“543. Before turning to the impact of the litigation, this is a convenient point to ask what sort of licence for Unwired Planet’s portfolio would be FRAND in terms of its geographical scope when applied to a multinational licensee like Huawei? I will start by asking what a willing licensor and a willing licensee with more or less global sales would do. There is only one answer. Unwired Planet’s portfolio today is (and in 2014 it was) sufficiently large and has sufficiently wide geographical scope that a licensor and licensee acting reasonably and on a willing basis would agree on a worldwide licence. They would regard country by country licensing as madness. A worldwide licence would be far more efficient. It might well have different rates for different regions and for different standards but that is another matter. The employment of different rates would not lead the parties to abandon a worldwide licence and go for country by country licensing. Assuming the licensee was a Chinese multinational like Huawei, they might well agree on different rates for China as for the Rest of the World but again they would not go for country by country licensing. If the multinational had a significant manufacturing base in another country in which the portfolio was weak, again that could be taken into account. 544. A point arose in the arguments on the terms of the UK only licence which Huawei called a manoeuvre. Unwired Planet insisted that the UK only licence should have a term in it precluding entry into the UK of unlicensed Huawei handsets. This seems to have caught Huawei by surprise but it really should not have done. It was a manifestation of the point that the UK only licence is only a licence under the UK patents. It illustrates one reason why country by country licensing is inefficient for goods like mobile telecommunications devices which will move across borders but I do not regard this as a major point in the present context. It would have to be addressed but that could be done (see below the section on the UK only licence where it is addressed in context). The real inefficiency of country by country licensing is the effort required to negotiate and agree so many different licences and then to keep track of so many different royalty calculations and payments. No rational business would do this if it could be avoided. ”
“I conclude that a worldwide licence would not be contrary to competition law. Willing and reasonable parties would agree on a worldwide licence. It is the FRAND licence for a portfolio like Unwired Planet’s and an implementer like Huawei. Therefore, Unwired Planet are entitled to insist on it. It follows that an insistence by Huawei on a licence with a UK only scope is not FRAND.”
“2.2 EFFICIENCY AND NON-DISCRIMINATION The non-discrimination element of FRAND indicates that rightholders cannot discriminate between implementers that are 'similarly situated'. Given that FRAND is not one-size-fits-all, solutions can differ from sector to sector and depending on the business models in question. As mentioned above, FRAND negotiations imply good faith negotiations from both parties. Efficiency considerations can come into play as well. Transaction costs relating to the negotiation of a licence should be kept to the minimum necessary. Furthermore, in sectors where cross-licensing practices are widespread, efficiency gains related to such practices should be taken into account. These points need to be taken into account when assessing on a case by case basis whether a licensing offer is compatible with FRAND. In line with the approach presented above, the Commission considers that the same principles of efficiency support the practice of SEP portfolio licensing for products with global circulation. As noted in a recent ruling, a country-by-country licensing approach may not be efficient and may not be in line with a recognised commercial practice in the sector.”
“For products with a global circulation, SEP licences granted on a worldwide basis may contribute to a more efficient approach and therefore can be compatible with FRAND.”
“Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States. Such abuse may, in particular, consist in: … (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; …”
“In this case, the question of whether or not unequal treatment is objectively justified can be answered by looking at, and weighing, all interests involved, which is geared to the purpose of the TFEU, namely to contribute to the development of effective, undistorted competition … What is decisive here are the type and extent of different treatment. Its admissibility depends, in particular, on whether the relative discrimination of the companies affected appears as a competitive reconciliation of interests that is determined by the respective offer in the individual case or whether it is based on arbitrariness or considerations and intentions that are alien to economically or entrepreneurially sound actions ... In view of the considerable scope of discretion that a patent holder has in such situations, not every difference in conditions can be regarded as an abuse of a dominant market position. Instead, the difference must be more than just minor in order to find that a condemnable abuse has taken place … At the same time, one must make sure, however, that the exercise of power by the dominant company does not result in the companies affected by such unequal treatment being impaired in terms of their ability to compete with each other …”
“Regardless of whether such declaration is of a constitutive or declaratory nature and whether the patent holder’s obligations resulting from it apply even if it does not have a dominant market position …, it certainly does not result in a different standard for nondiscrimination. With its commitment contained therein to not discriminate against license seekers, the SEP holder rather makes reference to Art. 102 c) TFEU: regarding its license terms, the SEP holder apparently wants to be bound (only) precisely to the extent required by the statutory nondiscrimination rule. Accordingly, its license offer is “nondiscriminatory” only if it treats the license seeker equally to other licensees or if there are good objective reasons for unequal treatment.”
