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

Interim licence declarations: a brief summary of the principles

The ETSI IPR Policy requires SEP owners and implementers to negotiate FRAND terms in good faith. The basis for, and nature of, the good faith obligation was explained in Panasonic v Xiaomi at [48] and Lenovo v Ericsson at [82].

The SEP owner’s undertaking to ETSI provides an implementer which is willing to take a licence of SEPs on FRAND terms with a contractual defence to claims of patent infringement. An implementer which has undertaken to the Patents Court to take a licence on the terms determined by the Patents Court to be FRAND (subject to adjustment on appeal) is by definition a willing licensee. Such an implementer will be required to pay royalties at the rate determined by the Patents Court to be FRAND from day one of implementation regardless of limitation periods and to pay realistic interest in respect of past royalties. The implementer therefore cannot be accused of holding out even if it had previously been holding out.

Interim licence declarations are a limited remedy to the problem of hold up by SEP owners after implementers have given such an undertaking. The essential basis for the declarations which this Court made in Panasonic v Xiaomi and Lenovo v Ericsson (Alcatel v Amazon was only concerned with the principle) was that the SEP owners were acting contrary to their obligation to negotiate FRAND terms in good faith: their purpose in pursuing injunctive (or equivalent) relief in other jurisdictions was to try to force the implementers to agree to take a licence on terms more favourable to the SEP owner than the English courts would find to be FRAND. Further, any rational SEP owner would want to be paid at least part of what they were due sooner rather than later, and yet the SEP owners were refusing this because of their desire to coerce the implementers.

The Court considered that the grant of the declaration would serve a useful purpose because it would be persuasive, albeit not coercive. It would not be contrary to comity because, if it led to an interim licence being agreed, it would relieve the foreign courts of burdensome and wasteful litigation; and, if not, it would be up to the foreign courts to make their own assessments of the parties’ conduct. As to what terms for an interim licence would be FRAND, in both Panasonic v Xiaomi and Lenovo v Ericsson the Court essentially took a midpoint between the parties’ most recent royalty rate offers and applied that rate to the anticipated period of the interim licence. (This does not exclude the possibility of another solution in an appropriate case.)

In Panasonic v Xiaomi the parties did subsequently agree to enter into an interim licence on the terms specified by the Court. In Lenovo v Ericsson they did not. All three cases were the subject of global settlements not long after this Court’s decision, which may or may not be coincidental.

Thus the issues raised by an application for a declaration that a SEP owner would enter into an interim licence are as follows:

Is the SEP owner in breach of its obligation to negotiate FRAND terms with the implementer in good faith?

Would the grant of the declaration serve a useful purpose?

Would the grant of the declaration be contrary to comity with foreign courts?

What terms for an interim licence would be FRAND?

The burden of proof lies on the implementer and the court must have a high degree of assurance before granting a declaration.

I should record before proceeding further that ZTE accept that the trio of cases referred to in paragraph 1 above constitute binding authority at this level that the Patents Court has jurisdiction to make an interim licence declaration, but reserve the right to argue to the contrary in the Supreme Court.