Category Archives: Telecoms

The Supreme Court’s decision in Unwired Planet – what comes next?

Introduction

The UK Supreme Court has handed down its long-awaited judgment in Unwired Planet. Its decision has profound implications for patent owners and implementers alike and is likely to lead to heavily contested jurisdictional disputes going forward.

These joined appeals concern Standard Essential Patents, or “SEPs”: a patent which the owner has declared to be essential to the implementation of certain telecommunications standards, such as 3G. In practical terms such a patent, if essential as declared and if it is valid, is necessarily infringed by technology implementing the relevant standard, notably mobile phones.  The appellants, Huawei and ZTE, manufacture smartphones and other telecommunications equipment, and implement such technical standards. They were defendants in two sets of patent infringement proceedings. The patent owners, Unwired Planet and Conversant, each had a multinational portfolio said to include SEPs in the UK and elsewhere. They had declared SEPs essential to practising technical standards set by the European Telecommunications Standards Institute (“ETSI”), and given an undertaking to ETSI that they were willing to license SEPs to implementers on “FRAND” terms: Fair, Reasonable and Non-Discriminatory.

The Supreme Court decided as follows:

  • Jurisdiction: The English courts have the power to declare that, as the price for avoiding an injunction restraining infringement of a UK SEP, the implementer has to enter into a global licence; and can determine the rates and terms of such a licence and declare them to be FRAND. (§49-91). The contract created by the ETSI policy confers this jurisdiction: it envisages that national courts will assess whether the terms of an offer are FRAND, looking at ‘real world’ commercial practice. (§58, 62). The Court was also not persuaded that damages, rather than an injunction, were the appropriate remedy (§163-169).
  • Forum non conveniens: in the Conversant claim, the implementers contended that England is not the appropriate forum for this dispute. The Supreme Court upheld the lower court’s rejection of China as a suitable alternative forum as, on the evidence, Chinese courts cannot currently determine terms of a global licence unless the parties agree. (§96-97).
  • Discrimination: Unwired did not discriminate against Huawei by failing to offer the same worldwide royalty rates that it had previously agreed with Samsung. The non-discriminatory limb of FRAND means that a single royalty price list should be available to all market participants based on the portfolio’s market value. (§112-114).
  • Competition law: Huawei had not abused a dominant position contrary to Article 102 TFEU and to the CJEU’s decision in Case C-170/13 Huawei v ZTE. Seeking a prohibitory injunction without notice will infringe Article 102 TFEU, but what is required by way of ‘notice’ is fact sensitive. Unwired had not acted abusively: it had shown that it was willing to grant Huawei a licence on whatever terms that the court deemed FRAND. (§150-158)

What’s next?

First, it is now clear that the UK courts have jurisdiction to rule on the terms of global licences. This could lead to a “race to sue”: implementers may opt to commence declaratory proceedings in their preferred jurisdiction (such as China) as soon as licence negotiations start to break down, so as to prevent the English court being seised of the entire portfolio if the SEP owner sues in this jurisdiction. This “race to sue” effect is compounded by the Court’s decision on Issue (4), i.e. its interpretation of the CJEU’s Huawei v ZTE. The factors therein are guidance, not “mandatory requirements” or “prescriptive rules(§151-152; 158), and Unwired did not need to propose a licence on the specific terms which the English court later determined were FRAND. (§158) This may reduce the consultation carried out by patent owners in future, before choosing to sue an implementer in the UK.

Moreover, now that the UK and German courts 75-78) have empowered themselves to settle the terms of global licences, other jurisdictions may well follow suit: notably, China and the USA. We should expect to see some hotly contested jurisdiction disputes in the next few years, centred on:

