CA-2025-001926 - [2025] EWCA Civ 1383

Conclusion

For the reasons given above I would allow the appeal. The only question which remains is whether all the declarations made by the judge should be set aside, or only declarations 1, 3 and 4. Declaration 2 simply reflects what is agreed between the parties, and is jurisdictionally neutral because it leaves open whether, and if so by which court, the terms of the interim licence should be adjusted to reflect the terms of the final cross-licence. For example, one possibility would be for the sum paid for the interim licence simply to be treated as a credit against whatever sum is found payable for the final cross-licence. Although a declaration would not normally be made merely because the parties agreed to it, the question here is whether to set aside a declaration that has already been made. In any event, this case is rather exceptional. During the course of argument neither party raised any specific objection to leaving declaration 2 standing, but they had not had the chance properly to consider the matter. I would therefore give the parties the opportunity to file brief written submissions on this question.

I would add that I agree with the observations of Birss LJ in his judgment, and in particular what he says in paragraphs 84 and 85.

Lord Justice Birss:

For the reasons given by Arnold LJ, I also would allow this appeal. Given the importance of this matter and the fact we are disagreeing with a judge of significant experience in this field, I will add a few observations of my own.

As my lord has explained, this case is quite different from the previous cases concerned with interim licences in a FRAND context. In this dispute there are two competent courts both seised with the issue of making a global FRAND determination as between these two parties. The judge rejected Samsung’s criticisms of the Chongqing Court and there is no appeal from that conclusion. The judge also found (and again there is no appeal) that the behaviour of ZTE which was said to be in bad faith was not directed to extracting supra-FRAND rates. These points alone make the case very different from Panasonic v Xiaomi and Lenovo v Ericsson.

Rather, as the judge held, what ZTE were doing was directed at trying to force Samsung to agree to a FRAND determination in Chongqing rather than London. To “force” ZTE to reconsider was the reason for making the interim licence declarations below. A striking aspect of ZTE’s case on this appeal was that a flaw with the scheme of the declarations and interim licence made by the judge was, conversely, that it was not just designed to force ZTE to reconsider Chongqing, it has the effect of forcing ZTE to agree to a FRAND determination in London instead. Despite counsel for Samsung’s best efforts to submit to the contrary, in my judgment there is a significant degree of symmetry between the positions of the two parties in this case. I can see that this aspect will not have been as apparent to the judge below given the range of issues the court had to address, but as matters now stand on this appeal, it is stark.

At this stage it is worth taking a step back. The concept of an interim licence is inherent in the 2015 landmark decision of the Court of Justice of the European Union C-170/13 Huawei v ZTE [EU:C:2015:477]. There at [67] the CJEU identified the idea that in some circumstances it might be for the implementer, in advance of a final resolution of the dispute between the SEP holder and the implementer, to provide appropriate security for the royalties which will end up being due in a licence agreement. Naturally, the CJEU did not need to dwell on this point in detail or work through all the possible permutations, many of which have only emerged in the decade since that decision was given. The key thing was to identify the principle. Once that principle is identified, one is then entitled to ask: what is it that the implementer is getting in return for the financial commitment they are making? Although not spelled out explicitly by the CJEU, the answer is fairly simple. The implementer is demonstrating their willingness to pay for the licence, once the terms can be agreed or resolved, and so, in the meantime the SEP holder ought not to be able to take the implementer’s products off the market by means of an injunction. In other words what the implementer gets in return for the financial commitment is, at least implicitly, a form of licence pending the final resolution of the dispute. It could be called an interim licence. Assuming the sum being committed or paid is calculated on a global basis, then the willingness of the implementer which it embodies is also global in nature.

I would have thought that in most cases, if it was required, a simple determination by a court of the appropriate financial terms to operate in the interim until the parties had signed a final agreement, is all that would be needed, with the sum paid (or committed as security) being taken into account appropriately in the terms of that final agreement. That would apply whether the final terms were agreed in negotiation or settled by any competent court or arbitration. No problem related to alleged bad faith or a lack of comity ought to arise. One would also have thought an interim licence settled in circumstances like these ought to be jurisdiction-neutral, e.g. by providing expressly that any competent court can take its terms into account and by not forcing jurisdiction on unwilling parties.

The difficulty in this case is that the terms of the interim licence itself and the declarations made are designed to seek to force one party to do something they clearly do not wish to do and have no intention of doing. Ground 3 of the appeal was that the particular declaratory relief granted went beyond what was necessary to respond to the mischief identified, even if the judge had been right to identify that mischief. As Arnold LJ has explained, this ground was not developed in oral argument. I will only say that I believe there was scope for argument about the terms of the declarations in this case even if some form of response to what ZTE were doing was appropriate. These terms will always be highly fact-specific and I would have liked to hear full argument about the merits and proportionality of declarations designed to force a party to do or not do something they are clearly unwilling to do, even if their conduct is to be deprecated. I can see utility in a simple declaration of what the terms of an interim licence should be as between the given parties. I use the term “should” advisedly because it does not force anyone to do anything but it may help later to expose and clarify what the motives of one party really are. It might not be necessary or appropriate to go any further. I would also like to have heard full argument about declarations which refer to a willing licensee or licensor in general rather than the parties themselves, and declarations which contain conditional clauses like declaration 4.

The consequences of how to deal with more than one court being seised with the issue of determining what is FRAND will have to be worked out internationally over time on a case by case basis, but the helpful possibility of payment or security from the paying implementer in advance of that determination, and the interim licence implicit in it, ought not to be turned into a tool to force that issue.

If a party really is acting in bad faith, then it can hardly complain if the court seeks to take steps to prevent it, but there may nevertheless still be grounds for a graduated response. For example one would generally wish to avoid creating an impression of a lack of comity, even if analytically a given response does not in fact amount to that. However as I have explained, these issues do not arise in this case because, as my lord has explained and I agree, there is no bad faith here.

Lord Justice Peter Jackson:

I agree with both judgments.