
UK Court of Appeal Provides Guidance on Interim Licenses in Latest FRAND Dispute
In Short
The Situation: The United Kingdom's Court of Appeal has issued an important decision on the principles governing the grant of interim licenses in standard essential patent ("SEP") disputes.
The Result: Lenovo's appeal was granted. Lenovo is entitled to an interim cross-license with Ericsson pending the English courts' resolution of their fair, reasonable, and non-discriminatory ("FRAND") dispute.
Looking Ahead: The Court of Appeal's decision provides important guidance on the principles governing the grant of interim licenses in the context of SEP disputes. However, some commentators view this decision as an example of extraterritorial overreach, and we may still see an appeal to the UK Supreme Court, given the importance.
The Ruling
The Court of Appeal delivered a judgment on February 28, 2025, in the case of Lenovo v Ericsson [2025] EWCA Civ 182, allowing Lenovo's appeal against Ericsson. The court held that Ericsson was in breach of its obligation of good faith under clause 6.1 of the European Telecommunications Standards Institute's Intellectual Property Rights Policy by pursuing claims for injunctions and equivalent remedies in foreign courts and tribunals, despite Lenovo having undertaken to enter into a license on the terms determined by the Patents Court to be FRAND. The court declared that a willing licensor in the position of Ericsson would enter into an interim license with Lenovo pending that determination, and set out the FRAND terms for that interim license.
Impact of the Decision
The Court of Appeal's decision further marks the UK courts' willingness to protect implementers in the face of injunctions granted by foreign courts, doing so by declaring the implementer is entitled to an interim license and its clear articulation of the principles governing FRAND terms to provide a robust framework for resolving complex patent disputes. The UK courts' ability to handle global FRAND rates, as established in previous cases such as Unwired Planet v Huawei, further underscores their competence and authority in this area.
It also underscores the importance of good faith negotiations in the context of SEP licensing. The court found that Ericsson's pursuit of injunctions in foreign jurisdictions was aimed at coercing Lenovo into accepting terms more favorable to Ericsson than those that would be determined to be FRAND by the English courts. The court emphasized that both SEP holders and implementers are required to negotiate in good faith to reach FRAND terms. This obligation extends to the process of negotiation, not just the end result. This decision reinforces the need for SEP holders to engage in genuine and fair negotiations with implementers.
Finally, the decision provides clarity on the approach to determining FRAND terms for interim licenses, emphasizing that such terms are designed to hold the ring pending the final determination of FRAND terms. The court recognized that SEPs are subject to a liability regime where the primary remedy is financial, and the role of an injunction is to enforce the SEP holder's entitlement to that financial remedy. By declaring the implementer is entitled to an interim license, the court ensures that the implementer can continue to use the SEPs while the final FRAND terms are being determined, thereby preventing the SEP holder from using the threat of an injunction to extract supra-FRAND terms. This approach provides a balanced solution that protects the interests of both SEP holders and implementers.
Conclusion
The Court of Appeal's decision provides important guidance on the principles governing the grant of interim licenses in the context of SEP disputes. Ericsson plans to appeal the Court of Appeal's decision to the UK Supreme Court.
This case remains one to watch.
Three Key Takeaways
- The UK Court of Appeal's ruling in Lenovo v Ericsson highlights the critical importance of good faith negotiations in the context of SEP licensing.
- The court's decision that Lenovo is entitled to an interim license pending the determination of FRAND terms serves as a mechanism to prevent hold-up by SEP holders.
- Lenovo v Ericsson demonstrates that the United Kingdom remains an attractive jurisdiction for patent litigation, particularly in the context of SEP disputes. However, an appeal of this decision, thought by some to be overreaching, may be forthcoming.