Context: The High Court of Justice of England & Wales (EWHC) denied Xiaomi a declaration of an interim license to Panasonic’s standard-essential patents (SEPs), primarily because Mr Justice Leech did not see a useful purpose in such declaration and was worried about stepping on the toes of his UPC and German colleagues (July 8, 2024 ip fray article). Meanwhile, three Panasonic v.Xiaomi SEP trials are imminent: in the Unified Patent Court’s (UPC) Mannheim Local Division (with Xiaomi’s FRAND defense to be discussed next Wednesday, October 9); Munich I Regional Court (next week’s Friday, October 11), and Mannheim Regional Court (a week later, October 18).
What’s new: Xiaomi has scored a spectacular win. All three judges of the England & Wales Court of Appeal (ECWA) who heard the case have explicitly condemned Panasonic’s bad-faith actions. A majority granted Xiaomi the requested declaration of an interim license, and the third judge would have preferred the antisuit avenue (link to EWCA decision).
Direct impact: Game over. Panasonic has been held in breach of its ETSI obligations as well as of a commitment to the UK judiciary, and would now be well advised to immediately withdraw its UPC and German cases against Xiaomi. Panasonic should forget about those UPC and German trials as they will only make matters worse. Even if Panasonic, which may now be liable for damages (costs of vexatious and oppressive foreign litigation) in a similar way as Motorola Mobility had to reimburse Microsoft more than a decade ago, decided to carry on with those actions, the UPC and the two German regional courts can’t actually hold a trial over an alleged SEP infringement when the defendant has been declared, by an appeals court of competent jurisdiction, to be entitled to an interim license. The UK ruling diplomatically leave it to those foreign courts to decide, but ip fray believes that it is irreconcilable with the rule of law, and would be downright irrational, to try a court-declared licensee for infringement.
Wider ramifications: The UK is presently a balanced SEP jurisdiction (unlike Germany). Two days ago, the same appeals court, with the same judge authoring the per curiam (Lord Justice Richard Arnold), resolved a different appeal in the SEP holder’s favor: Ericsson prevailed over Lenovo/Motorola Mobility (October 1, 2024 ip fray article). Also, there is a pending EU antitrust complaint over Panasonic’s conduct (September 25, 2024 ip fray article). As discussed below, Panasonic’s parallel cases against OPPO, while simultaneously filed, are in an entirely different procedural situation.
This is a landmark decision, one of the most significant SEP-related court rulings ever, though it’s important to understand that the result would have been different it not for some rare circumstances:
Both parties committed, at a November 2023 hearing before Mr Justice Richard Meade (EWHC), to a resolution of their dispute by means of a FRAND determination in the UK. Panasonic started it by seeking conditional FRAND injunctions, but above and beyond that, they wanted to be sure that in the end there would be a global license agreement in place on court-determined terms. As LJ Arnold’s opinion puts it, Panasonic backtracked, however, when push came to shove:
39. Rather less positively, on 3 November 2023 Panasonic appeared to be willing in principle to give an undertaking not to enforce any injunctions obtained by it in parallel proceedings in Germany or the Unified Patents [sic] Court (“UPC”) (as to which, see below) pending the FRAND trial in this jurisdiction, but on 8 November 2023 Panasonic changed its position and stated that it was not willing to give any such undertaking. […]
That transition “Rather less positively” is so typically British.
The three appellate judges are not the first ones in the UK to be annoyed (if not appalled) by Panasonic’s decision to renege on a firm commitment. Mr Justice Meade, who informed his UPC and German colleagues of his forthcoming FRAND determination in a letter published by ip fray on July 31, 2024, expressed his misgivings of what he called a “U-turn” (July 17, 2024 ip fray article).
