UK judges can set global royalty rates for the use of telecommunications technology, Britain’s highest court said on Wednesday in a pair of cases over how much Huawei Technologies Co (華為) owes US patent owners.
The UK Supreme Court affirmed a decision that Huawei would either have to pay Unwired Planet International Ltd a global rate set by judges or face an order limiting its British sales.
In a related decision involving another patent owner, the court rejected Huawei and ZTE Corp’s (中興) argument that if any court were to establish a global rate, it should be in China, where manufacturing and the bulk of sales are.
Photo: Bloomberg
While Huawei said that it has since settled with Unwired Planet’s parent company, the ruling could effectively make British courts a one-stop shop to set global royalty rates. It also could set off a competition should other countries, such as China, Germany and the US, decide they want to be the arbiter of these disputes.
Since the original ruling, UK tribunals have already become more popular with patent owners.
Companies worldwide are fighting over who profits from fundamental technology in wireless communications. The cases have pitted the owners of patents on standardized technology, including Qualcomm Inc and Ericsson AB, against those who use the systems in their products, including Apple Inc.
Regulators and courts around the world have grappled with how to value patents for essential technology and whether their owners have any rights to limit the use of the inventions.
It is a thorny issue that is becoming more important as the world transitions to the next generation of wireless technology known as 5G.
The unclear rules have frustrated automakers and other manufacturers of Internet of Things devices.
Patent owners want to get compensation for their research, while manufacturers want to reduce their costs.
The “decision makes the UK one of the leading global jurisdictions for the resolution of such disputes,” said EIP, one of the law firms representing the patent holders.
In a statement, Huawei said it “continues to advocate a balanced position” when it comes to licensing of standard-essential patents, calling it “critical to the innovation that brings enormous benefits to our industry and society.”
The “overall feeling” on both sides is that the UK courts are more likely to rule in favor of owners of patents on essential technology, said Dafydd Bevan, head of the high tech group at Marks & Clerk Law.
Companies might opt to limit British sales to avoid the court, he said.
It “could reshape technology licensing deals in the 5G era,” Bloomberg Intelligence analyst Tamlin Bason said.
It “may embolden patent owners like Qualcomm, Nokia and Ericsson, while undermining leverage for Apple and other device makers,” Bason said.
Legal experts debate whether this would mean more or less litigation.
It could set both sides “racing to the foreign courts that they consider will set the most favorable license terms,” said Steve Baldwin, an intellectual property lawyer with Kirkland & Ellis.
The ruling also set out steps judges could take to determine an appropriate global rate.
The decision assumes that not all patents in a portfolio are valid or essential to an industry standard as the potential licensees will try to knock out as many patents as they can.
Still, setting one global rate is consistent with how companies decide their own disputes when litigation is not involved, the court said.
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