The Greenshoots Podcast by Appleyard Lees – Interim licence declarations in SEP/FRAND litigation

Interim licence declarations in SEP/FRAND litigation – Court of Appeal broadens opportunity for licensees to obtain ‘non-willingness’ declaratory relief against SEP holders

On 28 February 2025, the Court of Appeal (“CoA”) handed down its judgment as part of the ongoing Lenovo v Ericsson SEP/FRAND dispute, reversing the decision of the Patents Court and siding with Lenovo to find that: (1)  Ericsson are in breach of their ‘good faith’ obligations under the ETSI IPR policy by pursuing injunctions and equivalent remedies in foreign courts despite Lenovo undertaking to enter into a licence on terms determined to be FRAND by the Patents Court; and (2) a willing licensor in Ericsson’s position would enter into an interim licence with Lenovo pending determination of that FRAND licence.

This is the third decision from the CoA in recent times concerning interim licence declarations (following Panasonic v Xiaomi and Alcatel v Amazon).  However, the key development that distinguishes this case is that the court made these declarations despite Ericsson (as licensor) never previously invoking the jurisdiction of the English courts to determine a global FRAND licence.  This decision therefore significantly broadens the ability of an ‘implementor’, or licensee, to invoke the jurisdiction of the court to obtain a declaration of ‘non-willingness’ against the licensor in a SEP / FRAND dispute.

It is important to remember that the court did not order the parties to enter into an interim licence, and Ericsson are therefore not compelled to enter into an interim licence as a result of this decision.  It is also at this stage unknown how foreign courts will react to these declarations and the extent to which they will be influenced by them.  Nevertheless, declarations from the English court that the SEP holder has in effect engaged in “hold up” behaviour are likely to be viewed as a powerful remedy in favour of the licensee in the context of global FRAND litigation.

Background to the dispute

This decision is the latest development in a long-running and complex dispute between the parties.  Ericsson are said to have been trying to negotiate a global cross-licence with Lenovo since 2008, and initiated infringement proceedings against Lenovo before the US International Trade Commission (“ITC”) on 11 and 12 October 2023 and before the Eastern District of North Carolina (“EDNC”) on 13 October 2023.

Also on 13 October 2023, Lenovo issued a claim before the English court seeking (amongst other things) the determination of FRAND terms for a global cross-licence.  As part of the UK proceedings, Lenovo made an application on 28 November 2023 seeking a declaration that willing parties in the position of Lenovo and Ericsson would enter into an interim cross-licence pending determination of the global FRAND licence.  This application was heard by the Patents Court in October 2024 and dismissed in its judgment of 19 November 2024 (and was the subject of this appeal before the CoA).

As well as the US, Ericsson also brought proceedings against Lenovo in Brazil (November 2023) and Columbia (November and December 2023), obtaining preliminary injunctions in both jurisdictions.

This background, though involved, is important for understanding the CoA’s reasoning in this decision.

The parties’ arguments

The parties had offered the following undertakings to the Patents Court: Ericsson had undertaken to enter into a cross-licence on terms which were consistent with any judgment of the EDNC (and had given a similar undertaking to the EDNC); Lenovo had undertaken to enter into whatever cross-licence the Patents Court determined to be FRAND.  It is important to note that, due to the way Ericsson had framed their case before the EDNC, there was a possibility that the EDNC would not ultimately determine a global FRAND rate.  Ericsson had therefore not formally agreed to enter into a licence determined by the EDNC to be FRAND and declined to amend their case to do so.

Before the CoA, Lenovo’s argument was that, given the undertakings Lenovo had provided, the only reason Ericsson could be said to be pursuing claims for injunctions in other jurisdictions is to pressure Lenovo to accept terms more favourable to Ericsson than those that will be determined by the Patents Court to be FRAND (i.e. supra-FRAND rates).  Lenovo also argued that any SEP holder acting in good faith would accept Lenovo’s offer of an interim licence and, in these circumstances, they sought a declaration a willing licensor in Ericsson’s position would agree to and enter into an interim cross-licence pending determination by the Patents Court of the global FRAND licence.

Ericsson’s position was that they were entitled to enforce their SEPs in any court of their choosing until Lenovo actually entered into a cross-licence.  They cited the Supreme Court decision of Unwired Planet to say that SEP holders are entitled to obtain injunctions to force implementers to choose between taking a licence and abandoning the relevant market, and that Lenovo’s undertakings to the Patents Court made no difference to this.

Hasn’t the court been here before in Panasonic v Xiaomi?

The CoA considered a similar question on interim licences in Panasonic v Xiaomi.  In that case, Xiaomi sought, and were awarded, a declaration that a willing licensor in Panasonic’s position would enter into an interim licence pending determination of the global FRAND licence.  However, in that case, both Panasonic and Xiaomi had previously given undertakings that they would enter into a global licence with terms determined by the English court to be FRAND.  Despite those undertakings, Panasonic continued to pursue parallel litigation elsewhere and refused to give any undertakings it would not enforce any injunctions it was awarded.