  • Forum non conveniens: The ratio of the Supreme Court’s decision on this point was narrow, focussing on the current practice of the Chinese courts. However, the Court also indicated, in obiter dicta, its agreement with the lower courts’ characterisation of the dispute (§95-96); namely, that global FRAND determination only arises as an issue in the context of relief for UK patent infringement and that it is up to the patent owner which national patents to assert. It is unclear whether the High Court will in future characterise the UK as the appropriate forum for pursuit of UK patent claims involving global licence disputes. The Supreme Court’s reference to “further issues” that could have arisen if China had been an available alternative forum 98) leaves open the possibility of implementers resurrecting arguments as to the suitable forum.
  • Case management stays: Where there are American or Chinese FRAND proceedings underway, there may be strong arguments to stay UK proceedings. The English courts will no doubt closely scrutinise the comity and propriety of litigating the FRAND assessment here; thereby imposing global terms on multinational companies like Samsung, Huawei and ZTE. The UK generally accounts for only a tiny proportion of relevant sales of such entities: in the Conversant proceedings, Huawei claimed that the Chinese market accounted for 56% of its worldwide sales on which Conversant made claims. The UK market by contrast comprised 1% of relevant sales. As to ZTE, 0.07% of its turnover came from the UK and 60% of its operating revenue came from China. Both entities manufacture in China. 37).

Secondly, the Supreme Court’s decision on non-discrimination is potentially highly important, in practical terms. The Court twice referred to a single royalty “price list” available to all licensees irrespective of their individual characteristics. (§114)  This raises the prospect that going to court could present risks for SEP owners; on the Supreme Court’s approach, once the court has set a fair and reasonable global rate, it appears that the patent owner will then have to offer that rate to all putative licensees.

Thirdly, like the lower courts, the Supreme Court drew succour from the prospect of global “FRAND” licences including a clause which reduces the rate payable if foreign patents are later found to be invalid or inessential. The ‘adjustment’ clause imposed by Birss J in the Unwired proceedings had problems, however ([2017] EWHC 2988 (Pat), §582-592): it only applied to “major markets” and did not provide any adjustment to royalties payable if there was a successful challenge to Unwired’s Chinese patents (§47, 65). Inevitably, the Supreme Court’s decision means that there will be much focus, in negotiating the terms of a global FRAND licence, on the drafting of these ‘adjustment’ clauses.

Conclusion

The Supreme Court’s decision has settled the law definitively on the power of the English courts to determine the terms of global FRAND licences for SEPs. However, it leaves important practical implications unresolved. The judgment, while providing clarity on the jurisdictional aspect, is unlikely to be the last word on questions of comity and the proper role of foreign courts; the dictates of non-discrimination; or the drafting and interpretation of ‘adjustment’ clauses, and how they will operate in practice. Moreover, other national courts may well start asserting jurisdiction over these disputes, particularly in countries which account for a far greater proportion of relevant sales than the UK market. The questions posed by this article are therefore likely to play out before the English courts in coming years.

 

Leave a comment

Filed under Abuse, Agreements, Conflicts, Procedure, Telecoms

Fresh grounds and evidence before the CAT

On the face of it, BT was the main winner in this week’s ruling from the Competition Appeal Tribunal: see British Telecommunications plc v Office of Communications [2015] CAT 6. However, the decision, which makes interesting comments on the rights of parties to adduce new grounds and evidence on an appeal, raises important notes of caution to all parties which may wish to appeal or intervene in future cases. Continue reading

Leave a comment

Filed under Procedure, Telecoms

The costs of intervening

There is an interesting little point on costs buried away in last week’s decision in the “Ethernet” disputes in the Competition Appeal Tribunal (see BT plc v Cable & Wireless Worldwide Plc and others [2014] CAT 20).

Parties which intervene in CAT proceedings generally know that they are unlikely to recover their costs, even if they intervene in support of the party which is ultimately successful. There are, however, various exceptions to that principle – – and, indeed, in the Ethernet case itself some of the intervenors recovered some of their costs from the unsuccessful party. Continue reading

Leave a comment

Filed under Procedure, Telecoms

Dogma in telecoms, cream for the CAT: 08- numbers in the Supreme Court

The Supreme Court yesterday handed down judgment in British Telecommunications plc v Telefónica O2 UK Ltd & Ors [2014] UKSC 42. Reversing the decision of the Court of Appeal (blogged on here by Emily Neill), Lord Sumption for a unanimous Supreme Court held that there had been no basis for Ofcom to disallow BT’s introduction of “ladder pricing” in wholesale termination charges for certain non-geographic telephone numbers (specifically 080, 0845 and 0870, whence the litigation’s popular name among telecoms lawyers: “08- numbers”). Continue reading

1 Comment

Filed under Procedure, Telecoms

Competition round-up: January 2014

It is again time for a round-up of recent competition law developments which have caught our attention.

