Burdon on Global FRAND Rate-Setting

On the IPKat Blog yesterday, Rose Hughes published an analysis by Michael Burdon of the problems inherent to having courts in one country (say, the U.K.) determine the terms of a global FRAND license.  (This is also a topic that I recently talked about in Japan, and that Jorge Contreras and I plan to write something about in the near future.)  Anyone interested in the topic should take a look at Mr. Burdon's thoughtful analysis.  In brief, he concedes that proceeding on a country-by-country basis is inefficient, but argues that the fault here lies primarily with SSOs, which to date have declined to establish an effective dispute resolution system or provide much guidance on how FRAND terms should be determined.  (I tend to agree; though I worry that some of DOJ Antitrust Chief Makan Delrahim's recent statements about potential antitrust liability on the part of SSOs will only chill these organizations all the more from taking such steps.)  He also notes the arguable imbalance in having a country with relatively minimal contacts with the dispute set the terms of a global license  ("In ZTE’s case, UK sales were less than 0.07% of their global sales. It is difficult to think of any other field of intellectual property where the indirect consequence of infringement of a UK right has an effect, exponentially greater than the local direct effect of that right.").

Anyway, read the analysis in full.  But here are a few thoughts of my own in response to the post:

1.  Citing paragraphs 124-27 of the Court of Appeal's Unwired Planet decision, Mr. Burdon understands that case as standing for the proposition that, when both the SEP owner and the implementer make FRAND offers, the SEP owner's offer effectively controls, because if the implementer refuses the offer it stands to be either (1) enjoined from selling infringing products in the U.K., or (2) coerced into taking a global license.  I hadn't previously thought of the opinion in quite those terms; after all, in Unwired Planet the court itself ultimately determined what the terms of a global license would be, rather than simply accepting the terms proposed by Unwired Planet.  (Mr. Justice Birss also thought there could be only one single set of terms that would be FRAND, a matter on which the Court of Appeal disagreed.)  But this does present a thorny question:  if both offer and counteroffer are FRAND, is the appropriate response to have a court or other third party decide on the terms of a FRAND license (global or otherwise), or must the implementer accept the SEP owner's terms?  The latter option doesn't seem right.  On the other hand, if a FRAND license would be global in scope, as Mr. Justice Birss believed was the case on the facts of Unwired Planet itself, there is a certain logic to saying that the defendant has to accept a global license or risk being enjoined.  It just doesn't follow that all of the terms must be those dictated by the SEP owner.   (It also doesn't follow that a court in a country with relatively few contacts to the matter is the most appropriate forum to determine the terms of a FRAND license.  In both Unwired Planet and Conversant, the court rejected the defendant's request to stay the U.K. litigation under the doctrine of forum non conveniens, but as I suggested in my Japan talks I wonder if this doctrine could be more fruitfully employed in future cases to address such situations.)

2.  Whether a court in the U.S. would follow the lead of the English courts in setting a global FRAND rate over the objection of the implementer is still a bit unclear--though as Professor Contreras pointed out to me recently, last year the Eastern District of Texas rejected such a request in Optis v. Huawei, noting that under Federal Circuit precedent U.S. courts aren't permitted to adjudicate claims involving foreign patents.  (The Federal Circuit so held in Voda v. Cordis, assertedly on the basis of the Paris Convention, though as Professor Graeme Dinwoodie has noted the Paris Convention almost certainly does not compel this result.)  Doctrinally, one further problem might be that, even if (in a given case) a FRAND license would be global, under eBay that still doesn't necessarily lead to the conclusion that the defendant must be enjoined from practicing the patent in the U.S., even if it is unwilling to accept the court's determination of a global FRAND license.   (At least I don't think eBay would contemplate any such "automatic" rule.)  Further, I shudder to think how, if the matter were tried to a jury, a jury could be expected to set a global FRAND rate.  To say that that doesn't seem practical is an understatement.

3.  Mr. Burdon also cites a 2018 U.K. Supreme Court decision, Morris-Garner v One Step ([2018] UKSC 20, which (though a breach of contract decision) discusses, among other matters, the availability in some cases of "user damages" in lieu of an injunction (i.e., an ongoing royalty)--and thus could have considerable relevance in patent and other IP cases as well.  I confess that I wasn't aware of this decision before, and will need to study it and report back.