Court of Appeal allows Lenovo’s appeal for a declaration of an interim licence

Today, the UK Court of Appeal handed down its appeal judgment in Lenovo v Ericsson allowing Lenovo’s appeal and so granting a declaration that “a willing licensor and a willing licensee in the situation of the parties would agree to, and actually enter into, a short-term cross-licence”. As a result, if Ericsson does not enter into the short-term cross-licence that the Court of Appeal has deemed to be FRAND, it will be deemed by the UK Court to be an unwilling licensor. In a decision that closely mirrors the Court of Appeal’s decision in Panasonic v Xiaomi [2024] EWCA Civ 1143, Ericsson were further held to be in breach of their obligation of good faith under clause 6.1 of the ETSI IPR Policy by pursuing their claims for injunctions and equivalent remedies in foreign courts and tribunals, despite Lenovo having undertaken to enter into a licence on the terms determined by the UK Court to be FRAND. The declaration was also held to serve a useful purpose and was not to be refused on the grounds of comity.

This decision from the Court of Appeal, with the leading judgment from Lord Justice Arnold, closely resembles the one delivered last year in favour of Xiaomi in Panasonic v Xiaomi. In those proceedings at first instance, Mr Justice Leech had declined to grant the declaration for an interim licence sought by Xiaomi. However, the Court of Appeal granted a declaration that a willing licensor in Panasonic’s position would agree to enter into, and would enter into, an interim licence of its SEP portfolio pending determination of the final FRAND licence by the UK High Court. The Court of Appeal held that such a declaration served a useful purpose, should not be refused on grounds of comity, and that the amount to be paid under the interim licence should be set as the mid-point between the parties’ respective offers.

The outstanding question in the Lenovo v Ericsson appeal was whether the differences between that case, and the circumstances of Ericsson and Lenovo in this case were sufficient to lead the Court of Appeal to come to a different conclusion as to the granting of a declaration for an interim licence. In short, as Lord Justice Arnold put it, the “essential question” is whether the decision in Panasonic v Xiaomi is confined to its specific facts or whether the reasoning is more widely applicable. 

The Court of Appeal returned to the central question it had posed in Panasonic v Xiaomi at [108], asking “what is the point of Ericsson pursuing the Brazilian, Colombian and US proceedings, and attempting to exclude Lenovo’s products from those commercially important markets, with all the massive attendant effort and expense for both parties?” Ericsson argued that the US proceedings would enable it to achieve a FRAND determination more quickly than the UK, and that being paid an interim payment in the UK sooner was not an advantage as such revenue could not be recognised under generally accepted accounting principles. Lord Justice Arnold found that none of the evidence about accounting practices put forward by Ericsson prevented him from reaching the same conclusion as in Panasonic v Xiaomi – that Ericsson was pursuing foreign proceedings to achieve a better outcome than a determination by the English courts would provide. As in Panasonic, despite not having invoked the jurisdiction of the English Court, Ericsson’s conduct was held to be a breach of its good faith obligation under clause 6.1 of the ETSI IPR policy. Once Lenovo had undertaken to enter into the FRAND licence set by the English Court, Ericsson’s “coercion” was no longer justified.

Similar ground was re-trodden on useful purpose and comity as in Panasonic v Xiaomi with Lord Justice Arnold coming to the same conclusions. The declaration sought served a useful purpose as, notwithstanding Ericsson saying it wouldn’t grant the interim licence regardless of the Court’s decision, the Court of Appeal considered that there was a realistic prospect that Ericsson would reconsider its position. It was noted that comity was an even more important issue in this case since Ericsson had not given an undertaking to be bound by the findings of the English Court.  However, the Court held that the declaration sought did not offend the principle of comity, noting that such a declaration is “less intrusive into the jurisdictions of foreign courts and tribunals than a global FRAND determination”.

A feeling of déjà vu would have been present in the FRAND terms determined by the Court of Appeal. Lenovo had already ceded the cross-licence aspect of the interim licence and were willing to assume the position of an implementer only. The Court of Appeal simply split the difference between Ericsson’s “nine-figure dollar sum” (the sum payable by Lenovo for an interim licence to 31 December 2025 with interest, in accordance Ericsson’s October 2023 offer) and an “eight-figure dollar sum” (the sum payable by Lenovo to Ericsson for an interim licence to 31 December 2025 with interest, in accordance with Lenovo’s January 2025 offer).

Read the judgment here.