“… if the trading conditions are basically the same, basically the same royalties or royalty rates should be collected. To determine if non-discriminatory terms are satisfied, it often requires comparative methods. Under the same terms of trade, if a standards-essential patents holder charges a lower royalty from a certain licensee while a higher royalty is collected from another licensee, the latter will have every reason to believe to be subject to discriminatory treatment by way of comparison. In this connection, the standards-essential patents holder would violate the commitment to grant non-discriminatory licenses.”
“It is in the end nothing more than a patent licence (with the associated assignment). UP's or PanOptis's motives for selling this licence cheaply on that occasion do not change the fact that they did sell the licence cheaply. The consequence of the licence is that PanOptis has been able to enhance its general relationship with Samsung and therefore to have a relationship with Samsung which it does not have with Huawei, but I reject the suggestion that this means that the transaction has features vis a vis Samsung which make it different in any objective sense relevant in this context from the licence Huawei is entitled to.”
“Huawei also submit that the comparables selected should include some, or ideally all, of three criteria: (a) the licensor is UP or Ericsson, (b) the licensee is Huawei, or a similarly situated company such as Samsung and (c) the licence is recent. I agree with (a) and subject to what "recent" means I agree with (c). However I am not convinced that (b), the identity of the licensee, should be a strong factor in determining what comparables are useful for determining the FRAND rate aside from the hard edged non-discrimination point addressed below. FRAND is supposed to eliminate hold up as well as hold out. Different licensees will have differing levels of bargaining power. That is another way of saying their ability to resist hold up and their ability to hold out will vary. It would be unfair (and discriminatory) to assess what is and is not FRAND by reference to this and other characteristics of specific licensees. In my view, it would not be FRAND, for example, for a small new entrant to the market to have to pay a higher royalty rate than an established large entity. Limiting comparable licences to those where Huawei or a similar company like Samsung is the licensee is therefore unjustified. In my judgment the FRAND rate ought to be generally non-discriminatory in that it is determined primarily by reference to the value of the patents being licensed and has the result that all licensees who need the same kind of licence will be charged the same kind of rate.”
“Some arguments were addressed to the non-discrimination ("ND") aspect of FRAND as opposed to the "FR" aspect of FRAND as if they were distinct. However it is not that simple. Most of the time the concepts of non-discrimination, reasonableness and fairness relate to one another. In that sense it is useful to characterise a royalty rate as FRAND rather than try to distinguish between something which is merely fair and reasonable as opposed to fair, reasonable and non-discriminatory. The argument about non-discrimination treated it as a concept which would apply to reduce a royalty rate even if that rate was otherwise "FR". For want of a better expression, I will distinguish between a "hard-edged" and a "general" non-discrimination obligation. The general non-discrimination obligation is the aspect of non-discrimination which I have mentioned already. It is part of an overall assessment of the inter-related concepts making up FRAND by which one can derive a royalty rate applicable as a benchmark. This rate is non-discriminatory because it is a measure of the intrinsic value of the portfolio being licensed but it does not depend on the licensee. The hard-edged non-discrimination obligation, to the extent it exists, is a distinct factor capable of applying to reduce a royalty rate (or adjust any licence term in any way) which would otherwise have been regarded as FRAND. This will take into account the nature of the particular licensee seeking to rely on it.”
“The “non-discriminatory” principle of FRAND, however, is not widely agreed upon. The standard economic definition would mean that all users pay the same royalty – i.e., there is literally no discrimination on price or any other terms. Some economists have proposed that it means only that all firms which use the standard be able to obtain a license, with no constraint as to the terms of the license. That of course allows different firms to pay different royalties but still have access to use of the patent. […] ‘Non-discriminatory’ in the context of an SSO setting standards for competing firms can be interpreted to mean that all implementers of the standard should be offered licenses to the technology and all ‘similarly situated’ firms should pay the same royalty rate.”
