FRAND determination stay agreed for IPCom v Nokia trial

By Shreedevi Chatterjee

The High Court has recently granted Nokia's request for a stay of its patent litigation with IPCom.1 Mann J agreed with Nokia's submissions that such a determination relating to whether IPCom's patent licence terms are FRAND need only be considered once the patent is deemed to be valid. Meanwhile, economic guideposts for assessing FRAND royalty rates have been published for the first time in Microsoft v Motorola, a landmark decision from the Western District of Washington. While this US case is the first to set out basic principles for determining FRAND rates, it remains to be seen whether it will influence other jurisdictions. For now, mobile competitors in the UK will eagerly await the decision of the European Patent Office's (EPO) Technical Board of Appeal (TBA), which is assessing validity in IPCom v Nokia, before the UK Court examines for the first time the methodology to adopt for a licence to be FRAND in respect of a standard essential patent (SEP).

FRAND

In order to facilitate lawful co-operation and interoperability, standard-setting bodies such as ETSI (the European Telecommunications Standards Institute) often require the use of FRAND (or RAND) terms in SEP licences. There is no legal precedent or legislation setting out what is meant by this but broadly speaking, terms should be:

Fair - terms should not be unfair or exploitative. This would e.g. prevent restrictions or foreclosure of competition through exclusionary licensing practices;

Reasonable - usually looked at in relation to licensing rates. For a royalty to be reasonable, a regulator may consider the requested rate compared to the next best alternative. For example, the German Siemens -v- Amoi (Zeitlagenmultiplexverfahren) case examined reasonableness of licensing rates against what could have been achieved in negotiations "under the conditions of an open market"; and

Non-discriminatory - technology rights holders are required to treat each licensee in a similar manner. This means that owners of essential patents cannot restrict competition downstream by imposing discriminatory royalty rates or conditions.

Patent wars

The bitter spat between Nokia and IPCom follows a number of claims and counterclaims between mobile technology rightsholders (we reported on the patent wars in our July 2011 IP/IT newsletter, Patent war ceasefire as Nokia and Apple settle smartphone dispute).

Following its acquisition of a telecoms patent (patent '268) from Bosch, IPCom has become embroiled in disputes with Nokia and HTC. Nokia and HTC faced claims for infringement from IPCom while they argued patent '268 should be revoked. In regards to the Nokia case, the High Court held that patent '268 was valid in an amended form and infringed by Nokia in relation to certain devices. This was upheld by the Court of Appeal in May 2013.²

As the patent had been found by Floyd J to be "essential", IPCom was obliged to license the patent on FRAND terms. An order was made to determine those terms, scheduled to commence between 4 June and 17 July 2013. This order was made on the basis of key undertakings given by the parties, including:

• IPCom will grant Nokia a licence of patent '268 on FRAND terms to be determined by the Court or between the parties;
• Nokia will take a licence of patent '268 on FRAND terms (subject to patent 268 not being found invalid in this action or by the TBA); and
• Nokia will give IPCom two months written notice of its intention to use patent '268 in the UK.

European proceedings

Running concurrently to the UK action, parallel proceedings were taking place in the EPO. On 25 April 2012, the EPO Opposition Division decided that patent '268 was partially invalid. IPCom appealed to the TBA. On 7 March 2013, the TBA orally announced its decision that patent '268 could only survive in an amended form. As written determination of the TBA has not been made, the validity of patent '268 remains in question.

Reasons for grant of stay

Mann J agreed that Nokia's undertaking referred to the patent reviewed initially by Floyd J, and he rejected IPCom's view that Nokia had undertaken to submit to a FRAND inquiry on patent '268 in whatever form that patent ultimately took. This was clear from express reference in the undertakings to invalidity, indicating Nokia was not absolutely intending to take a licence. Its agreement to submit to a FRAND determination turned on the form of patent '268 once determined to be valid, and it therefore followed that this should be decided prior to any consideration of FRAND terms.

Please click on the links below for the other articles in the August 2013 Technology & IP newsletter

• M&S's use of Google AdWords infringes Interflora's trade mark
• High Court accepts claim by FAGE to restrain Chobani from passing off its American-made yoghurt as 'Greek yoghurt'
• EU Commission intervenes in patent wars: the end of injunctive relief for infringement of "essential" patents?
• IP Bill to reform design rights and bring in Unified Patent Court
• Whose right is it anyway? Copyright reforms introduced by the Enterprise and Regulatory Reform Act 2013
• New Commission Regulation seeks to speed up broadband roll out
• Media convergence in the internet age

_Notes:

_{^1. (Nokia OYJ v IPCom GmbH & Co KG and IPCom GmbH & Co KG v HTC Europe Co Limited and others [2013] EWHC 1178 (Pat), 2 May 2013.)}

_{^2. (Nokia OYJ (Nokia Corporation) v IPCom GmbH und Co KG [2012] EWCA Civ 567, 10 May 2012.)}