Context: A couple of months ago, the England & Wales Court of Appeal (EWCA) heard Optis’s appeal against Apple (February 25, 2025 ip fray article). In 2023, Mr Justice Marcus Smith — who primarily serves as the President of the UK Competition Appeal Tribunal, but in this case presided over a standard-essential patent (SEP) litigation in the High Court of Justice for England & Wales (EWHC) — had awarded Optis a meager $5M per year, or roughly $60M in total, against the world’s richest mobile device maker. On appeal, Optis raised various issues. “Based on the redacted version of Optis’s skeleton argument, it appears highly unlikely that the lower court’s ruling will be upheld,” we wrote in February, and noted that even a somewhat conservative approach would result in a five times greater amount.
What’s new: Today, the EWCA handed down its appellate ruling (UK judiciary website). Lord Justice Colin Birss was supported by Lord Justices Richard Arnold and Lord Justice Guy Newey. With a total amount of $502 million, on top of which comes interest in excess of $200 million, this is probably the largest patent damages award in UK history. It is also, arguably, the most massive turnaround that ever happened in a dispute over SEP royalties.
Direct impact: It was not a given that the EWCA would set a royalty amount instead of remanding the case back to the EWHC. Now that it has, Apple can try to petition the UK Supreme Court (UKSC), but that is a high hurdle. This litigation may have reached a point where Apple is well advised to settle. It is worth nothing that the appellate decision also enables Optis to further pursue U.S. litigation against Apple, where there is the possibility of a multi-hundred-million dollar damages payout. Some degree of reconciliation between the two awards will be needed to avoid double-dipping, but the Mr Justice Smith barred Optis from pursuing the U.S. case at all.
Wider ramifications: Many SEP licensors will welcome the fact that in his concurrence, Lord Justice Arnold takes the comity-friendly position that “for the English courts to make an order requiring a regularly-obtained US judgment to be vacated seems to [him] manifestly to give rise to an issue of comity.” This suggests that while he believes the English courts have jurisdiction over cases in which declarations of an entitlement to an interim license are sought, he is still not necessarily prepared to grant the equivalent of an antisuit injunction even where a declaration of an entitlement to an interim license is made. The fact that interim licenses could run counter to the UK government’s IP-friendly policy positions was discussed here earlier this week (April 27, 2025 ip fray article). It is fair to say that what LJ Arnold wrote about comity (and the conclusions he drew from it for the particular case) in Optis v. Apple constitutes the very opposite of judicial imperialism.
This is one of the most important SEP rulings not only in the UK but even worldwide. The purpose of this news piece is not to provide exhaustive analysis, which will follow upon further reflection. It is to share the information on what has happened (and which is consistent with ip fray‘s prediction).
Simply put, Optis is now (barring a successful UKSC petition by Apple) entitled to about twelve times the amount awarded by the court of first instance.
Within a few months of each other, the 2023 FRAND (fair, reasonable and non-discriminatory) royalty determinations in this case and in InterDigital v. Lenovo (where a substantial upward adjustment was also made, though small compared to the one here, as the starting point was also considerably greater) led many implementers to seek out the UK as a presumably implementer-friendly jurisdiction where “lowball” royalty rates could be imposed on SEP holders. After today’s ruling, that view may change, at least in some places.
Key grounds of reversal
Mr Justice Smith essentially struck the valuation expert testimony of both parties, and was reversed on that one.
The appeals court places the emphasis on comparables. Instead of a one-sided approach, the appeals court recognizes that both hold-up and hold-out are issues to be dealt with when looking at other license agreements. Lord Justice Birss discusses Apple’s hold-out power in, for example, paragraph 122:
“When it can do so, Apple’s significant negotiating strength leads some parties to agree lower rates than would be agreed between a willing licensor/willing licensee. There is a degree of hold out involved. Using the judge’s Table 13 and ignoring Qualcomm and Blackberry, by simple inspection it is apparent that although there are exceptions (e.g. Huawei and LGE), by and large it is the organisations with larger stack shares like Ericsson, InterDigital and Nokia who have agreed licences with Apple which imply the total stack is more valuable than the stack implied by the licensees with smaller stacks.”
LJ Birss then looked at the numbers and other facts on the table, and calculated a DPU (dollar per unit) figure:
“The FRAND licence should contain a term in which a lump sum is to be paid which has been derived by capitalising the income stream from a FRAND rate of $0.15 DPU. Assuming I have understood the Optis spreadsheet provided at the hearing correctly, the lump sum to cover a period from 2013 to 2027 would be $502m.”
Interest must be added on top of this. In para. 148, the appellate decision notes that the $520M amount is “without interest.” We estimate interest to be north of $200 million (relative to the total amount, it was also quite high in InterDigital v. Lenovo after the appellate ruling). All in all, it means Optis is now entitled to more than $700M as a result of the UK judgment alone, and even if some of that will be taken into account to avoid double recovery in the U.S., it’s possible that in the total of UK and U.S. judgments Optis could net approximately a billion dollars. But it’s also important to consider that this is due in no small part to the long period during which Apple wasn’t licensed.
It’s worth nothing that the $0.15 per-unit royalty applies here because it’s about a subset of the patent portfolio of the group to which Optis belongs. For those who license everything from the group, the rate is $0.25. Para. 56 of the EWCA decision explains that “[t]he figure for Optis depends on whether certain [former] Ericsson patents are taken into account.”
Bad for Apple, but yesterday’s U.S. contempt ruling is even worse
Within a window of less than 24 hours, Apple has received three interesting court rulings:
- Its appeal against Fintiv became moot because the patent was declared invalid anyway in parallel Paypal case (today’s previous ip fray article).
- Even more important to Apple’s business than today’s UK decision, though subject to appeal, is the contempt ruling in Epic Games v. Apple, which could even result in a criminal conviction. On appeal, Apple’s most important argument will be that it cannot be constitutionally obligated to grant app makers a royalty-free compulsory license to its IP (today’s first ip fray article).
- And now the Optis ruling. Long before the High Court even made its FRAND determination, Apple was temporarily worried that the English courts might set royalty amount that would even lead Apple to leave the UK market. Apple’s counsel backtracked on that possibility rather quickly, and even a $700M patent royalty alone won’t have that effect, but this is now closer to the worst-case scenario Apple originally feared than to the EWHC determination.
Counsel
Counsel for plaintiff-appellant Optis: EIP Europe LLP (lead counsel: Gary Moss) and Osborne Clarke LLP instructed Adrian Speck KC, James Abrahams KC, Josephine Davies KC, Isabel Jamal and Thomas Jones.
Counsel for defendant-appellee Apple: Wilmer Cutler Pickering Hale & Dorr LLP instructed Jon Turner KC, Hugh Mercer KC, Michael Bloch KC, Brian Nicholson KC, Sarah Love and Ligia Osepciu.