valid and essential EP 558. Regarding EP 537, in January 2022, the High Court had originally found the patent invalid for lack of novelty over the prior art (case ID: HP-2019-000032). However, in February 2023 the Court of Appeal concluded that EP 537 was indeed valid, thereby overturning the previous High Court ruling (case ID: CA-2022-001060).

Furthermore, the High Court also handed down a decision in February 2023 (case ID: HP-2019-000032) concerning essential patent EP 318. Lenovo had argued that the patent was invalid for lack of novelty over two pieces of prior art. It also argued for invalidity based on obviousness, but the judge found InterDigital’s patent valid and essential.

International adversaries

InterDigital began the lawsuits with Gowling WLG, with co-chair of its global tech team Alexandra Brodie in the lead. She is supported by partners Matt Hervey and Jamie Rowlands, and director Michael Carter, as well as numerous associates.

Daniel Lim

Gowling is also leading parallel FRAND proceedings in China and the US, with the firm’s Beijing and Guangzhou offices providing support in this instance.

By contrast, the relationship between Kirkland & Ellis and Lenovo is relatively new. The US firm took over from Powell Gilbert, which initially represented Lenovo, shortly after the claims were filed in April 2020. Kirkland & Ellis partner Daniel Lim is running the FRAND trial, while Steven Baldwin leads on the technical aspects.

For InterDigital
8 New Square (London): Adrian Speck, Mark Chacksfield, Isabel Jamal, Thomas Jones, Edmund Eustace
Gowling WLG (London): Alexandra Brodie, Jamie Rowlands, Matt Hervey (partners); Michael Carter (director); Nick Cunningham (of counsel); associates: Andrew Maggs, Inga Pietsch, Arnie Francis, Charlie Bond, Jonathan Flower, Jonathan Zane, Lucy Singer, Felicity Wade-Palmer, Olivia Nimmo
In-house (Wilmington): Steve Akerley (VP, head of litigation)

For Lenovo
8 New Square (London): Daniel Alexander, William Duncan
Blackstone Chambers (London): James Segan, Ravi Mehta
Kirkland & Ellis (London): Daniel Lim, Steven Baldwin, Nicola Dagg, Gabriella Bornstein, Oscar Robinson (partners); Ashley Grant
In-house (North Carolina): Jennifer Salinas (executive director, general counsel), Anup Shah (legal director)

High Court of England and Wales, London
James Mellor (presiding judge)