UK Supreme Court in Unwired Planet v Huawei: missed opportunities, but welcome focus on ‘true value’ of SEPs


Brussels, August 27, 2020 – The Fair Standards Alliance (FSA) welcomes the clarification that the UK Supreme Court has brought in the Unwired Planet v Huawei, Conversant v Huawei, and Conversant v ZTE judgements on valuation of standard essential patents (SEPs).

The Court clarified that for SEP licence offers to qualify as fair, reasonable and non-discriminatory (FRAND), they should  be a fair market price for any market participant, to reflect the true value of the SEPs to which the licence relates and without adjustment depending on the individual characteristics of a particular market participant. The Court stated there should be a single royalty price list available to all.

The FSA has long advocated that royalties must be based on the value of the SEPs and not other factors, and that licenses should be available to any market participant. The FSA has also promoted increased transparency on SEP royalties as one of determinants for fairer licensing terms. This is particularly important for SMEs that often do not have the resources and bargaining power to negotiate with aggressive SEP asserters, and for companies that are not familiar with the SEP licensing process.

The FSA is concerned, however, that the court’s judgment may see SEP holders seeking to impose a global patent portfolio on potential licensees even when there are good arguments that such a licence is not required. It is troubling that a SEP holder could use a single patent, in a single jurisdiction, to force a potential licensee to enter into a worldwide SEP licence, including for patents that might not be essential, infringed or valid.

If parties voluntarily and mutually agree to negotiate a global portfolio licence, they certainly may do so. However, companies should not be forced to take a licence to SEPs they do not need or do not infringe. A company that operates only in a particular country or geographic region should not be required to pay for worldwide IP rights that it does not need. This Court’s judgement is a missed opportunity to clarify that.

However, we are pleased  with the Court’s clarification that licensees should be entitled to recover sums paid as royalties attributable to those patents that are later found by relevant foreign courts to be invalid or not infringed, especially as some studies show that as much as 85% of declared SEPs are later found to be invalid, or not essential, or not infringed.

“We are pleased that the UK Supreme Court made it clear that the FRAND rate is to be objectively determined based on the value of the SEPs, not taking into account the characteristics of individual licensees, and that licenses must be available to any market participant,” – said Robert Pocknell, Chairman of the FSA.

“It is to be hoped that SEP holders will now follow the Court’s ruling and provide the much-needed transparency and clarity on FRAND licensing terms, as this will be so important for the development of the IoT and for informing SMEs, energy companies and medical device companies, who are not highly sophisticated and well-informed about economics, practice in the market and competition laws across the world.’” – noted Pocknell.

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