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UK Court Rules Apple Must Unconditionally Commit to a FRAND License to Avoid an Injunction

In a recent judgment (Optis Cellular Technology LLC & Ors v Apple Retail UK Ltd & Ors [2021] EWHC 2564 (Pat), 27 September 2021), Meade J, sitting in the England and Wales High Court, gave a decision in a series of trials relating to eight of Optis's patents in the field of telecommunications. Each of these patents is asserted to be a standard-essential patent (SEP) and was declared to the European Telecommunications Standard Institute (ETSI).

In two of the earlier trials (Trials A and B), it was found that Apple did indeed infringe two of Optis's SEPs. The present decision (Trial F) is concerned with Optis seeking an injunction to restrain Apple from continuing to infringe Optis's patents. A further trial, Trial E, to determine the FRAND terms themselves, is set to take place in June/July 2022.

In the present trial, Optis argued that Apple was an "unwilling licensee" because Apple was not prepared to unconditionally commit to a license on FRAND terms that would be determined by the court. This is because Apple had only given an undertaking that they would enter into a Court-Determined Licence subject to a number of conditions. Meade J summarised these conditions as "Apple undertakes to take the Trial E licence unless its undertaking is found to be unnecessary, or too late."

Optis argued that an implementer wanting to take advantage of the requirement for a SEP holder to give a FRAND undertaking must engage constructively in negotiations, and if no agreement is reached must commit to take a licence on terms decided by a Court. If they do not, they are not a willing licensee, and thus should lose the right to a FRAND licence (and thus not be able to rely on the possibility of a FRAND licence as a defence to an injunction).

Apple's counter argument was that clause 6.1 of the ETSI IPR policy (which sets the requirement for an SEP holder to offer FRAND licences) does not restrict when Apple must commit to a FRAND licence. Accordingly, Apple argued that it could wait for the Court's decision about what FRAND terms are and then make a decision.

For the most part, Meade J sided with Optis, and held that "the right interpretation of clause 6.1 is that any person interested in implementing an ETSI standard must be entitled to have a licence on FRAND terms on demand to a patentee which has given the relevant undertaking", but "Clause 6.1 does not change the position that a party without a licence may potentially be injuncted" (paragraphs [278]-[279]).

Therefore, Meade J accepted Optis's argument that Apple cannot rely on the requirement for Optis to grant a FRAND license under clause 6.1 as a defence to being sued for patent infringement, without committing to taking a licence. Since Apple had not actually committed to taking a licence from Optis, and was found to be infringing valid SEPs, Apple are liable to being injuncted.

Meade J stated that Apple must either decide now (and not after Trial E) to commit to a licence determined by the Court, or be subject to an injunction by Optis because they are infringing valid SEPs without a licence.

The trial also dealt with a number of other issues, such as whether Optis was abusing its dominant position by only making offers which are far in excess of FRAND terms (cannot be determined until after Trail E), whether an injunction can be issued only at the end of all the proceedings since it is a discretionary remedy (no, but Apple can have some time to consider the present decision before an injunction can be issued), and whether the contingent undertaking by Apple actually applies or not (not possible to say given that Apple can still appeal this decision).

A practical consequence of this decision may be to speed up SEP trials before the UK courts by clarifying that implementers of technologies covered by SEPs cannot hold out on committing to FRAND terms set by a Court without the risk of being injuncted by the SEP holders.