Context: After approximately a year of litigation, the dispute between Ericsson and Lenovo is now at a stage where decisions are coming down in short succession. Last month, the United States Court of Appeal for the Federal Circuit revived Lenovo’s antisuiti injunction bid (October 24, 2024 ip fray article). last week, Lenovo avoided a U.S: import ban over two non-standard-essential patents (non-SEPs) (November 16, 2024 ip fray article).
What’s new: Today, Mr Justice Jonathan Richards of the High Court of Justice for England & Wales (EWHC) denied Lenovo’s request for a declaration that it is entitled to an interim license from Ericsson (November 19, 2024 judgment). In particular, the judge was unconvinced of Ericsson seeking injunctions in bad faith, given that a neutral third party – the U.S. International Trade Commission’s (USITC, or just ITC) Office of Unfair Important Investigations (OUII, or “ITC Staff”) – deems Ericsson to have discharged its FRAND licensing obligation while raising concerns over Lenovo’s demands for a license to its own patents. Mr Justice Richards distinguished the facts in this case from the Xiaomi-Panasonic situation (October 3, 2024 ip fray article).
Direct impact: The decision is appealable. Xiaomi also lost in the High Court, but prevailed on appeal. However, the two cases are far apart.
Wider ramifications: To a certain extent, the lack of clarity in today’s decision about the test for an entitlement to an interim-license declaration validates the concerns voiced by SEP licensors and their lawyers about whether UK interim licenses would become antisuit injunctions by any other name. While the outcome obviously shows that not every implementer is now going to obtain an interim-license declaration, the reasoning leaves room for interim license-declarations in far more cases than the outlier that was Panasonic v. Xiaomi. But given the high likelihood of an appeal (unless the parties settle in the near term), today’s ruling may not be influential for a long time.
While ip fray proudly serves distinguished readers in the UK judiciary (whose names would obviously not be disclosed unless they themselves say something in public), Mr Justice Richards is clearly none of them, as he says in today’s decision that the Federal Circuit appeal of the denial of an antisuit injunction was still pending, which it is not (see further above).
If he had granted Lenovo the requested declaration, the worst fears of critics of the Xiaomi-Panasonic appellate ruling would have come true. In that case it would have been questionable whether any implementer would ever be denied an interim-license declaration in the UK, at least in cases involving an ETSI FRAND pledge. But Mr Justice Richards equally declined to agree with Ericsson that the Xiaomi case was an extreme outlier.
From ip fray‘s perspective, the common elements between the two disputes are more or less exhaustively listed below:
- Chinese implementer
- ETSI FRAND pledge
- pursuit of injunctions in foreign jurisdictions
Mr Justice Richards reads the Xiaomi v. Panasonic appellate decision as not necessarily being limited to cases in which both parties have committed to enter into a license agreement on FRAND terms set by the UK judiciary. That is, in principle, fair. The EWCA obviously did not deprive itself and the court be low of all wiggle room. But based on how that hearing went and what the decision said, including but not limited to the fact that the appeals court actually felt Xiaomi would have been entitled to an antisuit injunction (had it sought one), it was clear that it would take rather exceptional cases for such interim-license declarations to be made.
One can reasonably read today’s Lenovo v. Ericsson decision as suggesting that this was not a close case: Lenovo never really came close to getting what it wanted. But the net effect of Mr Justice Richards also having rejected many of Ericsson’s arguments is that other implementers (in the absence of an appellate decision that renders this one much less relevant) will be able to cite to different passages and argue that their pattern is at least a little bit closer to Xiaomi’s than Lenovo’s was, and that they should therefore be granted an interim-license declaration.
The decision talks about various potential criteria without being clear as to what weight, if any, they should be given. It is the epitome of subjectivity to speculate about whether Ericsson was seeking injunctions to extract supra-FRAND rates. Based on what the ITC Staff said in a submission that will have some weight in the ITC proceedings, yet is not a judicial or even quasi-judicial decision, Ericsson’s behavior was far more likely to be FRAND than Lenovo’s (September 18, 2024 ip fray article):
92. The OUII’s conclusion that the October 2023 Offer [by Ericsson] set out pricing that was comfortably in the FRAND range is not binding on me. However, it is a significant finding by an independent body after a detailed evidentiary hearing, particularly given that Lenovo is not positively seeking to persuade me that Ericsson’s conduct is designed to achieve supra-FRAND rates […].
94. […] Such little evidence as I have suggests that Lenovo was over-valuing its portfolio of SEPs in the February 2024 Offer, given the OUII’s criticism of that offer. […]
95. Putting all that together, I am not satisfied to a high degree of assurance that, in exerting pressure on Lenovo to accept the October 2023 Offer Ericsson is necessarily seeking supra-FRAND rates.
The above is obviously bad for Lenovo, which made its bed and has to lie in it, but it is also bad for legal certainty, which affects the wider ecosystem. In the Xiaomi-Panasonic case, the EWCA assumed that the only plausible reason for which Panasonic was seeking injunctions despite Xiaomi offering an interim license was that it wanted to extract supra-FRAND royalties. Today’s decision actually makes a good point where it explains that income from a “true-up” interim license agreement (meaning that adjustments could go either way) can’t be recognized as revenues on the balance sheet. That is indeed something to consider. But on the bottom line, today’s decision looks like the next implementer would get an interim-license declaration from the EWHC provided that it gathers some indications at an early stage of proceeding according to which the SEP owner’s royalty demand is not FRAND. For instance, an implementer could then go to a court in some jurisdiction (possibly one that is extremely implementer-friendly) and use that result as persuasive authority in the UK for the purpose of obtaining an interim license.
The outcome is anything but unexpected. The reasoning, however, could hardly be hazier with a view to the next case.
There are good things in the decision, such as a clear acknowledgement of the importance of the principle of comity. But the SEP ecosystem will now be even more confused than it already was before today’s decision. That is regrettable given that the Xiaomi-Panasonic ruling by the EWCA was a very appropriate one given the almost unique, or at least rather unusual, circumstance of both parties having told the UK court that a license agreement would be concluded once the FRAND rate has been set.
For a reminder: in Xiaomi-Panasonic, it would have been easy for Xiaomi to obtain an antisuit injunction, but the appeals court was struggling, like the judge below, with the concept of an interim-license declaration. One of the three appellate judges dissented, for that (and only that) reason. Xiaomi just didn’t want an antisuit injunction because that would have made it an unwilling licensee in the eyes of some German judges. Lenovo, however, had no basis for an antisuit injunction, and was seeking an interim-license declaration for that reason.