Apple faces iPhone and iPad patent injunction

The court has given Apple time to consider its judgment but has indicated that the company is likely to have to commit to accepting patent licensing terms that it will set at a trial next year to avoid an injunction being imposed on it in the UK in the interim period.

The US technology giant has been accused of being unwilling to agree a licence to use standard-essential patents (SEPs) owned by telecoms company Optis. Optis is bound to license its SEPs on fair, reasonable and non-discriminatory (FRAND) terms in accordance with the intellectual property rights (IPR) policy developed by ETSI, the standard-setting body under which these SEPs were developed. However, the two companies have been unable to agree on what constitutes a FRAND licence for use of the patents globally.

The High Court, most recently in the summer, previously determined that two of Optis’ SEPs are valid, essential and infringed by Apple. It is set to consider two further SEPs in Optis’ patent portfolio in separate trials due to be held before the end of January 2022.

Based on the High Court’s infringement finding for one of its patents, Optis recently asked the court to impose an injunction against Apple to restrain Apple from infringing that patent. However, Apple challenged Optis’ right to an injunction at this stage in the litigation.

Because Optis and Apple cannot agree on what constitutes a FRAND licence in their case, the High Court will determine the issue for them. This is set to be decided following a trial scheduled to take place in June and July 2022. Apple argued that it would be unfair to expect it to commit to accept licensing terms that have not yet been determined. Optis argues that Apple is an unwilling licensee because it takes the benefit of Optis’ FRAND undertaking to ETSI to license its SEPs on FRAND terms without any of the burden – i.e. Apple committing to accept court determined licence terms.

Apple also cited its claims of alleged anti-competitive behaviour by Optis as a further reason why the injunction should not be imposed. According to the High Court, Apple’s competition defence is based on its view that Optis’ proposed licensing terms are “so far in excess of FRAND that they disrupted negotiations” and that by subsequently applying for an injunction against it in that context, Optis abused its position of market dominance, in breach of competition law. The alleged anti-competitive behaviour will be considered in full by the High Court as part of the summer 2022 trial.

Dealing with Optis’ request for an injunction in the interim, Mr Justice Meade considered the wording of the ETSI IPR policy and how it should be interpreted under French law, under which the policy was established. The UK Supreme Court already considered how the ETSI IPR policy balances the respective interests of SEP holders and implementers of technology standards under the ETSI IPR policy, and Mr Justice Meade reflected on the Supreme Court’s views in that regard. The judge said that, where there has been a finding of infringement in respect of a SEP, “the balance is in favour of an injunction in the absence of FRAND terms”.

The judge rejected Apple’s claims that it should not be forced to make an undertaking to the court in respect of agreeing a licence to use SEPs before it knows what the terms of that licence are.

Mr Justice Meade said: “It is not right and not the intention of clause 6.1 [of the ETSI IPR policy] for a party using the technology of a SEP to have the benefit of the patentee’s FRAND undertaking in terms of immunity from being sued, without the corresponding burden of taking a licence.”

“As matters stand, Apple is infringing Optis’ patent rights. It therefore needs a licence now if it is not to be acting unlawfully,” he said.

The judge said that Apple can “remedy this situation” by giving “an undertaking to take whatever licence is set” by the High Court at the summer 2022 trial. He rejected Apple’s further claims that the competition law allegations it has raised should be determined before the court imposes an injunction and dismissed the threat of Apple exiting the market as “hypothetical and not persuasive”.

Mark Marfé, patent law expert at Pinsent Masons, said: “In coming to his decision, Mr Justice Meade also confirmed that the court cannot compel a party to take a licence. Where the court has found an SEP valid and infringed the implementer can choose to rely on SEP holders’ FRAND commitment or submit to the injunction. This choice, on the implementer’s part, is what is unusual about a FRAND injunction. The injunction ceases to have effect if the FRAND licence is entered into.”

During the proceedings, Optis had claimed that technology implementers lose the right to a FRAND licence “forever”, and that SEP owners are entitled in such cases to “an unqualified and permanent injunction”, if the implementers do not commit to accepting unknown FRAND terms to be set by a court prior to an infringement finding. The High Court rejected this argument.

The judge rejected Optis’ claim that Apple would permanently lose the right to a FRAND licence by failing to commit to a licence at the relevant time. The judge held that implementers may decline to commit to a FRAND licence for a number of reasons, including taking the view at an early stage of the proceedings that they did not infringe or that they only had a small presence in the UK. He said that “it would be unfair and unprincipled to punish what was merely a misjudgement by removing the FRAND entitlement permanently”. Mr Justice Meade also rejected Optis’ assertion that a global SEP portfolio must necessarily include valid and infringed SEPs as he said some portfolios will be small and weak and so will not. 

Mr Justice Meade said the “novel” nature of the issues considered by the court meant that it was fair to give Apple some time to consider his judgment. This will enable Apple to determine whether to give an undertaking to accept whatever FRAND terms the court sets next year or to propose an alternative undertaking to avoid an injunction. The judge said, however: “I am sceptical if anything short of committing to the terms that will be awarded at [the summer 2022 trial] will serve, but I will allow Apple time to consider it.”

Sarah Taylor, patent law expert at Pinsent Masons, said “Apple must now decide whether it should agree to take a FRAND licence, on terms yet to be determined, or face an injunction in the UK. Of course, Apple has the right to appeal the decision, and its next steps will be watched with interest by other implementers of standardised technologies.”