Context: Last year, Mr Justice James Mellor of the England & Wales High Court (EWHC) made a FRAND determination in InterDigital v. Lenovo that came down to 17.5 U.S. cents per unit. Lenovo was fine with it, except that they cross-appealed because they didn’t want to pay interest on back-royalties. At the hearing, it became clear that the appellate panel (Lord Justices Arnold, Nugee and Birss) were unconvinced of the lower court’s methodology in some respects (June 12, 2024 ip fray article).
What’s new: Just as ip fray predicted, an adjustment was made in InterDigital’s favor (appellate judgment). But in numerical terms it means that the per-unit royalty just went up from 17.5 cents to 22.5 cents, while InterDigital wanted 49 cents. Those numbers make it clear that Lenovo has won the appeal.
Direct impact: Lenovo is absolutely fine with that per-unit royalty and has now publicly offered InterDigital to take a license on that basis. Either party can appeal the unfavorable parts. For Lenovo, however, the per-unit royalty works.
Wider ramifications: This adjustment is “too little, too late” to entice standard-essential patent (SEP) holders to enforce their rights in the UK.
This is just a short “breaking” piece. For logistical reasons (air travel), it’s not possible to do an elaborate article right now, but ip fray has commented quickly on LinkedIn (link).
This key passage is a disaster for InterDigital:
“Overall result of grounds A and B 284. Multiplying $0.30 by 0.75 gives a per unit figure for Lenovo of $0.225. Multiplying that figure by 792,571,429 units (the final figure used by the judge) gives a total of $178.3 million. I will ask the parties to calculate the interest due on that figure at the judge’s rate of 4% compounded quarterly.”
InterDigital appealed and got only a marginal improvement.
From Lenovo’s rightly triumphant public statement:
“Lenovo is publicly offering InterDigital 22.5 US cents per cellular unit for a forward-looking license.”
That is 6 cents more than the High Court determined but way below InterDigital’s position. This FRAND determination largely went Lenovo’s way. It will be difficult for the German courts to ignore it.
The bottom line is that Lenovo got largely what it wanted in numerical terms. As ip fray expected after following the hearing, the England & Wales Court of Appeal did not agree in full with Mr Justice Mellor’s methodology. But in commercial terms, the per-unit past royalty rate for a long period is now pretty close to what Lenovo offered. In fact, Lenovo is now offering that rate as a future per-unit royalty.
ip fray is aware of a public statement by InterDigital claiming victory as well, but in this case the numerical part of the outcome speaks an unmistakable language and supports Lenovo’s views.
The Munich Higher Regional Court has yet to rule on Lenovo’s motion to stay the enforcement of InterDigital’s German SEP injunction (May 15, 2024 ip fray article). The fact that Lenovo has won two rounds of litigation in the UK may very well give the appellate panel pause and result in a stay pending the resolution of the appeal. That same appeals court knows that the European Commission disagrees with the lower court’s (and generally Germany’s) SEP case law.
The decision does not mean that every other defendant is entitled to a license from InterDigital on the same basis. It’s just for Lenovo and until (including) 2023. Even Lenovo itself needs another court decision for the future, but obviously this outcome is going to have major effects even on other cases involving InterDigital’s portfolio unless InterDigital manages to make a stronger case for a higher per-unit rate than it did in this litigation.
Theoretically this can be appealed to the UK Supreme Court.
The UK judiciary is now baically telling SEP holders that they should give the Unified Patent Court (UPC) a chance. More and more SEP cases are filed with the UPC.
Another FRAND determination will be heard by the same appeals court next year: Optis v. Apple. While both cases have in common that the royalty rate was set at a much lower level than the SEP holder wanted, that is about the only thing the two cases have in common. Today’s InterDigital v. Lenovo decision does not resolve any of tjhe question on which Optis v. Apple turns.