This morning the Court of Appeal for England and Wales released its decision in Panasonic Holdings Corp. v. Xiaomi Technology UK Limited, [2024] EWCA Civ 1143, principal opinion by Lord Justice Arnold. The appeal is from orders entered in the Patents Court in July, dismissing Xiaomi’s application for a declaration that a willing licensor in the position of Panasonic “would agree to, and would enter into, an interim license of” Panasonic’s portfolio of 3G and 4G SEPs, “pending the determination by the Patents Court of what terms for a final license” are FRAND. The parties had agreed to an undertaking in November 2023 that they would abide the terms of a global FRAND license as determined by the Patents Court. Panasonic then backed away from this agreement (para. 39), and at present has several hearings in patent infringement actions against Xiaomi scheduled to take place in Germany, beginning next week. Meanwhile, the FRAND trial in the Patents Court also is scheduled to take place starting later this month, with a decision projected for the end of the year. Xiaomi therefore applied to the Patents Court for a declaration that, under the circumstances, a willing licensor would agree to an interim license pending the Patents Court’s determination of a final license. The Patents Court denied the application, but the EWCA grants the appeal.
Without going into great detail for now, I’ll note simply that the EWCA’s view is that Panasonic is not acting in good faith, as required by clause 6.1 of the ETSI IPR Policy, because the only point of proceeding with the German litigation and refusing an interim license (other than on terms which would greatly favor Panasonic, see paras. 59-60, 85) can only be seen as a means to negotiate a better deal than the one the Patents Court is likely to strike if the case proceeds to final judgment there. See, e.g., para. 82: “Panasonic seeks to achieve better terms than those determined by the Patents Court. Put bluntly, Panasonic wishes to use the exclusionary power of injunctions granted by the German courts and/or the UPC to try to force Xiaomi to pay more than the English courts would order.” Further, Lord Justice Arnold writes, “In my judgment Panasonic’s conduct is indefensible. . . Panasonic is not complying with its obligation to negotiate a licence with Xiaomi in good faith, and thereby avoid hold-up, but aiming to coerce Xiaomi into accepting terms more favourable to Panasonic than the Patents Court would determine to be FRAND. . . . [T]he key point is that it is plain that Panasonic is attempting to coerce Xiaomi into paying more than the Patents Court determines to be FRAND, despite Panasonic having both invoked that jurisdiction and both parties having undertaken to enter a licence on those terms” (paras. 86, 87). The Court takes pain to note that it is not criticizing the German approach to FRAND, and is not advising the German courts how to proceed—though “if the declarations do induce Panasonic to reconsider its position and to grant Xiaomi an interim licence, that would, as Xiaomi submit, promote comity because it would relieve the German courts and the IPC of a great deal of burdensome and wasteful litigation” (para. 96). Lord Justice Arnold writes that, in his view, the terms of the interim licence should be as follows:
It is probable, although not
certain, that the terms determined by the Patents Court to be FRAND for the
final licence will be somewhere between the terms offered by Xiaomi and those
demanded by Panasonic. Accordingly, in my judgment the terms on which a willing
licensor in the position of Panasonic would grant an interim licence to Xiaomi
are those proposed by Panasonic for the final licence with two modifications. First,
the period of the interim licence should be from 2011 until the licence
determined by the Patents Court takes effect (rather than until 2029). For the
convenience of calculating the royalty payable, it may be assumed that the
latter date will be 31 December 2024. Secondly, the sum payable by way of
royalty in respect of that period should be midway between (i) the sum offered
by Xiaomi for that period and (ii) the proportion of the sum demanded by
Panasonic on 13 September 2024 that is referrable, on a pro rata basis, to the
period of the interim licence. This sum (and the accompanying licence terms)
will be subject to adjustment up or down when the Patents Court determines the
terms of the final licence (para. 100).
Lord Justice Moylan concurs. Lord Justice Phillips would dismiss the appeal, and instead writes that this case is one in which an antisuit injunction (ASI), on the ground of vexatious and oppressive conduct on the part of Panasonic, might be appropriate.
For further discussion, see this post by Florian Mueller on ip fray.
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