Wednesday, May 30, 2012

UK High Court denies a patent injunction against Nokia in light of a FRAND commitment

In the United Kingdom, patent holders have a very low rate of success compared to the situation in Germany. In addition, UK patent litigation is expensive, and injunctions are an equitable remedy like in the United States. For these and other reasons, I couldn't find any UK case law on injunctive relief over FRAND-pledged patents, and a UK lawyer speaking at a FRAND litigation conference in March wasn't aware of any precedents either. Instead, he said that the courts would likely provide further clarification in connection with IPCom v. Nokia. He was right. Today, Nokia commented on a decision following a hearing on May 18, 2012, and it's a markedly FRAND-friendly ruling.

In June 2011, IPCom won a ruling against Nokia over its #100A patent, a patent on a technique that ensures preferential access to cellular networks for emergency responders and other priority users. The patent is considered essential to the 3G standard (also known as UMTS). Since the summer the parties had been wrangling over whether Nokia would be barred from selling products implementing the patented technique in the UK. In light of the FRAND declaration IPCom made in late 2009 to avoid a formal EU antitrust investigation, the UK High Court indicated to IPCom at the early stage of a May 18 hearing that an injunction was hardly going to happen and instead advised the parties (as the written judgment says) "to proceed to a determination of the terms of the licence as rapidly as was practically possible".

The May 18 hearing transcript is more specific. After clarifying that IPCom is a non-practicing entity, Justice Roth recalled that IPCom has an obligation to grant a license and that Nokia is willing to take one on FRAND terms to be determined by the court:

"And once the licence is granted, which you are willing to grant and Nokia wants and the FRAND terms are determined, if an injunction were granted, it would come to an end."

IPCom's counsel confirmed. The judge continued:

"I have to say in those circumstances I am very uncertain, to put it mildly, to see why a permanent injunction should be granted in this case at all or indeed any injunction. It seems to me a classic case for consideration of the [Shelfer v City of London Electric Lighting Co] criteria, given these circumstances. You are willing to give a licence. Nokia wants to get a licence. You cannot agree on the terms. They will be determined. There will then be a licence. In those circumstances for a non (unclear) [presumably a reference to IPCom's NPE status] to get an injunction seems to me quite extraordinary. That has been raised in the written arguments. It seems to me that is the area which I would like you to address me because that may resolve this matter quite apart from all these difficult questions of what the different German judgments mean and which principles of res judicata should be applied. It comes down then to the discretion of this court whether it is appropriate to grant an injunction at all."

The Shelfer case is a 19th-century ruling that laid out criteria based on which injunctive relief can be denied because monetary compensation is considered sufficient. It has been applied to a number of recent patent decisions in the UK.

While the fact that IPCom is a non-practicing entity went into the equitable analysis in this particular case, it would be a mistake to infer that operating companies always obtain injunctions. Even in a dispute between two operating companies the Shelfer criteria could apply. Also, operating companies like Motorola frequently pursue injunctive relief based on standard-essential patents even when they are not being harmed as a competitor. For example, Motorola doesn't build gaming consoles that compete with the Xbox 360, or operating systems that compete with Windows 7, or PC web browsers that compete with the Internet Explorer. And even in a case like Motorola v. Apple (these two companies compete in the wireless devices market), UK law would probably be flexible enough to deny an injunction if there are clear signs of FRAND abuse.

The above quote also mentions the concept of res iudicata: the principle that something thas has been adjudicated by one court shouldn't be adjudicated by another (unless it's the competent appeals court). Nokia and IPCom have a lot of litigation pending in Germany, especially in Mannheim. German courts consider FRAND licensing offers made by implementers of standards (but unfortunately don't attach any importance to FRAND pledges made by patent holders) under the Orange-Book-Standard framework. Some patent holders like IPCom would like those unFRANDly German decisions to have res iudicata status in other European countries with respect to any FRAND issues. In this particular UK case, the court concluded that it didn't need to reach that question. If this ever had to be decided, there's a good chance that the conclusion would be that FRAND issues play such a secondary role in German infringement lawsuits that they aren't adjudicated in a way that would preclude defendants from raising the same issues in other jurisdictions. The concept of res iudicata requires a formal decision on a particular issue.

Nokia welcomed the UK High Court's decision: "Nokia is pleased that the UK High Court has finally dismissed IPCom's attempts to obtain an injunction. Mr Justice Roth has confirmed that IPCom must abide by the commitments that it made to the European Commission and cannot seek injunctions under standard-essential patents against companies such as Nokia who are prepared to take a licence on fair reasonable and non-discriminatory terms."

And if Tim Cook, who noted yesterday that standard-essential patents are an area in which the patent system is broken, hears about this pro-FRAND UK decision, I'm sure he, too, will welcome it.

Germany continues to be the only major jurisdiction in Europe to be firmly on the side of FRAND abusers, a fact that means money in the pockets of a few law firms but hurts the economy at large.

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