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Apple Trial Spotlights U.K. Ban Potential in Global Patent Fights

July 8, 2021, 9:02 AM

Apple Inc. will ask a London court this month to reject arguments that the iPhone maker is an “unwilling” patent licensee, during a high-stakes trial that could raise the U.K’s growing profile in global patent fights.

Apple already has been found to infringe two Optis Cellular Technology LLC patents essential to 3G and 4G communications standards. The court has been asked to determine a licensing rate that is fair, reasonable, and non-discriminatory, or FRAND.

Apple doesn’t want to commit to taking a license before the rate is determined, however. A trial set to begin July 19 focuses on whether that makes Apple an “unwilling licensee,” a label that can open the door to a possible sales ban in the U.K.

The trial, among the first of its kind, has implications for companies sued in global disputes over patents essential to technological standards. They may have to commit to take a court-determined rate once a patent is found valid and infringed—or risk their products being blocked from the U.K.

“If it ends up being that Apple loses that hearing and then needs to quickly resolve the dispute to avoid being enjoined from selling phones in the U.K., it will be a very attractive tool for others to emulate,” said Michael Renaud, chair of the IP division at Mintz Levin Cohn Ferris Glovsky and Popeo PC in Boston.

An Optis win also would make U.K. courts more desirable to owners of standard-essential patents, or SEPs. Their appeal is already on the rise after the U.K. Supreme Court said last year that British judges can set global licensing rates.

The Nuclear Option

The patent battle between Apple, Optis, and Optis’ partners, PanOptis Patent Management and Unwired Planet LLC, involves iPhones and other devices and has been split into a series of trials in London.

Two Optis patents were found by a court in recent months to be valid and infringed by Apple. Additional trials are scheduled over other Optis patents. The trial to determine a fair, reasonable, and non-discriminatory licensing rate is set for the summer of 2022.

The question of how courts determine willingness—at issue in this month’s trial—is a developing issue in the U.K. and Europe.

The European Union’s top court held, in the landmark 2015 ruling Huawei v. ZTE, that a patent holder obligated to license a patent can violate competition law by seeking an injunction against a company that is willing to take a license on FRAND terms.

Typically, injunction decisions come at the end of a case, following a FRAND trial. Putting companies like Apple at risk of an injunction and sales ban earlier increases the likelihood of a settlement, attorneys say. And a settlement could allow patent owners to avoid a costly and time-consuming FRAND trial.

Justice Colin Birss said in a January order it would be “a major blow to Apple” if the company were found to be an unwilling licensee. Birss said there was a “tangible likelihood that the case would settle at that stage and bring this whole dispute to an end.”

If there is an injunction to “stop the sale of Apple products, that’s huge,” said Jorge Contreras, a law professor at the University of Utah. “All of this dispute is around whether or not the SEP holder can exercise that nuclear option, getting an injunction.”

What Is Willing?

Optis argues that, once a company like Apple has been found to infringe a valid patent, it becomes an unwilling licensee if it doesn’t commit to accepting a court-determined rate.

Apple maintains it shouldn’t have to make any commitments until the court determines what is FRAND. That’s a view likely shared by other device makers reluctant to agree to licensing terms without knowing what those terms will be.

“It is a bizarre set of circumstances to effectively write a blank check to take a license,” said Sophie Lawrance, a partner at Bristows LLP in London and Brussels.

“Admittedly, it is a blank check only in response to a court determination that this is a FRAND rate,” Lawrance added. “But there is sufficient risk.”

Optis also argues that, in addition to an injunction, Apple should lose its right to a FRAND license if it’s found to be an unwilling licensee. That means the iPhone maker could face higher royalties.

“I think the aim is to try to put as much pressure as possible on Apple to take the license without litigating it fully,” Lawrance said.

U.K. Popularity

Worldwide battles have been picking up between patent owners and makers of wireless devices like Apple, Samsung Electronics Co., and Huawei Technologies Co. They’re expected to become more prevalent with the transition to 5G and the emerging Internet of Things.

“I think the U.K. is clearly setting itself up to be a port of call for patent owners to sue in,” Contreras said.

U.K. judges can set global royalty rates for essential technologies, the U.K. Supreme Court ruled in August 2020 in a closely watched case involving Unwired Planet and Huawei. Already, the decision has made U.K. courts popular among patent owners.

“If PanOptis against Apple turns out to be a judgment reasonably favorable to PanOptis, then the U.K. would become an even more effective venue,” said Paul Lugard, a Baker Botts LLP partner in Brussels.

Other cases like it are in the pipeline. A judge has scheduled a trial in the U.K. in January to determine whether Lenovo Group Ltd. is an unwilling licensee in a dispute with InterDigital Inc.

Companies will be watching the trials closely. If SEP holders can establish a successful track record, unwilling licensee trials “will be the most popular thing to do in the SEP enforcement bar,” Renaud said. But a few early losses would “probably extinguish the fascination with willing and unwilling licensee hearings.”

Optis is represented by EIP and Osborne Clarke LLP. Apple is represented by WilmerHale.

The case is Optis Cellular Technology LLC et al v. Apple Retail UK Ltd. et al, EWHC (U.K.), No. HP-2019-000006.

To contact the reporter on this story: Matthew Bultman in New York at mbultman@correspondent.bloomberglaw.com

To contact the editors responsible for this story: Renee Schoof at rschoof@bloombergindustry.com; Keith Perine at kperine@bloomberglaw.com

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