Lenovo ‘overall winner’ of UK FRAND trial as InterDigital confirms appeal

In March 2023, the UK High Court decided on FRAND licensing and terms in the telecommunication dispute between InterDigital and mobile device manufacturer Lenovo (case ID: [2023] EWHC 538 (Pat)). With InterDigital’s portfolio of patents previously declared essential to the 3G, 4G and 5G standards, the judge determined that neither InterDigital’s so-called 5G ‘Extended Offer’, nor Lenovo’s so-called ‘Lump Sum Offer’, were FRAND. Neither, says the judge, did the offers fall within what the court determines as the ‘FRAND range’.

InterDigital awarded lump sum

While the court took jurisdiction to determine a FRAND offer for Lenovo to accept, it also noted that Lenovo had conducted itself as a willing licensee. But this was not the final outcome of the first-instance hearing: in the March 2023 judgment, presiding judge James Mellor said he “remained undecided whether to award interest on past royalties”. As such, the court has released a further judgment addressing the issue of interest, as well as a third decision on confidentiality, given the redacted nature of the March decision.

According to the issues and costs judgment, published on 26 June, Mellor examined if he should award interest on the lump sum of $138.7 million, and if so at what rate; the appropriate order regarding the FRAND trial costs; and how to resolve what he describes as “certain issues arising on the terms of the licence.”

The main question rested, according to Mellor, on whether it would be FRAND to order Lenovo to pay interest on the lump sum, taking into account the non-payment of past royalties. Perhaps unsurprisingly, InterDigital maintained that this would comply with FRAND and ETSI guidelines, with the court ultimately deciding to award compound quarterly interest on the $138.7 million. This equals $46.2 million, meaning Lenovo is paying InterDigital $184.9 million overall.

The court also considered who should bear what it describes as the ‘substantial cost’ of the FRAND proceedings, which it estimated to stand at £17.25 million for InterDigital, and £14.27 million for Lenovo. This discussion also included an evalution of the FRAND case’s ‘overall winner’, according to the presiding judge, as well as whether the court might realistically make a cost order against whichever party it declares the ‘winner.’

Lenovo as overall winner

With FRAND judgments differing from ‘normal’ patent judgments, and considering the lack of case law on FRAND which currently exists in the UK, James Mellor used the previous first-instance decision in Unwired Planet vs. Huawei, handed down by then-High Court judge Colin Birss, as a framework for his cost determination.

In Unwired Planet vs. Huawei, judge Birss considered the issues of: a worldwide vs. UK licence, the FRAND rate, and finally Article 102 on the Treaty on the Functioning of the European Union (TFEU), which considers if the party in a dominant position has, in its undertaking, committed abuse in the market. Mellor agreed with Birss that the “FRAND rate determination in this type of case is properly to be characterised as a tariff-setting exercise.”

Ultimately, the presiding judge declared Lenovo the ‘overall winner’ for several reasons, including finding a per unit rate of $0.175 as much closer to Lenovo’s proposal of $0.16, and a ‘long way’ from InterDigital’s contention of a blended rate of $0.53. The court also found the payable lump sum ‘substantially lower’ than InterDigital’s offer of $337 million, found Lenovo the winner regarding comparables, and found Lenovo successful on the ‘top down’ and ‘conduct’ aspects of the case. InterDigital was ordered to pay Lenovo’s costs of the FRAND part of the action, excluding Lenovo’s costs of the foreign law and interest issues, while Lenovo must pay InterDigital’s costs of the foreign law and interest issues.

Up for appeal

Mellor also noted that it makes a difference that InterDigital is mounting what he describes as a ‘substantive appeal’ against the March 2023 FRAND judgment. However, the judge also noted that InterDigital had to pursue Lenovo to court level to secure a FRAND determination.

In a press release, John Mulgrew, deputy general counsel, chief IP officer and VP of Lenovo says, “Lenovo’s clear win is a broader, landmark victory for the technology industry and the customers we serve. The court’s determination that InterDigital’s global cellular royalty rate should be US$0.175 per unit provides full transparency in the face of InterDigital’s supra-FRAND offers and behaviour as an unwilling licensor. We are pleased that the UK Court’s judgment facilitates the proliferation of affordable innovation to customers around the world.”

InterDigital has responded, with chief legal officer Josh Schmidt quoted as saying, “We welcome the court’s careful consideration of this case and its decision to award InterDigital interest to increase its initial award to $184.9 million, as well as granting us permission to appeal”. As such, it appears the case is not over, with the court also granting permission for Lenovo to cross-appeal.

Alexandra Brodie

A question of confidentiality

The judgment on confidentiality is considerably shorter and considers if the presiding judge should remove some redacted parts of the public judgment, as released on 16 March 2023. The confidentiality trial also included, as well as input from Lenovo and InterDigital, written and oral submission from Apple, Wistron, NEC, Huawei, Innovius, PA Consulting, Acer, ZTE, Samsung, Xiaomi, Doro, Fairphone and a third-party licensee of InterDigital.

Of these, Samsung, Apple, Xiaomi, Huawei, ZTE, Acer, Wistron, NEC, Innovius, AB and PA Consulting had the common view that the judgment should maintain its redactions, while Doro and Fairphone did not object to the removal of three redactions apiece, concerning them.

Lenovo also contended, based on the principles of ‘open justice’, that the court remove a number of redactions.

The court ultimately concluded to retain much of what was redacted, removing ‘relatively few from the initial public FRAND judgment’ in order to protect commercially sensitive information. However, the judge did recognise that a hearing on the confidentiality issues has incurred ‘significant costs’ for the parties.

International adversaries

InterDigital began the lawsuits with Gowling WLG, with co-chair of its global tech team Alexandra Brodie in the lead. Partner Matt Hervey and director Michael Carter, as well as numerous associates, are supporting Brodie on the FRAND aspects of the case.

Daniel Lim

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.

The 4 April confidentiality hearing involved several third parties, included those listed: Wistron, NEC and Apple. As such, several other patent law firms were involved. Lee & Thompson represented Wistron, while Morrison & Foerster represented NEC. The London office of Freshfields Bruckhaus Deringer appeared for Apple.

The European offices of the firm regularly represent the US company in proceedings, especially in Germany and the Netherlands. In the UK, Apple usually relies on WilmerHale.

For InterDigital
8 New Square (London): Adrian Speck, Mark Chacksfield, Edmund Eustace
Gowling WLG (London): Alexandra Brodie, 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
Blackstone Chambers (London): James Segan
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)