UK Court Of Appeal Orders Lenovo To Pay More To InderDigital In ‘Frand’ Dispute

UK Court Of Appeal Orders Lenovo To Pay More To InderDigital In ‘Frand’ Dispute

It covered 3G, 4G and 5G standards for sales between 01 January 2007 and 31 December 2023

The UK Court of Appeal presided over by Lord Justice Richard Arnold has increased the royalties by $35m, excluding interest, that the Chinese tech giant Lenovo must pay to its US rival InterDigital.

The dispute concerns licensing standard essential patents (SEPs) along the fair, reasonable and non-discriminatory (frand) terms.

The entities had appealed last year’s order of the High Court judge Justice James Mellor about the licence amount Lenovo should pay to InterDigital’s SEP portfolio.

The UK High Court is among the world’s few that decided on a ‘frand’ dispute and the correct treatment of past sales by implementers.

It was the second time that the English court had to decide on the ‘frand’ terms. Earlier, Lord Justice Colin Birss ruled on the Unwired Plant vs Huawei case.

The present ruling has raised the lumpsum amount from $138.7m to 178.3m to be paid by Lenovo, considering the interest totaling approximately $240m. The previous amount was $184.9m.

Katie Coltart, the IP Partner at Linklaters in London commented on the uplift in the lump sum. She stated that it reflected what the court described as an ‘internally inconsistent’ approach by the High Court to discount the payments for past sales in comparable licences.

She added, “The High Court erred in finding that heavy discounts for past sales forced upon InterDigital and other SEP holders (including those leading to the comparable licence relied on heavily in calculations LG 2017) were not ‘frand’, but failed to correct the blended per unit rate, derived from LG 2017, to eliminate such non-frand factors.”

The new amount set a new unit ‘frand’ rate for Lenovo, increasing it from $0.24 to $0.30 per unit.

While calculating the sum, the court adjusted the ratios that Lenovo would pay from 0.728 to 0.75. It observed that multiplying $0.30 by 0.75 gave a per-unit figure of $0.225. The new royalty rate was multiplied by 792,571,429 Lenovo product units, totaling $178.3m, calculated by the judge.

Justice Arnold held, “I will ask the parties to calculate the interest due on that figure at the rate of 4 percent compounded quarterly.”

The Linklaters partner, Coltart stated that the court noted a comparable licence analysis – as undertaken by the High Court, which was more reliable for ‘frand’ estimation, and not the InterDigital’s ‘top-down cross-check’ approach.

She added that the comparable analysis approach was “appealing because it is market-driven.” Coltart furthered, “though the decision demonstrates the court’s willingness to look behind market figures to eliminate non-frand elements.”

However, InterDigital contended that the judge should have declared that the US firm was a willing licensor. But the judge had ruled, “It was not necessary to reach any conclusion on this question, because even if InterDigital was a willing licensor, it had not identified any purpose that would be served in this court making a declaration to that effect.”

On the other hand, Lenovo remarked that the new ‘frand’ rate of $0.225 per unit, was “only 6.5 cents higher than what it argued at the trial, representing a limited and very modest uplift of the original royalty rate.”

It continued that apart from the royalty rate, Justice Mellor’s original ruling “remained undisturbed, including his determination of InterDigital’s un-frand conduct.”

On further evidence of its willingness and commitment to ‘frand’ licensing, the Chinese firm stated that it was publicly offering InterDigital $0.225 per cellular unit for a forward-looking licence. It hoped that would resolve the dispute.

John Mulgrew, Lenovo’s vice president, deputy general counsel, and chief intellectual property officer, said he was “encouraged by the decision for the ongoing negotiations with InterDigital, the wider industry IP litigation cases, and how it facilitates the proliferation of affordable innovation to customers around the world.”

Mulgrew added, “The decision is far closer to Lenovo’s original position than InterDigital’s. We believe this is a win for us and reinforces our continued commitment to ‘frand’ licensing and being a willing licensee of supra-frand offers and behavior.”

Upbeat by the outcome, Josh Schmidt, the chief legal officer of InterDigital remarked, “The decision gives us another court win in our licensing dispute with Lenovo.”

Schmidt added, “It takes an important step towards achieving a balance between innovator and implementer by making it harder for implementers like Lenovo to delay taking a license to patented technologies that are the bedrock of connected devices. Lenovo has remaieds unlicensed to our cellular portfolio since the beginning of this year. We remain committed to signing an agreement that includes fair compensation for our patented technologies.”

Meanwhile, Coltart stated that the court’s decision not to rule on whether InterDigital was a ‘willing licensor’ furthered the understanding that “detailed arguments around past conduct in negotiations and in particular allegations of ‘hold up’ and ‘hold out’, are now of significantly diminished value in ‘frand’ proceedings in the UK.”

She added that though the decision improved InterDigital’s position, “the English courts remain a relatively balanced forum when it comes to implementer vs SEP-holder interests, particularly when compared to Germany’s jurisdictions.”