First things first: CONGRATULATIONS to now-Lord Justice Richard Arnold, who was sworn in a few days ago as a new IP judge at the UK Court of Appeal. For the time being, Justice Colin Birss is now the only (at least the only well-known) patent-specialized judge at the court below, the England & Wales High Court (EWHC). Some thought Justice Birss was going to be promoted sooner, but Lord Justice Arnold, whom I listened to earlier this year, is far more likely to bring balance to the appeals court.
Who knows--maybe the decision-makers read Justice Birss's Unwired Planet v. Huawei ruling, which came down to letting a SEP holder enforce an injunction only because the defendant declined to enter into a global (as opposed to UK-specific) portfolio license on terms dictated by the UK court, is not just an outlier. It was and, until overruled, continues to be outrageous. If considered, that one would have done nothing to boost his chances. But what's easily ten times worse is that the UK Court of Appeal affirmed it.
The next four days--Monday through Thursday--the Supreme Court of the UK, which granted the equivalent of a cert petition by Huawei, will hold a hearing that is the last chance to dissuade the UK judiciary from going further down Disaster Road.
Unlike in the U.S. or Germany, where hearings by the top court for patent infringement cases are focused on narrow legal questions and take only a couple of hours, the Supreme Court of the UK will look at this in great depth and from many angles. While Unwired Planet is where things went awry first, that appeal was consolidated with Conversant v. ZTE.
Huawei has more than one potential way of winning. For an example, the grant of an injunction was reversible error simply because Unwired Planet was found not to have made a FRAND-compliant offer--enough of a reason under the CJEU's Huawei v. ZTE framework to deny injunctive relief. And he reads the "ND" part out of "FRAND" (or at least applies it in antitrust--not contractual--terms). But the two most fundamental--and interrelated--questions are whether a UK court should coerce a defendant into a global portfolio license at all, and even if that was considered a possibility under some circumstances, whether that would even apply in a case like this: Huawei generates only about 1% of its worldwide sales in the UK, making the choice of venue nothing but (extreme) forum shopping on Unwired Planet's part.
Apart from patent monetization-centric companies like Qualcomm, Ericsson (which fed Unwired Planet with patents), and Nokia (which sold patents to Conversant), the technology industry at large stands behind Huawei and ZTE. The last case of a similar profile in which everyone I talked to hoped for reversal by the highest court was the design patent damages (to the extent of unapportioned disgorgement) Apple v. Samsung case.
In January 2015, Justice Birss himself was still on the right track in Vringo v. ZTE:
"I could see a very different circumstance if Vringo had made a FRAND offer for the [UK patent-in-suit] itself and that offer had not been accepted. Then an injunction might well follow. In that sort of case, unlike the one based on the global portfolio licence, the threat of the injunction, which is after all a territorial remedy, would not be being used to create some sort of international coercion or coercion about other patent rights." (emphases added)
Between that sensible holding, a subsequent occasion on which he reiterated that view, and the Unwired Planet v. Huawei mess, Justice Birss--one of many European judges who are anxious to see the Unified Patent Court put in place at long last--radicalized himself and went off the deep end.
It's a longstanding principle of patent law that it confers territorial rights. Even if multiple patents belong to the same patent family as they share an original specification and its priority date, a British patent is not a U.S. patent is not a Chinese patent.
With "coercion," Justice Birss, prior to his self-radicalization, was spot-on. While his Unwired Planet v. Huawei ruling doesn't formally order Huawei to enter into a global portfolio license agreement, that's simply the net effect unless Huawei would prefer to just exit the UK market. Unwired Planet's enforcement of the injunction would serve the purpose of what would otherwise (in the event of a court ordering specific performance) be contempt sanctions--very draconian ones in this case.
It's not in the interest of justice to let a court in one country simply presume the validity and infringement of patents in another jurisdiction, given that patent law does differ. In a decade of watching patent infringement cases closely, I've seen many situations in which patents from the same family fared differently not just because of judges taking different views (that happens even within the same jurisdiction all the time, especially with patent cases) but for venue-specific reasons. For an example, I've seen parties raise prior use defenses in Germany, and what they presented had (to have) happened only in Germany. I've seen prior art being deemed eligible in one jurisdiction but not in another, simply based on whether something one could find in a particular unversity library wasn't deemed public knowledge elsewhere.
It's disrespectful of other jurisdictions to adjudicate what they should rule on. This is called comity of nations. It's also an issue in connection with antisuit injunctions, a topic Professor Jorge Contreras touches on in his new paper, "The new extraterritoriality: FRAND ryoyalties, anti-suit injunctions and the global race to the bottom in disputes over standard-essential patents." Violating that principle has been described as "judicial imperialism," which appears to have become Justice Birss's school of thought.
The fact that Justice Birss set a global base royalty rate with a potential for further increases based on the status of local SEPs held by the same party doesn't solve the problem that Unwired Planet might simply not be entitled to a single cent in some places (or, if not to nothing, to much less than what Justice Birss determined).
Justice Birss based his coercive approach on the fact that real-world negotiations typically result in global portfolio licenses. But even when a court of law analyzes what would or might happen in the real world, a court will never have the full breadth of options available that private parties do when they negotiate with each other. There must be limits as to what can be imposed on someone against his will.
Paragraph 377 of Justice Birss's decision is a textbook example of a fundamentally flawed approach to an important question of fact: the number of relevant SEPs (i.e., SEPs reading on the cellular standards at issue in the case), as the question of how much Unwired Planet is entitled should not lead to an aggregate royalty on everyone's SEPs that would be excessive royalty-stacking:
"The number for 4G handsets [proposed by Huawei] is 1812 and is much too high. The corresponding number in [Unwired Planet's proposal] is 355 but that number is much too low if it is to represent all Relevant SEPs. I think both values are out by about a factor of two. Half of 1812 is 906 while twice 355 is 710. Splitting the difference takes one to 800. Standing back, about 800 is fair and in my judgment an appropriate figure for the pool of 4G/LTE patents. Applying that as the denominator in a fraction to determine the share S which Unwired Planet’s patents represent from the pool gives 6/800 = 0.75%." (emphasis added)
Give me a break. The part I highlighted simply assumes that justice is served by assuming either party exaggerated by a factor of two, just in opposite directions.
There's nothing there that supports either the finding that one number is too high (other than the reasonable assumption that a SEP holder obviously benefits from a lower number (because then the share is higher) and a defendant conversely would like it to be high.
This. Is. Primitive.
It might be the way that a kindergarten teacher resolves a dispute between two children. Hopefully, those kids will acquire greater analytical skills when they grow up.
A similar approach may have been deemed wise in the case of the Judgment of Solomon (whether or not that story actually happened). But nowadays motherhood could be determined based on a DNA test instead of threatening to cut a baby in half. For FRAND rates, there are studies, and there are expert witnesses.
There have been roughly 3,000 years of legal evolution since Solomon's era. Justice Birss, a patent zealot, chose to rewind those three millennia. Now there's only one time machine that can put us all back into the 21st century: the Supreme Court of the UK will hopefully--and I'm very optimistic--dethrone this self-crowned King Solomon of FRANDland.
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