“497. I infer from the paper that there is no wide agreement amongst economists about how the non-discrimination limb of FRAND applies. In the passage quoted the paper proposes three possible interpretations. First, the "standard economic definition". That is one in which all licensees pay identical rates on identical terms. It is not supported by either party before me. I am not surprised. If that is what the ETSI undertaking was supposed to mean it could readily have been written in that way. While such an approach has the virtue of simplicity it would be impractical in practice. It would be highly restrictive. Many licences contain most favoured licensee clauses but they are not generally as onerous as this would be. There is no reason to interpret the ETSI FRAND undertaking in such a strict way. 498. The second version of non-discrimination referred to is one which "some economists" have proposed. It is very weak. Since the ETSI FRAND undertaking already obliges licensors to offer licences to everyone, it does not add anything to that. It is also weaker than the benchmark FRAND rate approach, which at least applies to all licensees with licences of the same type. The benchmark approach does not mean that all licensees must pay exactly that rate but it provides a benchmark against which such a rate can be judged. In practice it will stop licensees having to pay much more than the benchmark set by reference to the value of the portfolio. Competition law can intervene to penalise the imposition of excessive prices much higher than the benchmark FRAND rate. Neither side supported this weak second version of nondiscrimination. 499. The third interpretation proposed by Prof Carlton is based on similarly situated firms paying the same rate. It is based on the same concepts as competition law. In effect this is the one Huawei contend for although one cannot take that too far. The paper is not purporting to set out a fully worked out proposal on the correct approach in law to interpret the FRAND undertaking. It is not focussed on the distinction between the arguments of Huawei and UP.”
“Having got this far it seems to me that it is not necessary to read this hard-edged non-discrimination obligation into the ETSI FRAND undertaking at all provided one takes a benchmark rate approach to assessing a royalty under the ETSI FRAND undertaking. That approach is itself non-discriminatory and gives effect to the “ND” limb of FRAND. It is a more stringent non-discrimination obligation than the weakest one proposed in Prof Carlton’s paper but much simpler to apply in practice than the first proposed obligation or the one based on all the competition law concepts. Competition law will always be available in an appropriate case.”
“61. On a general note, it is important to bear in mind that discrimination, including discrimination in the charging of prices, is not in itself problematic from the point of view of competition law. The reason for that is that price discrimination is not always harmful to competition. On the contrary, as is evidenced in particular by the (vain) official attempts made in the United States to repeal the provision in the Robinson-Patman Act of 1936 which prohibits such discrimination, purely and simply prohibiting price discrimination may prove injurious to economic efficiency and the well-being of consumers. 62. Indeed, it is well established that a practice of discrimination, and a differential pricing practice in particular, is ambivalent in terms of its effects on competition. Such a practice may have the consequence of increasing economic efficiency and thus the well-being of consumers. These are goals which, to my mind, should not be overlooked in the application of the rules of competition law, and they are, in any event, quite distinct from considerations of fairness. As the Court has repeatedly held, the rules of competition law are designed to safeguard competition, not to protect competitors. 63. It should only be possible to penalise price discrimination, either under the law applicable to cartels or under the law applicable to abuses of a dominant position, if it creates an actual or potential anticompetitive effect. The identification of such an effect must not be confused with the disadvantage that may immediately be experienced, or suffered, by operators that have been charged the highest prices for goods or services. Accordingly, the fact that an undertaking has been charged a higher price when purchasing goods or services than that applied to one or more of its competitor undertakings may be characterised as a disadvantage, but it does not necessarily result in a ‘competitive disadvantage’. 64. Therefore, even where an undertaking is charged higher prices than those applied to other undertakings and, as a result, suffers (or considers that it suffers) discrimination, the conduct in question will be caught by Article 102 TFEU only if it is established that it is likely to restrict competition and diminish the well-being of consumers.”
“These discrepancies favour Huawei's argument. However there is a major difference between this case and a case like [Attheraces Ltd v The British Horseracing Board Ltd [2007] ECC 7], because at this point in the argument the discrepancy is with respect to a benchmark rate which represents what has been determined to reflect the true value for the portfolio under licence. The discrimination is not that Huawei is being required to pay a rate higher than that, the issue is that Huawei's competitor has been given a much lower rate.”
“In my judgment the ETSI FRAND undertaking should not be interpreted so as to introduce the kind of hard-edged non-discrimination obligation supported by Huawei without also including consideration of the distortion of competition. Competition law does not seek to prohibit different prices being charged to different customers. An important aspect of the way that result is assured in competition law is by the requirement that only terms which are sufficiently dissimilar to distort competition are prohibited. In other words, the various elements of the competition law applicable [to] discriminatory pricing operate as a whole to achieve a fair balance. Splitting off some parts without the others is unbalanced and risks unfairness.”
“… a position of market strength enjoyed by an undertaking which enables it to prevent effective competition being maintained in the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers.”
