“Keep the SEP system simple”

One, two, three or even five anti-interim licence injunctions. Who can keep up? Highly specialised lawyers at best, but hardly managers in licensing departments or CEOs who must decide on licence agreements for SEP portfolios.

As those involved in the global SEP system constantly emphasise at conferences, the goal is a practicable system where SEP owners and implementers can arrive at mutually acceptable licence rates. In many cases, the parties manage this quite well, for example with patent pools or through agreements by means of bilateral negotiations without resorting to court.

But when negotiations fail, things get complicated. Too complicated, say many experts. European courts, namely the Unified Patent Court, the UK High Court and the Munich Regional Court, are currently playing a central role. Driven by the requests of disputing parties, these authoritative patent courts in Europe have long been in a race that does not benefit the system.

Race of courts

On one side, there is the UK High Court as the central court for setting global FRAND rates. On the other, the new Unified Patent Court as well as the Munich Regional Court with probably the most SEP infringement claims. The key question in the interplay between courts is what parties can enforce in one court without blocking proceedings in another.

Implementers and SEP holders are trying to gain the upper hand with increasingly complex litigation strategies. This was evident last year when Xiaomi prevailed against Panasonic with an application for an interim licence at the UK High Court, quickly leading to a global settlement. Since then, interim licence applications have become very popular with implementers.

“A new phenomenon has emerged: the AILI”

In its current dispute with InterDigital over video coding and decoding technology, Amazon has not yet applied for an interim licence, but has hinted it might. This was enough for both the Munich Regional Court and the UPC local division Mannheim to impose an anti-suit injunction against Amazon a fortnight ago. Notably, InterDigital has not yet filed any infringement claims against Amazon with the continental courts. But a new phenomenon has emerged: the anti-interim-licence injunction, or AILI.

Action and counteraction

The last few days have been hectic at the UK High Court. In a hastily convened case management conference, judge Richard Meade took stock of the situation. Surprisingly, he then issued a temporary injunction on Monday prohibiting the patent holder from taking legal action in other countries to block UK proceedings. Initially, Amazon had sought a declaration of non-infringement at the High Court, alleging that InterDigital had abused a dominant position. Amazon also sought certain declarations concerning InterDigital’s obligations under the ITU-T FRAND commitment (RAND).

In the coming days, the question in London will be whether the court will accelerate the RAND trial. In mid-November, the UPC local division in Mannheim will again hear InterDigital’s AILI application, this time Amazon will be heard. Remarkably, the injunctions from Mannheim, Munich and London were all issued ex parte.

“The UK judiciary is limited to its national role due to Brexit”

The courts cannot be faulted for processing parties’ applications or protecting their jurisdiction. But something seems to have gone awry. With the UPC, a new player has entered the league of important patent courts. The UPC judges are confidently seeking their place in global patent litigation. Although UK judges have an attractive offer in global FRAND rate determination, which pre-existed the UPC, the UK judiciary is nevertheless limited to its national role due to Brexit and non-participation in the UPC.

Encroachment

Law firms also have an interest in keeping their home jurisdiction attractive with creative strategies. The next stage in the upward spiral of SEP disputes is already on the horizon. So far, implementers have applied to the UK court for FRAND-rate determination. Whether parties then adhere to the court-set rate is at their discretion.

“Specific performance is mentioned more frequently”

Recently, “specific performance” has been mentioned more frequently. In contrast to FRAND-rate determination, the UK court would then, simply put, oblige the SEP holder to conclude a licence agreement at the implementer’s request. According to current expert opinion, such an agreement would remove the basis for infringement claims before the UPC or German courts.

So far, it appears specific performance has only been applied for in exceptional cases, such as the dispute between TP Link and Huawei. However, should the UK High Court order such a licence agreement, it will be interesting to see the creative response of continental courts.

Even if judges on both sides always emphasise their respect for proceedings in other courts, as Richard Meade did in his last judgment, the decisions now have significant reciprocal effects on other jurisdictions. Ultimately, disputing parties will have to decide how to handle this.

The CJEU’s decision in BSH vs Electrolux further fuelled competition between European courts, as did the UPC’s long-arm jurisdiction approach. One lawyer described the BSH vs Electrolux decision as legally sound but “politically unwise”. It was clear that UK courts would not leave this unanswered.

The solution

The solution is obvious and repeated as a mantra at every conference: ultimately, only companies are best placed to judge a technology’s economic value and arrive at the most economically sensible results.

Unfortunately, practice is not so simple. It becomes difficult when industry fronts are hardened or economic power between disputing parties is unevenly weighted. Why else do SEP licence negotiations end up in patent courts?

“Stakeholders should focus on simple, sensible solutions”

In-house lawyers increasingly report that litigation costs significantly exceed licence agreement values. Moreover, explaining the legal aspects of such litigation to managers is becoming increasingly difficult.

Patent pools with transparent conditions offer an alternative, even if they occasionally take implementers to court. The number of pools and their presence has increased considerably over the last decade.

Arbitration and mediation processes are another alternative, mainly because disputing parties must undertake to accept the court’s proposed solution. However, a popular counter-argument here is that arbitration and mediation prevent the transparency of settlement licences in the market. This is true, but instead of seeking the solution to end all solutions, stakeholders should focus on simple, economically sensible solutions.

Is change really wanted?

I often have the feeling that the high costs of complex global litigation are priced into the licences from the outset and that many stakeholders live very well with the current system. The bill for complex legal proceedings is ultimately paid by the consumer.

A different approach, as the heated debate surrounding the EU Commission’s proposal for European SEP regulation has recently shown, may not even be desirable. Rather than a system change, a camel may go through the eye of a needle, or a UPC judge may dare to make a FRAND-rate determination.