InterDigital Inc (IDCC)

[Paullee]

InterDigital to appeal UK FRAND decision while Lenovo battle continues in China and US
Adam Houldsworth
29 June 2023
Two landmark global FRAND rate decisions by the High Court of England and Wales have disappointed SEP owners in recent months (see here and here).
Now InterDigital has been given permission to appeal one of those judgments, teeing up the UK’s first Court of Appeal dispute on the substance of global FRAND rate methodologies and providing hope to rights holders that a more SEP-friendly approach may be adopted by the higher court.
Moreover, InterDigital’s global SEP licensing fight with Lenovo continues to be fought in China and the US, despite the implementer’s undertaking to accept the rate set by the High Court in London. So the dispute appears to be far from over.
All this was revealed in an extensive follow-on decision handed down by the High Court this week. Dealing with several issues left unresolved in the first ruling, this opinion contains some other notable positives for InterDigital, which has been awarded an additional $46.2 million as part of a global SEP licence that the court has ordered Lenovo to sign. This represents the interest that the Chinese implementer must pay on the $138.7 million royalty the court has decided should have been paid for a global 3G-5G patent licence for the years 2007-2023.
Lenovo had argued that it is not obliged to pay interest to compensate the patentee for delays in payment. This, it said, was because the ETSI policy does not require it, because the $138.7 million sum was calculated in a way that it already accounts for any potential interest, and because InterDigital was found to be an unwilling licensor. However, Mr Justice Mellor rejected these points, awarding the patentee 4% interest compounded quarterly. This takes the value of the global licence to $184.9 million – a substantial increase.
InterDigital, however, was less successful on the subject of litigation costs, which tend to be awarded to the winning party in UK disputes. A substantial sum of money was at stake over this question: InterDigital spent £17.25 million on the FRAND portion of the UK litigation, whereas Lenovo has paid £14.27 million.
Despite the global per unit rate set by the court ($0.175) being substantially closer to Lenovo’s favoured rate of $0.16 than InterDigital’s $0.498, the patentee argued that it was the overall winner because the implementer was the one being forced to ‘write the cheque’. InterDigital had also needed to take Lenovo to trial to obtain a global licence agreement, it added, and to force the implementer to accept the court’s ruling.
However, Mellor J stated that he was “in no doubt that Lenovo are the overall winner of this FRAND trial”. Agreeing with Mr Justice Birss in Unwired Planet, he held that FRAND rate disputes are tariff-setting exercises. It matters, therefore, that the court largely sided with Lenovo on the subject of top-down checks and comparables analysis, and that it granted an award much closer to the implementer’s suggested licensing fee.
But despite ordering InterDigital to pay most of Lenovo’s costs, Mellor J circumscribed some specific outgoings that must be paid by the implementer. Lenovo must pay InterDigital’s costs relating to the questions of foreign law that the Chinese company raised then abandoned during trial. It must also cover the patentee’s outgoings relating to the dispute over interest payments, Mellor J ruled. The breakdown of these sums will need to be subjected to detailed assessment if an agreement cannot be reached.
The follow-on decision also throws light on the nature of the parties’ broader global dispute. Though the UK court’s decision concerns a global licence rate and Lenovo has undertaken to accept the ruling, the companies continue to fight it out in China and the US.
A trial at the US District Court for the District of Delaware is scheduled for 4th December this year. This will consider InterDigital’s claim that Lenovo is infringing seven of its 3GPP SEPs as well as Lenovo’s antitrust counterclaim which, among other things, seeks “a refund for any overpayment for a licence to US Patents based on InterDigital’s UK action”.
Lenovo is also challenging the outcome of the UK court’s global FRAND decision in Chinese proceedings before the Beijing Intellectual Property Court, which it is asking to set a FRAND rate for the Chinese portion of InterDigital’s portfolio.
In fact, Lenovo has told the Beijing court that its decision may have an impact on the rate set by the UK courts. This despite the fact Lenovo abandoned its argument that the UK-set licence should contain an adjustment clause (to factor in subsequent US and Chinese decisions) during the High Court trial.
It also transpires that Lenovo had once again reversed its position on this matter in UK proceedings, asking Mellor J to include an adjustment clause in the global licence, allowing royalties to be changed in accordance with future decisions elsewhere.
It is clear, Mellor J stated, “that Lenovo does intend to maintain their attacks on the Judgment, the Licence and to undermine its Undertaking to this Court”. He refused to include an adjustment clause in the licence that Lenovo must now sign. However, Mellor J continued, “it is for the US and Chinese Judges to regulate the proceedings which are before them, not me”. So the global licence set in London may not ultimately be the final word on the parties’ agreement, if either party can persuade other courts to intervene.
Even more interesting is that Mellor J has granted InterDigital permission to appeal – and Lenovo to counter-appeal – his FRAND decision.
InterDigital had expressed its intention to challenge the ruling on several grounds. These include that the rate Mellor J derived from the LG 2017 licence ought to have factored in the sub-FRAND rates paid on past sales in that agreement, and that the finding of unwillingness against it failed to consider its offer of third-party arbitration.
These arguments were dismissed as unlikely to succeed, but Mellor J permitted an appeal to seek guidance on several points of principle relating to his ruling. These include whether national limitation periods have a role to play in rate-setting; whether volume discounts are justified; whether it is appropriate for the court to seek to discourage hold-out; and whether it would be discriminatory against Lenovo to apply the kinds of discounts hitherto applied by InterDigital.
Lenovo, for its part, has been allowed to appeal the award of royalties from before the six-year limitation period.
This is good news for the patent community, especially SEP owners, because it promises further guidance on the principles according to which global FRAND rate decisions will be made in the UK.
Such guidance is much needed because of the dearth of existing case law: only three such decisions have yet been made by the English High Court and the Court of Appeal has not made a detailed judgment on methodological rate-setting questions.
https://www.iam-media.com/article/interdigital-appeal-uk-frand-decision-while-lenovo-battle-continues-in-china-and-us?utm_source=InterDigital%2Bto%2Bchallenge%2BUK%2BLenovo%2BFRAND%2Bdecision&utm_medium=email&utm_campaign=IAM%2BDaily