“670. Standing back, the question I have to decide is whether Unwired Planet is in a dominant position in the relevant market. The relevant market is a market for licences under the SEPs. It is a market in which the SEP owner has 100% market share. The market is covered by the FRAND undertaking which does weaken the SEP owner’s position. It is a market in which licensees can engage in holding out and there is some evidence that they do, particularly given the relative weakness of Unwired Planet. If a proper economic analysis had been done into this market then the issue might be more finely balanced but as it stands, and without that analysis, I am not satisfied either of these points alone or together is sufficient to justify not drawing the inference that the holder of a 100% market share is likely to be dominant. I hold that as the owner of SEPs, Unwired Planet is in a dominant position in the market for licences under those SEPs.”
“55. In such a situation, in order to prevent an action for a prohibitory injunction or for the recall of products from being regarded as abusive, the proprietor of an SEP must comply with conditions which seek to ensure a fair balance between the interests concerned. 56. In this connection, due account must be taken of the specific legal and factual circumstances in the case (see, to that effect, judgment in Post Danmark, C-209/10, EU:C:2012:172, paragraph 26 and the case-law cited).”
“60. Accordingly, the proprietor of an SEP which considers that that SEP is the subject of an infringement cannot, without infringing Article 102 TFEU, bring an action for a prohibitory injunction or for the recall of products against the alleged infringer without notice or prior consultation with the alleged infringer, even if the SEP has already been used by the alleged infringer.”
“61. … alert the alleged infringer of the infringement complained about by designating that SEP and specifying the way in which it has been infringed.”
“63. … present to that alleged infringer a specific, written offer for a licence on FRAND terms, in accordance with the undertaking given to the standardisation body, specifying, in particular, the amount of the royalty and the way in which that royalty is to be calculated.”
“65. … respond to that offer, in accordance with recognised commercial practices in the field and in good faith, a point which must be established on the basis of objective factors and which implies, in particular, that there are no delaying tactics.”
“71. It follows from all the foregoing considerations that the answer to Questions 1 to 4, and to Question 5 in so far as that question concerns legal proceedings brought with a view to obtaining the recall of products, is that Article 102 TFEU must be interpreted as meaning that the proprietor of an SEP, which has given an irrevocable undertaking to a standardisation body to grant a licence to third parties on FRAND terms, does not abuse its dominant position, within the meaning of Article 102 TFEU, by bringing an action for infringement seeking an injunction prohibiting the infringement of its patent or seeking the recall of products for the manufacture of which that patent has been used, as long as: – prior to bringing that action, the proprietor has, first, alerted the alleged infringer of the infringement complained about by designating that patent and specifying the way in which it has been infringed, and, secondly, after the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, presented to that infringer a specific, written offer for a licence on such terms, specifying, in particular, the royalty and the way in which it is to be calculated, and – where the alleged infringer continues to use the patent in question, the alleged infringer has not diligently responded to that offer, in accordance with recognised commercial practices in the field and in good faith, this being a matter which must be established on the basis of objective factors and which implies, in particular, that there are no delaying tactics.” – prior to bringing that action, the proprietor has, first, alerted the alleged infringer of the infringement complained about by designating that patent and specifying the way in which it has been infringed, and, secondly, after the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, presented to that infringer a specific, written offer for a licence on such terms, specifying, in particular, the royalty and the way in which it is to be calculated, and – where the alleged infringer continues to use the patent in question, the alleged infringer has not diligently responded to that offer, in accordance with recognised commercial practices in the field and in good faith, this being a matter which must be established on the basis of objective factors and which implies, in particular, that there are no delaying tactics.”
“74. In the present case, according to the description set out in the order for reference, the actions for infringement brought by the proprietor of an SEP, seeking the rendering of accounts in relation to past acts of use of that SEP or an award of damages in respect of those acts of use, do not have a direct impact on products complying with the standard in question manufactured by competitors appearing or remaining on the market. 75. Consequently, in circumstances such as those in the main proceedings, such actions cannot be regarded as an abuse under Article 102 TFEU.”
“In its Huawei judgment, the CJEU established obligations applying to both sides of a SEP-licensing agreement, when assessing whether the holder of a SEP can seek an injunction against a potential licensee without infringing Article 102 TFEU. SEP holders may not seek injunctions against users willing to enter into a licence agreement on FRAND terms, and the CJEU established behavioural criteria to assess when a potential licensee can be considered to be willing to enter into a licence. ”