While
I was on vacation in late June, Mr. Justice Mellor handed down his decision in Samsung
Elecs. Co. v. ZTE Corp., [2025] EWHC 1432 (Pat). The decision grants the interim declaration
that Samsung had sought, to wit:
i) a declaration that the Defendants (ZTE) are in
breach of their obligations of good faith under ETSI;
ii) a declaration that a willing licensor in the
position of ZTE and a willing licensee in the position of Samsung would enter
into an interim licence in respect of each other’s standard essential patents
(SEPs) with appropriate royalty terms to be determined by this Court, subject
to adjustment and amendment upon final determination of global FRAND terms by
this Court (or as otherwise agreed by the parties); and
iii) a declaration that if ZTE refuse to offer Samsung
such an interim licence, ZTE are unwilling licensors (and unwilling licensees
in view of the cross-licence).
Although other
commentators have already written about the decision, I will provide a short
summary and add a few thoughts of my own.
First
off, however, for readers who are new to the topic of interim licenses, a little
background on interim licenses for FRAND-committed SEPs may be helpful. The foundational decision, still less than a
year old, is Panasonic Holdings Corp. v. Xiaomi Tech. UK Ltd., [2024]
EWCA Civ 1143, in which the Court of Appeal for England and Wales held that
Xiaomi was entitled to a declaration that a
willing licensor in the position of Panasonic “would agree to enter into, and
would enter into, an interim licence of” Panasonic’s SEP portfolio “pending the
determination by the Patents Court of what terms for a final licence” are
FRAND. In that particular case, the SEP
owner had agreed to submit a global FRAND determination by the U.K. courts, but
then appeared to renege on that commitment by proceeding with litigation in
Germany, which might have had the effect of coercing Xiaomi to settle before the
resolution of the matter in the U.K. The
EWCA concluded that the declaration “would serve a useful purpose in forcing
Panasonic to reconsider its position” (and in fact, the case settled shortly thereafter),
and stated that the requested relief would be less intrusive than an
antisuit injunction (ASI). Since then,
the English courts have considered requests for declarations concerning interim
licenses in four additional cases, including the present one. The most far-reaching of these, arguably, is Lenovo
Group Ltd. v. Telefonaktiebolaget LM Ericsson (Publ), [2025] EWCA Civ 182, in
which the EWCA held that Lenovo was entitled to an interim-license declaration despite
the fact that Ericsson, unlike Panasonic, had not agreed to the U.K. court’s
determination of global FRAND terms, and the U.K. action (initiated by Lenovo)
was not the first filed between the parties.
Coming
back to the present case, the facts, briefly, are as follows. On December 19, 2024, Samsung filed an action
in the EWHC for the infringement of certain SEPs, and requested the determination
of global FRAND terms including a cross-license for ZTE’s SEPs. (Samsung will be a net licensee rather than licensor.) The next day, Samsung filed an E.U.
competition law claim against ZTE in Frankfurt, Germany. On December 23, ZTE filed an action in the
Chongqing Intermediate People’s Court for a global FRAND cross-license. Thereafter, ZTE commenced actions for the infringement
of individual SEPs in Germany, the UPC, Hangzhou (China), and Brazil, obtaining
a preliminary injunction in the last of these.
Samsung also filed additional actions, including an antitrust action in
the Northern District of California and claims for the infringement of certain
patents in Germany, the UPC, and China.
Unlike the previous English cases involving requests for interim
declarations, however, in this dispute both parties have offered to
agree to interim licenses, the difference being that Samsung wants the declaration
to state that the terms of the interim license will be adjusted to bring them “into
line with the terms of the final global license determined to be FRAND by the
High Court of Justice of England & Wales at the UK FRAND Trial, and subject
to any later adjustments or amendments following any appeals in the UK FRAND Proceedings,
or the license that is otherwise agreed between the Parties” (para. 10), whereas
ZTE wants the interim license to be adjusted “in accordance with the final
determination of FRAND terms in an action brought by ZTE in Chongqing (absent
earlier agreement by the parties)” (para. 9; see also para. 71).
In reaching
its decision in favor of Samsung, the court concludes, first, that ZTE breached
its obligation to negotiate in good faith.