LJ Arnold’s opinion is consistent with the views he indicated at the hearing two weeks ago: why would a rational, constructive and willing licensor in Panasonic’s shoes decline to grant an interim license and to start getting paid now? Only if the objective is to engage in hold-up and impose supra-FRAND royalty obligations on Xiaomi. That’s what they wanted to do, and they’re not going to get it. Instead, they’ll probably have to pay for the costs of vexatious and oppressive UPC and German lawsuits.,
The appellate decision came down in record time. The hearing was held only two weeks ago (September 22, 2024 ip fray article). And even though Xiaomi did not manage to move the goal posts for the evidentiary standard, the appeal succeeded even under a rather high one.
All three appellate judges took issue with the same behavior, the only practical difference being that LJ Arnold and LJ Andrew Moyhan decided in favor of granting the appeal and, therefore, holding that Xiaomi is entitled to an interim license, while Lord Justice Stephen Phillips would have deemed an antisuit injunction the more appropriate remedy. Actually, should Panasonic carry on with its UPC and German cases (as unthinkable as this appears in the current situation), an antisuit injunction would still be a possibility, unless Xiaomi decides it’s not worth it because the matter has effectively been put to rest one way or the other.
No UPC or German judge has spoken out on Panasonic’s conduct yet. And none ever may, given that there really is no more point in holding those trials in the UPC (Mannheim and Munich LDs) and the Mannheim and Munich I Regional Courts). They can still hear Panasonic’s cases against OPPO, where the procedural situation is fundamentally different: there was no agreement between Panasonic and OPPO to resolve their dispute in the UK. Instead, OPPO wants a FRAND determination from the UPC that appears unlikely to be made (June 27, 2024 ip fray article) and would not be global as the royalties for OPPO’s sales in its most important markets would be set in China.
The following paragraph looks like a very polite invitation to German judges to develop a more balanced approach to SEPs:
53. I should also make the obvious point that neither the English courts’ approach nor the German courts’ approach is set in stone. On the contrary, this is a rapidly developing field of English law, and I am confident that the same is true of German law. In these circumstances both systems can learn from each other’s experience.
In light of the above, ip fray would like to reiterate the view that the UPC should draw more inspiration from the UK approach than the German one. That said, the UPC should be a major SEP venue where right holders have a multi-country enforcement opportunity. There are three SEP disputes scheduled to be heard by the UPC this month, and each is different, so the outcomes could also differ:
- Panasonic v. Xiaomi:
After today’s EWCA decisions, those are “dead lawsuits walking.” Panasonic outmaneuvered itself and will pay for it. But they will get royalty payments. - Panasonic v. OPPO:
As discussed above, today’s Xiaomi decision has no bearing on that dispute as OPPO had different procedural preferences as to how to arrive at a court-determined royalty rate. But with Panasonic now being suspected of seeking supra-FRAND royalties, a presumptively supra-FRAND demand might doom Panasonic’s pursuit of SEP injunctions against OPPO. Huawei v. ZTE must be applied strictly sequentially as the European Commission explained in an amicus curiae brief (August 4, 2024 ip fray article) and will reinforce at the end of this month when its outside counsel will deliver oral argument in the Munich Higher Regional Court. - Huawei v. Netgear:
In that case, the SEP holder, which is known to take balanced positions because it’s also a major implementer, has a strong FRAND argument based on numerous license agreements reached with third parties (mostly without and sometimes with litigation). By way of contrast, Netgear’s tactics of asking a U.S. court to interfere with European proceedings, only because they hope to benefit from geopolitical divisions, do not correspond to the conduct one would reasonably expect of a willing licensee (June 20, 2024 ip fray article). This looks like a dispute where a strictly sequential application of Huawei v. ZTE is nevertheless rather likely to result in the SEP holder’s entitlement to injunctive relief.
Today’s decision breaks new ground for the industry and is a spectacular success for Xiaomi’s UK lawyers. ip fray has not always agreed with the creative and novel theories and remedy designs presented by Kirkland & Ellis on behalf of implementers. But one can’t argue with success in this case, and it shows that lawyers must also accept or create major challenges to achieve the best results for their clients. Kirkland’s lawyers on this matter are Nicola Dagg, Steven Baldwin, Jin Ooi and Andrew Marks. Daniel Alexander KC was the barrister retained by Kirkland who did the oral advocacy for Xiaomi.