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UK Court Sides with Acer and ASUSTeK in Nokia Licensing Battle

In a judgment delivered last week by Mr Justice Mellor, the UK Patents court ruled against Nokia in a dispute over the terms of global licenses for video codec technologies offered on reasonable and non-discriminatory (RAND) terms.The court also granted declarations sought by Acer and asustek (along with Hisense) regarding interim RAND licenses. This is a meaningful victory for Morgan Lewis clients Acer and ASUSTeK.

This decision marks the first time the court has defined the scope of RAND commitments made by standard essential patent (SEP) holders to ITU-T, the standards organization for video codec SEPs. It also clarifies whether an SEP owner can mandate arbitration instead of court determination of RAND rates. Details of the ruling are outlined below.

Acer and ASUSTeK are represented in the United Kingdom by Tim Powell and Hiroshi Sheraton, with support from Benjamin Rowlatt, Kristjan Bloudoff, Kulraj Singh Bhangra, Dania Al-Bayati, and Teal St. Nicklaus.Morgan Lewis also represents Acer in related US International Trade Commission (ITC) proceedings, led by partners Brent Hawkins and Stephanie Roberts and associate Zack Miller.

1. BACKGROUND

Acer and ASUSTeK were negotiating with Nokia for RAND licenses to Nokia’s portfolio of video codec patents, wich Nokia had declared essential to ITU-T standards under H.264 and H.265. nokia initiated legal action in multiple jurisdictions – including the United States, the Unified Patent Court (UPC), Germany, Brazil, and India – seeking injunctions against the Claimants, but without requesting those courts to determine RAND license terms. In response, the Claimants filed proceedings in the United Kingdom, seeking determinations and declarations of RAND terms for global interim and final licenses.

2. KEY FINDINGS OF THE COURT

The court’s decision centered on two primary issues:

• Jurisdiction: Nokia argued the UK court lacked jurisdiction to determine the terms of global licenses. The court rejected this argument, asserting its authority to set RAND terms for licenses covering the UK and, importantly, extending to global licenses.
• Interim RAND Licenses: The Claimants sought declarations regarding interim RAND licenses. The court granted these declarations, establishing a framework for licensing while final terms are negotiated.

The court’s ruling provides clarity on the interpretation of RAND undertakings to ITU-T and confirms that SEP holders cannot unilaterally dictate arbitration as the sole method for resolving RAND rate disputes.

3. IMPLICATIONS OF THE DECISION

This ruling has several vital implications for the technology industry:

• Strengthens Licensee Position: The decision empowers licensees in negotiations with SEP holders, providing a clear path to court determination of RAND rates.
• Clarifies RAND obligations: It establishes a precedent for interpreting RAND commitments to ITU-T, perhaps influencing future licensing negotiations.
• Limits SEP holder Control: The ruling restricts SEP holders’ ability to force arbitration,offering licensees more versatility in dispute resolution.

FAQ

Q: What are Standard Essential Patents (SEPs)?

A: standard Essential Patents are patents that claim inventions essential to implementing a specific technical standard, like video codecs. Owners of seps typically pledge to license them on RAND terms to ensure widespread adoption of the standard.

Q: What does “RAND” mean?

A: RAND stands for Reasonable,Available,and Non-Discriminatory. It’s a licensing commitment made by SEP holders, promising to license their patents on fair terms that don’t unfairly disadvantage competitors.

Q: Why is this case important for video codecs?

A: Video codecs (like H.264 and H.265) are crucial for streaming video and other multimedia applications. Disputes over licensing terms can significantly impact the cost and availability of these technologies.

Q: What is the ITU-T?

A: The