Most attention-grabbing of all was the European Commission’s genius/bizarre/inexplicable decision to publish a comic book which is probably best described as a bureaucrat’s fantasy. A young Commission official (Thomas) starts talking to a beautiful woman (Chloe) in an airport departure lounge. Instead of ignoring his slightly creepy advances, Chloe turns out to want nothing more than to hear about the Commission’s antitrust work. Indeed, when Thomas false-modestly suggests that he might be boring her, she insists she wants to hear more:

EU-cartoon

And so starts the most fascinating hour of Chloe’s life. I should thank the Legal Cheek blog for bringing this important piece of work to my attention. Continue reading

Leave a comment

Filed under Abuse, Agreements, Conflicts, Damages, Economics, Mergers, Pharmaceuticals, Policy, Round-Up, Telecoms

Competition round-up: Summer 2013

It is time for what has become the Competition Bulletin’s regular half-yearly update of EU and UK competition law developments. (For our previous round-ups see here).

Thinking big Continue reading

Leave a comment

Filed under Abuse, Agreements, Conflicts, Damages, Free movement, IP, Mergers, Penalties, Pharmaceuticals, Policy, Procedure, Procurement, Round-Up, State aid, Telecoms

UK government proposes “streamlining” regulatory and competition appeals

The UK government on Wednesday published a consultation on streamlining regulatory and competition appeals. The press spin was that the proposals are all about preventing “armies of lawyers” from blocking consumer-friendly measures. In reality, although it is true that the proposals are designed in part to put a lid on litigation, the consultation contains a series of thoughtful suggestions – many of which are likely to attract widespread support.

Take, for example, the suggestion that there should be greater consistency in the available appeal routes. Someone at the Department for Business, Innovation and Skills has had fun mapping out the existing appeal routes for different decisions in the regulated sectors. The resulting table speaks for itself (figure 3.5 of the consultation):

Regulatory decisions

Continue reading

Leave a comment

Filed under Abuse, Agreements, Mergers, Policy, Procedure, Telecoms

Appeals on the merits: only pick a hole if you can fill it

In his recent blog “Down the rabbit hole,  Tom Richards described the “quasi judicial review within an appeal” contained in s.193(7) Communications Act 2003 as something of a Wonderland.

Last Wednesday it was the turn of the Court of Appeal to enter Wonderland. However, the judgment of Moses LJ in Everything Everywhere Ltd v Competition Commission and ors [2013] EWCA Civ 154 gives important general guidance on the evidence needed for an appeal “on the merits”. It is likely to be of assistance to appellants in a variety of contexts, whether or not they have ventured into this particular statutory Wonderland. Continue reading

2 Comments

Filed under Procedure, Telecoms

Competition round-up: January 2013

As today is the first day of the new court term, I thought it would be a good moment for a round-up of last term’s competition cases – and, of course, the customary plug of our own blogs.

If there was a theme to the Michaelmas term, it was the highs and lows of follow-on claims. Few pieces of legislation can have attracted so much judicial attention in so short a time as s.47A of the Competition Act 1998. It has now gone as far as the Supreme Court, which confirmed in BCL Old Company Ltd v BASF plc [2012] UKSC 45 that the rules governing limitation periods for bringing follow on claims in the CAT are not so unpredictable as to breach European principles of legal certainty (a topic which I blogged on here). Continue reading

Leave a comment

Filed under Abuse, Agreements, Damages, Penalties, Pharmaceuticals, Policy, Procedure, Round-Up, Telecoms

Down the rabbit-hole: costs, the Comms Act and the Competition Commission

‘“But I don’t want to go among mad people,” Alice remarked.

“Oh, you can’t help that,” said the Cat:  “we’re all mad here”.’

Where an appeal to the Tribunal under section 192 of the Communications Act 2003 gives rise to specified ‘price control matters’, the CAT must hive them off for determination by the Competition Commission: see section 193(1) and SI 2004/2068.  The CAT is then bound by section 193(6) to follow the Commission’s determination, except ‘to the extent that the Tribunal decides, applying the principles applicable on an application for judicial review, that the determination of the Competition Commission is a determination that would fall to be set aside on such an application’: section 193(7).

