Apple falls short of committing to take court-determined FRAND licence in Optis v Apple... for now

5 minute read
25 October 2021

Last month, the UK Court decided that a party who has been held to infringe a valid and essential patent must provide an irrevocable commitment to take whatever FRAND licence the Court determines, or accept an injunction. Our summary on the original decision can be found here. We also reported that this decision will be appealed.

A follow up judgment to decide the form of order has now been published. The Court reiterated that it had made it clear that Apple was expected to "give a simple and unconstrained undertaking to accept whatever licence was ruled to be FRAND" following a trial planned in June/July 2022. So, has Apple duly provided that undertaking? Not quite.

What is the difficulty?

There were a number of points, Apple said, which made it difficult to provide the straightforward undertaking envisaged by the Court.

  1. Apple wanted the guarantee (a "cap") that the FRAND licence it was expected to take will not be more favourable towards Optis than the offer made by Optis when the litigation started in February 2019 ("Optis Offer").

    This cap issue arises from a not unreasonable concern that Optis may increase, "perhaps substantially increase", the total licence fees it was seeking. Optis declined to promise it would not make such an amendment. However, the Court cautioned that if Optis were to adopt such an approach then it would be open to Apple to allege that such conduct by Optis would itself be an abuse of a dominant position and thus block an injunction – the current competition defences not being sufficient to block the grant of an injunction.

    In any event, the Court thought the argument lacked reality and said it was improbable that the Optis Offer is not in fact the upper bound, and that theoretical arguments about the possibility of the court-determined FRAND licence rate being higher than the Optis Offer, were not very helpful. The Judge encouraged the parties to give consideration to finding a solution to avoid further time-consuming arguments.

    While the Court was critical of Apple's position that it was not able to say whether it could give the undertaking to accept whatever FRAND licence the Court determined, the Court said it would give Apple more time to consider. Apple asked for 14 days, which the Court thought too long but rather than set a prescribed time, gave Apple 48 hours to file evidence as to how much time it really needed and why.
  2. Apple wanted a further contingency, such that any undertaking it gave would disappear if there was a reversal of the finding of validity/infringement of the two standard essential patents (SEPs) upon which the FRAND injunction was based and any final validity/infringement finding in relation to the other two remaining SEPs in the case. This contingency was to ensure that Apple did not give an undertaking to accept any UK Court determined (global) FRAND licence if none of Optis' asserted SEPs are eventually held to be valid and essential.

    The Court considered that the application of the contingency suggested could be complicated because the timing and the results of further trials and appeals were uncertain. Instead, the Court opted to give Apple the ability to apply to the Court to change its undertaking at a stage where there is no possibility of an essential patent remaining in the case.
  3. As a final point to consider, Apple referred to a contractual undertaking it had given to Optis to take the court-determined FRAND licence following a finding that one of Optis' asserted SEP was valid and essential (but now expired). Apple requested that it be released from this contractual undertaking upon giving a suitable undertaking to the Court (that it would take the court-determined FRAND licence).

    The Court declined to release Apple from the contractual undertaking it had given to Optis previously, even though it was unlikely to be any wider than the undertaking the Apple was due to give to the Court. That was a bargain done between the parties, and the Court refused to interfere with it.

Although this decision was published on 20 October 2021, the original decision was made nine days prior.

Update: Apple undertook to the Court that they will accept the FRAND licence as finally determined by the Court (meaning including the Appeal should there be one) with the ability to apply to be released from the undertaking depending on the outcomes of any further patent trials and appeals of the first instance patent decisions. This is because if it transpires that no asserted patents of Optis is valid and essential, then the need to commit to the Court determined FRAND licence to avoid the injunction falls away.

If you have any questions about this article, please contact Huw Evans, Alex Brodie or Seiko Hidaka.

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