Huawei phones facing possible UK ban after High Court decision

The UK High Court patents arm has said Huawei must license Unwired Planet's networking patents on a global basis to avoid intellectual property infringement in the UK -- or it will be prevented from selling its phones there.
Written by Corinne Reichert, Contributor

Huawei may be blocked from selling its smartphones throughout the United Kingdom under an injunction by the English and Wales High Court, which has told the Chinese technology giant that it must license patents from Unwired Planet on a global basis in order to prevent intellectual property infringement within the UK.

The case arose when Unwired Planet sued Huawei, Google, and Samsung back in 2014 for infringement of six of its UK patents -- five of which were claimed to be standard-essential patents (SEPs). Should the patents have been deemed SEPs, their owner would have had to declare them as such to the European Telecommunications Standards Institute (ETSI) and license them on fair, reasonable, and non-discriminatory (FRAND) terms.

Huawei had argued that Unwired Planet was in breach of both competition law and its FRAND obligations by seeking a worldwide licence rather than a UK-only licence for products being sold in the UK.

In a judgment [PDF] handed down on May 5 in the High Court of Justice Chancery Division Patents Court, Justice Birss said that there had been no breach of competition law, and that Unwired Planet is entitled to license its patent portfolio on a global basis.

"Simply stated, the main dispute to be resolved is about whether and to what extent various terms on offer are or would be FRAND," Birss J said on Wednesday.

"A UK portfolio licence is not FRAND. The FRAND licence between Unwired Planet and Huawei is a worldwide licence."

While Unwired Planet is in the dominant position as the holder of the SEPs, the court also found that it did not abuse this position by prematurely seeking an injunction, insisting on a worldwide licence, imposing unfair prices, or bundling its SEPs and non-SEPs into a single portfolio.

"Since Unwired Planet have established that Huawei have infringed valid patents EP (UK) 2 229 744 and EP (UK) 1 230 818, and since Huawei have not been prepared to take a licence on the terms I have found to be FRAND, and since Unwired Planet are not in breach of competition law, a final injunction to restrain infringement of these two patents by Huawei should be granted," Birss J ordered.

"The final injunction will be considered at a hearing in a few weeks' time once Unwired Planet have drawn up a full set of the terms of the worldwide licence incorporating the decisions made in this judgment. To the extent damages should be awarded, they would be at the same rate as the appropriate FRAND rate."

The patents relating to Wednesday's judgment were EP (UK) 2 229 744, which is for an invention concerning poll triggers, and EP (UK) 1 230 818, which concerns an inter-RAT handover.

Going into the trial, Unwired Planet and Huawei had both offered a pricing scheme for the related licences concerning LTE infrastructure and mobile devices, and GSM/UMTS infrastructure and mobile devices. However, Justice Birss concluded that neither of these offers were FRAND, with Unwired Planet overstating the value of its portfolio and Huawei understating it.

Intellectual property law firm EIP, which represented Unwired Planet during the trial, called the decision a significant one internationally for the telecommunications industry, as it could see Huawei prevented from selling any patent-infringing phones in the UK until it agrees to the global FRAND licence.

"Until now, there has been a view that even if the infringing party is successfully sued, at the end of the day they would have to pay no more than the royalty rate they would have had to pay anyway, and only for the countries in which they were sued," Gary Moss, head of EIP Legal, said.

"That gave an incentive for implementers to hold out in the hope of achieving a more favourable royalty rate. Today's judgment confirms that this need not be the case, and that the English court will take a commercially sensible, "real-world" approach to such issues. Mr Justice Birss' judgment is an important contribution to the worldwide body of case law in this area."

Huawei, however, said it welcomed the portion of the decision maintaining that Unwired Planet's suggested licensing rates had overstated the value of its portfolio, and added that it would evaluate the judgment before making a decision.

"We welcome the decision by the Court that Unwired Planet's royalty rate demands have been found to be unreasonable," a Huawei spokesperson told ZDNet.

"Huawei is still evaluating the decision, as well as its possible next steps. Huawei does not believe that this decision will adversely affect its global business operations.

"As one of the world's leading intellectual property rights (IPR) owners, Huawei has a strong record of respecting the IPR of others, in addition to doing whatever is required to protect our own such IPR assets. Huawei remains committed to provide its cutting-edge products and services to our customers without interruption."

Unwired Planet had procured most of its 2G GSM, 3G UMTS, and 4G LTE patents from Ericsson, with its business relying on the money received by licensing those patents to telecommunications equipment manufacturers across the globe.

After filing against Huawei, Samsung, and Google, Unwired Planet had offered to license them its entire global portfolio at a certain rate in April 2014; however, all three refused, denying both the essentiality of the patents and that they had infringed them, and adding that the patents were invalid. Huawei and Samsung also used the opportunity to counterclaim on the basis of competition law breach.

Unwired Planet then made a further offer in July 2014 pertaining to its 2G, 3G, and 4G SEPs, with Google settling on these in mid-2015. Samsung settled in mid-2016 and discontinued its counterclaim.

Huawei also discontinued some parts of its counterclaim last year when the royalty rate Unwired Planet wanted to charge was removed.

On reaching court, the dispute was separated into a series of trials: Five technological trials on the infringement, essentiality, and validity of the six patents, which ran between October 2015 and July 2016; and a non-technical trial to decide competition law issues, FRAND issues, injunctive relief, and damages, which was heard at the end of 2016.

Unwired Planet won two and lost one of the technical trials, with two of its patents found to be valid and essential to relevant standards, and another two ruled invalid. All three results are now in the UK Court of Appeal.

The judgment this week was in relation to the sixth, non-technical trial.

In making his judgment, Justice Birss also found that FRAND applies to English courts; competition law is not necessary to enforce FRAND; FRAND royalties should be determined by reaching a benchmark rate governed by the value of the patent holder's portfolio; and that FRAND rates can be determined by using comparable licences and by counting patents, also relying on the Huawei v ZTE case.

Huawei is not new to the legalities surrounding patent infringement; Huawei sued Samsung in both the US and China for "using its 4G cellular technology, operating systems, and user interface software" in May last year, seeking $12 million in compensation, with Samsung suing Huawei for for infringing six patents in July.

Huawei also sued T-Mobile in July for 4G patent infringement.

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