This “quasi-judicial review within an appeal” jurisdiction under section 193(7) is tribute in itself to the complexity of the legal imagination.  In British Telecommunications Plc v Office of Communications [2012] CAT 30 the Tribunal takes us deeper still into wonderland with this question: can the Competition Commission, when it participates in a section 193(7) review before the Tribunal, recover its costs of so doing? Continue reading

4 Comments

Filed under Procedure, Telecoms

Flip Flopping: Telefonica UK v Office of Communications

What should Ofcom do when mobile network operators (“MNOs”) spot a loophole in the regulator’s price control mechanism and proceed to “game” the system over several years, increasing their revenues by many millions of pounds?

This unsuccessful appeal before the Competition Appeal Tribunal was brought by Telefonica, the only MNO that had failed to exploit the loophole, against Ofcom’s decision that, although it intended to amend the price control regime prospectively, it would not interfere with charges that had already been levied in accordance with the letter, if not the spirit, of the regime. The case raises an interesting point about the value to be placed on legal certainty by Ofcom. Continue reading

1 Comment

Filed under Telecoms

Competition round-up: Summer 2012

As most of us are now returned from our summer holidays, I thought I’d take advantage of the ‘back to school’ feeling with a round-up of the most significant competition cases since Easter. This also provides a good excuse to highlight the best blogs from the Competition Bulletin’s first couple of months.

I’ll start with a case that should, but probably won’t, make the law reports: the decision of the Appeal Panel of the Rugby Football Union, which held in an appeal by London Welsh that the RFU rules on primacy of tenure are contrary to Articles 101 and 102 TFEU and therefore void. The case is notable not only for the finding itself, but also because it was heard and decided so quickly – arguments which would take days in the High Court (and probably weeks in the CAT) were heard over the course of a day, and the 38-page judgment completed the following day. James Segan blogged on the case here.

There has been much good news for claimants in follow-on damages claims. Continue reading

Leave a comment

Filed under Abuse, Agreements, Damages, Free movement, IP, Mergers, Penalties, Procedure, Round-Up, Telecoms

Keeping the CAT in its bag: the 08 Appeal

Ofcom will likely be delighted by the result in the Court of Appeal’s decision in Telefonica O2 UK Limited and others v British Telecommunications PLC [2012] EWCA Civ 1002, in which the Regulator appeared as an interested party.

Not only does the judgment uphold Ofcom’s various dispute determinations relating to ladder pricing by BT for termination of calls to certain non-geographic number ranges, but the judgment make Ofcom’s life easier in a number of respects.

First, and for the immediate future, Ofcom will likely benefit from a decrease in its dispute determination workload. The decision of the CAT which was challenged before the Court of Appeal had generated a web of interlinked disputes raised by various communications providers to be determined by Ofcom under the s.185 Communications Act 2003 procedure. Continue reading

1 Comment

Filed under Telecoms

As long as the regulator’s foot

The Court of Appeal’s remarks in BT v Ofcom (Partial Private Circuits) make Ofcom’s dispute-resolution power a still more distinctive alternative to court litigation, and in the right circumstances a more attractive one.  

The appeal arose out of a dispute, brought to Ofcom under s.185 Communications Act 2003, about whether BT had overcharged for partial private circuits (“PPCs”), components necessary for other communications providers to extend their networks. Ofcom decided in 2009 that it had, and ordered repayment. That decision was upheld by the CAT on appeal.

Much of BT’s further appeal to the Court revolved around whether Ofcom had failed to take various aspects of the domestic and European regulatory framework into account. The Court ruled that it had not.

But there were two issues of greater long-term interest. Continue reading

Leave a comment

Filed under Damages, Telecoms

Ex ante and ex post regulation following Telefónica

Hats off to Spain for having the nerve to suggest that it might have been a better target for the Commission’s attention than Telefónica, the former monopoly telecoms provider recently fined over €150 million for committing a margin squeeze in the Spanish broadband market (see case T-398/07 Kingdom of Spain v Commission).

The case is the latest in a line which tests the boundary between ex ante regulation (obligations imposed on particular undertakings by national regulatory bodies) and ex post competition law (in this case, the general prohibition against abuse of dominance). Continue reading

Leave a comment

Filed under Abuse, Telecoms