In a judgment that further swings the pendulum back towards the UK being a ‘SEP-owner-friendly’ jurisdiction, the CoA has set the terms of the FRAND licence payable by Apple at a little over $700m ($500m + $200m interest).Β This is a dramatic uplift from the first instance judgment, which set the total figure at a little under $60m.
As well as significantly uplifting the value of the licence, the CoA clarified a number of points concerning how FRAND terms are to be calculated.Β There were several aspects of this case that distinguished it from previous UK FRAND cases, but amongst them were (1) Apple’s arguments that their previous licences (as licensee) should be used as the comparables, rather than Optis’ licenses as licensor; (2) the Judge’s approach to calculating the FRAND rate in the first instance decision.
With regards to (1), the CoA said that the SEP holder’s own licences are the “place to start”, but if other factors render them less good as comparables then the licences of the licensee can be considered. The would-be-licensees licences can therefore be used as comparables in some circumstances, but are not the default starting position.Β These remain the SEP-holder’s licences, on the basis those licences relate to the same portfolio under consideration.
The Judge’s approach to calculating the FRAND rate was also considered.Β The Judge’s approach is concisely summarised at para 101 of the appeal judgment.Β Each of Apple’s licences were put on a common scale by calculating for each licence the implied total lump sum to the whole stack of SEPs.Β A simple average of these figures is calculated, adjustments made to take account past release, and then multiplied by Optis’ share of the stack.
The CoA’s main criticism of this approach is that it treated all of Apple’s licences as comparables, despite the large spread in implied total lump sum values indicating not all of Apple’s licences were FRAND as a result of hold out.Β In so doing, the CoA confirmed that the correct approach is the comparables-based approach that only considers the most appropriate comparables and excludes the others.
Perhaps unsurprisingly, the CoA also rejected the Judge’s distinction between “legitimate” and “illegitimate” hold up and hold out, explaining that the entire basis of the SEP/FRAND system was to both protect the patentee from hold out and the licensee from hold up.
I’m sure much will be written about this judgment in the coming days as it is analysed in more detail, but it is clear that it is likely to have a significant impact on SEP/FRAND litigation strategies and the role of the UK courts in such global disputes.
