28 October 2021

An irrevocable commitment to take a FRAND licence must be given, or you face an injunction: Lessons from ‘Trial F’ in Optis v Apple [2021] EWHC 2564 (Pat)

As has become commonplace with FRAND patent disputes in the UK, the Optis dispute has been managed via a number of technical patent trials (i.e. covering only infringement/essentiality and validity) and after they conclude the Court holds a trial to set FRAND terms and address any competition law issues. This creates a rather long timetable (these proceedings having commenced in early 2019), and so understandably a party asserting their patents are keen to know at what point they might obtain an injunction.

Optis, having been successful in two technical trials – with the court holding that their SEPs were valid and infringed – sought injunctive relief (though it is important to recognise that this is not an interim injunction on American Cyanamid principles – judgment [317]).

Mr. Justice Meade’s judgment in ‘Trial F’ addressed this question, giving us guidance on the approach to injunctions and what position a party must have taken to be subject to an injunction.  The key question in this judgment was whether Apple should be subject to an injunction now, given the finding that there is an Optis patent in force, held to be valid and infringed, or whether any decision regarding the grant of an injunction should be deferred until the outcome of ‘Trial E’ set for June and July 2022, which will determine the terms of a FRAND licence for the Optis SEPs.

The judgment (albeit presently subject to an appeal) helpfully confirms that the English court will not allow ‘evergreen’ arguments in multi-phase SEP proceedings to delay unduly a patentee’s entitlement to injunction where their patents have been held to be essential, valid, and infringed; in such circumstances, the patentee will be granted an injunction. Mr. Justice Meade held that unless Apple committed irrevocably to enter into a licence from Optis on whatever terms are held at Trial E to be FRAND, Optis should be entitled to an injunction. Apple objected, saying it was unfair to be subject to an obligation to take a licence or accept an injunction before the court had determined the precise FRAND licence terms, but Mr. Justice Meade’s view was that the parties had made submissions on the timetable for the various trial phases, and Apple could not now complain if he gave a ruling.

The take away lesson, therefore, is that a party who has been held to infringe a valid and essential patent must provide an irrevocable commitment to take whatever FRAND licence the court determines, or accept an injunction.

Apple’s appeal of Mr. Justice Meade’s judgment has been accepted on at least the following issues:

Whether the judge wrongly interpreted Clause 6.1 of the ETSI IPR Policy.  Clause 6.1 provides that a SEP owner must provide “… an irrevocable undertaking in writing that it is prepared to grant irrevocable licences on fair, reasonable and non-discriminatory (“FRAND”) terms and conditions …”. The clause gives rise to a stipulation under which the promisor provides a promise to the stipulator for the benefit of a third party (similar to a third party beneficiary provision under English law; the ETSI policy is subject to French law). In this instance, it was accepted that ETSI is the stipulator and that the SEP holder is the promisor; the dispute centred on whether the third party, being in this case Apple, was a beneficiary within the meaning of clause 6.1 of the ETSI policy.

Apple’s argument focussed on the proviso in Clause 6.1 that the undertaking may be made subject to the condition that those who seek FRAND licences agree to reciprocate.  Apple argued that due to the wording of the proviso to Clause 6.1, it considered that ETSI has defined a beneficiary as a party that is ‘seeking’ a licence rather than a party that is ‘taking’ or ‘committing’ to a licence.   Apple contended that an injunction at this stage, if they do not accept a licence, amounts to giving the SEP holder the ability to frustrate the negotiation by demanding a commitment to take a court-determined FRAND licence.

Apple additionally submitted that it would be wrong to grant an injunction at the forthcoming final order hearing on the infringed, valid patent (Trial E) without taking due account of Apple’s pleaded case that Optis is in breach of competition law by virtue of its behaviour.

The appeal of the judgment means a further period of relative uncertainty, pending a decision as to whether Mr. Justice Meade’s approach is to be followed in future.