Huawei loses UK top court ruling over global patent rates

UK judges can set global royalty rates for the use of telecommunications technology, Britain’s highest court said in a pair of cases over how much Huawei Technologies Co owes a US patent owner.

The UK Supreme Court on Wednesday affirmed a decision that Huawei would either have to pay Unwired Planet International Ltd a global rate set by judges or face an order limiting its British sales. In a related decision involving another patent owner, the court rejected Huawei and ZTE Corp’s argument that, if any court were to establish a global rate, it should be in China, where manufacturing and the bulk of sales are located.

Unwired Planet and Conversant Wireless Licensing Sarl each have patents related to the 2G, 3G, and 4G telecommunications standards. Unwired Planet is seeking royalties on Huawei’s phones and infrastructure, while Conversant contends it’s entitled to royalties from both Huawei and ZTE.

Huawei and ZTE were challenging rulings that would effectively make British courts a one-stop-shop to set global royalty rates. Since the original ruling, the country’s tribunals have become increasingly popular.

The “decision makes the UK one of the leading global jurisdictions for the resolution of such disputes,” EIP, one of the law firms representing the patent holders, said in a statement.

A spokesman for Huawei didn’t immediately return a message seeking comment.

Apple, Qualcomm

The cases have pitted the owners of patents on standardized technology, including Qualcomm Inc. and Ericsson AB, against those who use the systems in their products, including Apple Inc. It’s a thorny issue that’s becoming more important as the world transitions to the next generation of wireless technology known as 5G.

Regulators and courts around the world have grappled with how to value patents for essential technology and whether their owners have any rights to limit the use of the inventions. The unclear rules have frustrated automakers and other manufacturers of so-called internet of things devices poised to adopt 5G for everything from connected cars to robotic surgery.

Businesses that are normally competitors have come together to establish industry-wide standards so, for instance, a photo, text message or phone call from a Samsung Galaxy phone can seamlessly transfer to an Apple iPad, or a phone using a network can switch to Wi-Fi without a hiccup.

Because they have an advantage on getting their inventions included in any standard, participants pledge to license their relevant patents on “fair, reasonable and non-discriminatory terms.”

The phrase, known as FRAND, has never been defined, as the standard-setting boards rely on the companies to work out contracts among themselves, sometimes through high stakes litigation. It was at the heart of billion-dollar fights such as Apple’s since-resolved efforts to lower the amount it pays Qualcomm.

Since patents are limited to national borders, judges hearing these disputes decide the appropriate rate for the inventions in their home country. Each side files lawsuits in courts they consider favorable, in hopes that a ruling will give them an advantage in negotiations.

Patent owners, such as Unwired Planet, would prefer to have issues resolved in one court, particularly if they get to choose the most patent-friendly venue.

American, Chinese Courts

American courts have been limiting patent rights, even though big damage awards are still possible, while Chinese courts have been criticized for having low damage awards.

Unwired Planet is part of a Texas-based firm called PanOptis Patent Management that won a $506 million US verdict against Apple August 11. Apple said the company failed to follow its obligation to license its 4G patents on fair terms.

The cases are Unwired Planet International Ltd vs Huawei Technologies Co, UKSC 2018/0214; and Huawei Technologies vs Conversant Wireless Licensing SARL, UKSC2019/0041, both UK Supreme Court.