The CoA has overturned the High Court’s decision in 𝘚𝘢𝘮𝘴𝘶𝘯𝘨 𝘷 𝘡𝘛𝘌, ruling that it is in general not bad faith for a SEP holder to try and force an implementer to accept determination of FRAND terms by the SEP holder’s preferred court rather than the implementer’s preferred court. The CoA distinguished this case on this basis from the previous cases of 𝘗𝘢𝘯𝘢𝘴𝘰𝘯𝘪𝘤 𝘷 𝘟𝘪𝘢𝘰𝘮𝘪 and 𝘓𝘦𝘯𝘰𝘷𝘰 𝘷 𝘌𝘳𝘪𝘤𝘴𝘴𝘰𝘯, where SEP holders were held to be acting in bad faith by using injunctive relief in other jurisdictions to force implementers to agree to terms more favourable to the SEP holder than the English courts would order. The judgment also considers the weight to be placed on which court is first seised of the dispute, confirming that it is not a ’trump card’.
The decision will be welcomed by SEP holders, who now have a wider remit to apply pressure on an implementer through strategic litigation to accept the FRAND terms determined by the preferred court of the SEP holder. Provided the English courts do not think this is to achieve higher FRAND rates than the English courts would order, such behaviour would not seem to constitute bad faith.
𝘡𝘛𝘌 𝘸𝘪𝘯 𝘰𝘯 𝘢𝘱𝘱𝘦𝘢𝘭
In a first win for patent holders in interim licence disputes, the CoA said that “unless there is a legitimate and substantiated objection to the forum in question”, it is not bad faith for a SEP holder (ZTE) to pressure an implementer (Samsung) to agree to the SEP holder’s preferred FRAND determination venue (here, the Chongqing court in China). Such conduct was held to be “unattractive” by the CoA and not endorsed, but falls short of constituting bad faith.
Importance of court first seised?
The CoA also confirmed that the fact the English court was first seised of this dispute (in this case by two days compared to the Chongqing court ) is not a sufficient basis to conclude ZTE have acted in bad faith. The CoA raised two problems with the principle that the court first seised should determine the FRAND terms: 1) it encourages forum shopping, which is to be discouraged; 2) it is not a principle that has international acceptance – proven in this case by the fact the Chongqing court did not decline jurisdiction despite being second seised.
𝘛𝘩𝘰𝘳𝘯𝘺 𝘪𝘴𝘴𝘶𝘦 𝘰𝘧 𝘤𝘰𝘮𝘪𝘵𝘺
One of ZTE’s grounds of appeal was that the High Court decision contravened comity by interfering with the Chongqing court’s ability to hear the proceedings brought there. This part of the decision courted a lot of discussion and controversy. Perhaps pragmatically, the CoA opted not to decide on this ground of appeal on the basis they had already allowed the appeal on the basis of the ‘bad faith’ point.