According to the court, ZTE’s purpose in proceeding with the Brazilian,
German, UPC, and Hangzhou litigation is “to try to force Samsung into accepting
that global FRAND terms would be decided in Chongqing”—that is, to use “the
exclusionary power of national injunctions to enforce its jurisdictional
preference” for the Chongqing forum, which ZTE perceives as advantageous—despite
the fact that the U.K. courts were the first seised (a matter that the court describes
as not being “a trump card in all situations,” but a possible “tie-breaker in
an appropriate case”) (paras. 99-100, 105, 117, 119). Moreover, given the UKSC’s decision in Unwired
Planet, recognizing the English courts’ jurisdiction to determine global
FRAND royalties even in the absence of the consent of both parties, there was
nothing improper about Samsung’s resort to the English courts to make a global
FRAND determination here (para. 120).
All of this leads the court to conclude as follows:
127. In my judgment, a willing licensor in the position of
ZTE would have engaged with this action and proceeded as speedily as possible
to the FRAND trial, in the absence of earlier agreement between the parties. In
my view, a willing licensor would not commence a wave of injunctive
proceedings, whatever the aim of the pressure which those proceedings would
exert on the SEP licensee. The wave of injunctive proceedings commenced by ZTE
were completely unnecessary since Samsung were and are actively seeking fresh
global FRAND cross-licence terms, to
replace the previous global cross-licensing terms which the parties abided by
for several years. There is no suggestion that Samsung were operating other
than as a willing licensee (and as a willing licensor).
128. I acknowledge that a SEP licensor who seeks to
persuade what they perceive to be an unwilling licensee to take a licence on
FRAND terms will necessarily seek injunctive relief as the ultimate incentive
to force the licensee into accepting the FRAND terms determined (in this
instance) by the Court. In the UK, a so-called FRAND injunction presents the
licensee with that choice. There is, however, a clear difference between
seeking final injunctive relief in the FRAND proceedings on the one hand and
seeking interim injunctive relief in many jurisdictions to try to force the
other party off various markets. In FRAND proceedings, the licensor’s ultimate
remedy is money and the risk of irreparable damage is rare or non-existent
where substantial companies are involved.
129. Of course, from ZTE’s standpoint, the wave of
injunctive proceedings was necessary to fulfil a principal aim of ZTE: to force
Samsung into accepting a global FRAND determination in Chongqing.
130. Overall, and notwithstanding the manoeuvring by ZTE to
narrow the gap between the two sides, the conclusion in my judgment is
inescapable. ZTE have acted in bad faith with their wave of unnecessary
injunctive proceedings, and by using the continuing threat imposed by them to
seek to sideline or displace the jurisdiction of this Court and in seeking to
secure their preference for a determination in Chongqing.
The court’s statement that, in
FRAND cases, “the licensor’s ultimate remedy is money and the risk of
irreparable damage is rare or non-existent where substantial companies are
involved,” is of course consistent with the views expressed in other English
decisions, particularly those authored by Lord Justice Arnold, and is quite
different from the views expressed by the German and UPC judges (see, e.g.,
here).
Second,
the court concludes that the requested declaration would serve a useful purpose
because it may “force ZTE to reconsider its position”: “Faced
with a decision by this Court that ZTE are in breach of their obligation of
good faith and a formal declaration that a willing licensor would enter into
the interim licence proposed by Samsung, would ZTE really persist in conduct
that the Court has unequivocally and publicly condemned? I not only hope that
ZTE will see the error of their ways but consider there is a prospect of them
doing so” (paras. 135-36). More
specifically, in view of the declaration “a number of possibilities arise,
including the following: i) First, both actions will proceed to trial, yielding
two global FRAND determinations. From an academic and practical perspective, it
would be interesting to have the opportunity to compare those outcomes even if they
are unlikely to match due to the fact that each court is likely to hear different
evidence. ii) Second, the parties agree that only one of these actions should
proceed. If the parties manage to agree that, I suspect they would have moved closer
to agreeing FRAND terms. iii) Third, the parties agree FRAND terms” (para. 139).
Third,
the court concludes that the declaration would not undermine comity, writing
that “[i]f the declaration does induce ZTE to reconsider their position and
grant Samsung an interim licence on the terms Samsung seek, that would promote
comity because it would relieve the courts and tribunals of Brazil, Germany,
the UPC and Hangzhou of a great deal of burdensome and wasteful litigation
commenced by ZTE, but also the retaliatory litigation in those jurisdictions
plus the USA commenced by Samsung” (para. 152).