In those circumstances, the CoA found Panasonic was not acting as a willing licensor consistent with its good faith obligations under the ETSI IPR policy.

The crucial difference here was that Ericsson had given no such undertaking to the English court that it would enter into a licence determined by it to be FRAND, and the central question underpinning the appeal was therefore whether the decision of Panasonic v Xiaomi was specific to its facts or more generally applicable.

The judgment

The CoA concluded that Ericsson were in breach of their good faith obligations under the ETSI IPR policy by pursuing claims for injunctions despite Lenovo having undertaken to enter into a licence determined by the Patents Court to be FRAND (and having offered to submit to the determination of FRAND terms by the EDNC).  They also held that a willing licensor in Ericsson’s position would enter into an interim licence with Lenovo pending that FRAND determination.

The CoAs reasoning

The CoA agreed with Lenovo that, despite the factual differences with Panasonic v Xiaomi, the key question remains the same: what was the point of Ericsson pursuing parallel proceedings and attempting to injunct Lenovo in key markets when they are guaranteed to get whatever the English courts determine to be FRAND (plus interest not subject to the statute of limitations)?

The CoA said there were two possible answers to this question: (1) achieving the same result as a determination from the English courts, but more quickly; or (2) achieving a better outcome than a determination by the English courts.

The CoA’s problem with (1) was that it was inconsistent with Ericsson’s conduct and its resistance to enter into an interim licence.  The CoA held that the true reason for Ericsson’s conduct was answer (2) and that Ericsson perceived there to be a real risk the court would determine the offer they had previously made to Lenovo was not FRAND.

The court rebutted Ericsson’s arguments that they were simply exercising their rights available to them in other jurisdictions and that this cannot constitute a lack of good faith.  According to the CoA, the whole point of a SEP owner’s ETSI obligation is that it is an exception from a patentee’s ordinary entitlement to enforce its patent through an injunction.  Secondly, ‘good faith’ is intended to act as a constraint upon a party’s ability to enforce its legal rights solely to its benefit.  Key to the court’s conclusion was that, despite engaging in hold-out in the past, Lenovo had now given an undertaking to enter into whatever licence the English court determined to be FRAND.  Doing so effectively immediately made Ericsson’s continued coercion of Lenovo through its strict legal rights unjustified.

This latter point continues a theme emerging from recent FRAND decisions of the English courts: once an implementer / licensee gives a FRAND undertaking to the court, it is in practice no longer possible for the SEP holder to argue they are an unwilling licensee (no matter how many years negotiations have been ongoing) and in fact the SEP holder risks being labelled an unwilling licensor should they continue to apply pressure through parallel litigation.

Can a licensee now always get a willingness declaration from the English court?

In this case, Lenovo was successful in its application for an interim licence declaration despite the fact that Ericsson, as SEP holder and licensor, had never agreed to enter into a licence determined by the English court to be FRAND.  This decision therefore unequivocally broadens the range of circumstances in which a licensee can successfully obtain a willingness declaration against the SEP holder before the English court.

However, comments from the CoA concerning the adherence of this decision to the principle of comity suggest that there are likely limits to the court’s readiness to issue such declarations.  The CoA acknowledged that the “principled answer” to the question of jurisdictional conflict “might be that the court first seised should determine what terms are FRAND”.  Though in this case the CoA found Ericsson had no other preferred jurisdiction to determine a FRAND licence (as a result of their refusing to amend their case before the EDNC, mentioned above), it nevertheless leaves open the possibility that the English courts might be unwilling to grant these types of declarations in circumstances where the SEP holder has (1) first initiated proceedings in a foreign court and (crucially) agreed to enter into a FRAND licence on terms determined by that court; and (2) not given any undertakings it would be willing to enter into a FRAND licence on terms determined by the English courts. 

Key takeaways

This decision confirms that the decision of Panasonic v Xiaomi is more generally applicable and not specific to its facts.  In declaring Ericsson is in breach of its good faith obligations under the ETSI IPR policy and that a willing licensor in their position would enter into an interim licence, despite Ericsson having never invoked the jurisdiction of the court to determine a FRAND licence, the CoA has seemingly significantly widened the opportunities for licensees to obtain similar declarations in future disputes.

Such declarations do not compel the licensor to actually enter into an interim licence.  One might therefore question what the value of the declarations is in a SEP/FRAND dispute, particularly as the reaction of other courts to these declarations is not yet known.  That is a reasonable question; however, two points are worth bearing in mind.  The first is that, if the licensor was firmly of the belief the declaration would have no material impact on the dispute, they would be unlikely to spend the considerable cost and time of fighting the application that both Ericsson and Panasonic did.  The second (related) point is that, as the CoA themselves noted, would a licensor “really persist in conduct that this Court has unequivocally condemned?”.   Viewed in this context, declarations of willingness are likely to be a useful remedy for licensees seeking to apply pressure to licensors in a SEP/FRAND dispute.