Is the UPC still needed for SEP disputes?

When the representatives of Panasonic, Xiaomi and Oppo met for a three-day hearing at the local division in Mannheim in mid-October, it was meant to be the Unified Patent Court’s grand kick-off for SEP and FRAND proceedings. Panasonic had brought actions for infringement of countless patents against the two Chinese implementers here as well as at the Munich local division, at two German Regional Courts, and at the UK High Court.

The Mannheim local division would hand down its first judgment on 6 December. This would have been the UPC’s first significant SEP ruling. It is possible that the Mannheim judges led by Peter Tochtermann would also have commented on a FRAND rate, but they will no longer get the chance, as the three companies reached a basic agreement to settle their disputes.

Interim license sets a new bench mark

Peter Tochtermann and his UPC colleagues would probably have been just as happy to make a ruling as their fellow judge from the UK High Court, Richard Meade, would have been to set a FRAND rate before Christmas. But this won’t be happening either.

The decisive factor to settle was the UK Court of Appeal ordering an interim license between Xiaomi and Panasonic at the beginning of October until the final license is determined. Xiaomi had applied for this interim license and was unsuccessful at the High Court as the court of first instance. The decision by the UK Court of Appeal has ramped up the pressure on Panasonic.

No FRAND judgment by the UPC for now

This was very noticeable in the Mannheim court room just a few days later during the UPC’s FRAND hearing. Panasonic and Xiaomi had applied for a stay of their proceedings, so the hearing only concerned the case against Oppo. The UPC judges were of course aware of what had happened in the London patent courts. After all, Richard Meade had told them in a letter, which many of those involved understood as a request not to order any injunctions until he had ruled on the FRAND rate.

And, of course, Peter Tochtermann and his UPC colleagues were interested in what exactly the UK Court of Appeal had decided regarding the interim license and how that affected the proceedings with Oppo. What the UPC judges would have decided in their first major FRAND case, no one will ever know. Many observers from the mobile communications industry would have liked to see the UPC’s first ruling to get an idea of the new court’s stance on FRAND issues.

There are other SEP suits pending at the UPC. The Munich local division heard the case between Huawei and Netgear yesterday, but it will be at least another six weeks before there is a judgment.

London sets the tone in FRAND proceedings

Now that the biggest FRAND battle of the last two years has come to an end, one thing is clear: in the weeks and months ahead, London will be where the action is in SEP disputes in which a party has applied for a FRAND rate setting. Whether German courts or the UPC order an injunction will probably be of minor importance in the future, although the UPC in particular had been vaunted as a new player in global SEP cases. It was the London patent judges, however, who have found more creative solutions of late.

Competition among patent courts is a well-known phenomenon. But this latest SEP case has taken the competition to a whole new level of complexity, which is unlikely to fill patent holders with optimism. Since the UK’s withdrawal from the UPC project, the London courts have been under pressure to find their place in the global patent litigation scene.

The UK judge in the Panasonic-Xiaomi dispute made splendid use of this opportunity. The London courts have had the confidence to set FRAND rates for years and have recently written assertive letters to their fellow judges on the continent. UK patent judges do not rule out anti-suit injunctions, and interim licenses are set here, which – although not legally – de facto block injunctions by continental European courts.

Complexity reaching its limits

And the UPC? It is probably the more important court across all sectors and technical fields overall considering the larger economic area behind it. In SEP proceedings, however, the UPC judges must ask themselves whether they, like the German courts, want to limit themselves to issuing injunctions, or whether they can bring themselves to set FRAND rates. Leading UPC judges have implied at various conferences that this is entirely possible.

However, two courts competing for a FRAND rate setting in Europe would further increase the complexity of SEP disputes. Politicians have the opportunity to reduce this complexity. Europe has an obligation here, since the EU Commission took an interest in SEP cases and submitted a proposal for SEP regulation. The proposal is now before the European Council for a vote, giving the EU member states a historic opportunity to rein in a system that is threatening to come apart at the seams.

And companies must ask themselves whether the effort involved – as in the case of Panasonic against Xiaomi and Oppo – is really still worth it, or whether they could perhaps achieve the same result without expensive legal proceedings. Put simply, the UK courts are assuming the role of a clearing house for FRAND rate setting, but Panasonic, Xiaomi and Oppo ultimately negotiated the rate and contract details themselves.