To be sure, “the various offers made by ZTE would, if accepted, also
relieve the same courts of the same amount of burdensome and wasteful
litigation”; but in the court’s view “there is no basis . . . for criticizing
Samsung for not accepting ZTE’s terms” given that the English court has
jurisdiction over the matter, whereas “there is a basis for criticizing ZTE’s
conduct in trying, through their interim licence terms, backed by their wave of
litigation, to either derail or displace this action. ZTE’s terms interfere
with the jurisdiction of this Court which they have accepted . . . . In
practical terms, ZTE’s terms are designed to render this action pointless, so
that Samsung effectively has to abandon it, unless they can bear the prospect
of the costs of two FRAND determinations” (paras. 155-57). The court acknowledges “that one of the
unintended consequences of this judgment is that it enhances the significance
of the Court first seised of a claim to determine FRAND terms, with the
consequences mentioned by Arnold LJ in Nokia CA at [16] and particularly
the first”—that is, the “rush by each party to the court to establish
jurisdiction in a forum which is perceived to be favourable to that party’s position”—but
states that “[t]here is nothing I can do about that. It is a further reminder
that ETSI and other Standard Setting Organisations need to focus attention on
incorporating some dispute resolution procedure(s) into their terms” (para. 161).
I’ll
be giving this case a good deal of thought over the next week, and may speak
about it at the upcoming IP Day Conference at Boston University a week from
today. For now, I’ll just note a few initial
thoughts. First, on one view this case might
seem similar to Microsoft v. Motorola (in which Judge Robart issued an ASI)
and Panasonic v. Xiaomi (in which Lord Justice Arnold concluded that an
interim license was appropriate), in that the SEP owner can be viewed as using litigation
in another forum to derail proceedings that are properly before the forum
issuing the requested relief. (See,
e.g., para. 159: “If ZTE were right in
their opposition to this application and the position they have adopted, it
would add a powerful weapon to the SEP licensor’s armoury, in this sense. Any
action for FRAND terms commenced by an implementer or net payer under a
cross-licence, could be derailed in short order by the SEP licensor offering an
interim licence on condition that the other party must accept the SEP
licensor’s choice of forum, the offer being backed with injunctive relief in
other jurisdictions, most likely targeted to cause the maximum damage to the
SEP licensee’s business.”) On the other
hand, although ZTE is not challenging the English court’s jurisdiction, it hasn’t
committed to agreeing to whatever the court’s global FRAND determination
happens to be, which might distinguish this case from Microsoft and Panasonic. Second, as the court acknowledges, the EWHC’s
conclusion that ZTE has acted in bad faith is not binding on any of the non-U.K.
courts and does not preclude those courts from proceeding as they see fit—though
it may have consequences in the U.K. litigation, if it leads to the conclusion
that ZTE is an “unwilling” licensor/licensee (see paras. 5(iii), 28-29). Third, however, if ZTE doesn’t back down and the
Chongqing court reaches a global FRAND determination first, what then? If Samsung were to accede to the Chinese
court’s terms, that would seem to be the end of the matter, I would think, and
perhaps that is what ZTE is hoping for—though whether the Chongqing litigation is
likely to terminate first is unclear (see paras. 35, 47), and the decision surely
shifts some bargaining leverage to Samsung.
Fourth, as noted above, the decision would seem to encourage forum
shopping by exacerbating the race-to-the-courthouse phenomenon—though perhaps
only marginally so, since even if the decision had come out the other way I
should think that both net licensors and net licensees would have a substantial
incentive to strike first in their favored forums. Fifth, is it possible that there would be
less strategic maneuvering in cases like the present one if the English courts
hadn’t first embraced global FRAND determinations in Unwired Planet–or would
the Chinese courts have adopted that practice eventually anyway, and in so
doing encouraged the U.K. to do the same?
I suppose we will never know—though even without courts making global FRAND
determinations, SEP owners would surely use the prospect of injunctive relief
in jurisdictions such as Germany, the UPC, and Brazil to nudge licensees into global
settlements on licensor-friendly terms, forum shopping being one of those
things that everyone condemns and that every advocate nevertheless does to
serve their clients’ interests. (In the
words of La Rochefoucauld, “l'hypocrisie est un hommage que le vice rend à la
vertu.”) Sixth—although I think it is unlikely
things will actually get this far—perhaps this will be the first case in which
two different courts each establish global FRAND terms for the very same
portfolios. As Mr. Justice Mellor notes,
if that came to pass it would “be interesting to compare the FRAND ranges or
rate determined by each Court and the reasoning which led to each result”—although
“because the evidence heard and accepted by the English Court may well be
different to that heard and accepted by the Chongqing Court, the two Courts
might reach differing conclusions, but one would hope their FRAND ranges would
overlap to a significant extent” (paras. 28(iv), 91). One would, indeed, hope so.
