UK Court Grants Xiaomi Interim Licence in Patent Dispute with Panasonic

In a significant legal development, the UK Court of Appeal has overturned a High Court ruling, granting Xiaomi the right to an interim licence to use Panasonic’s standard essential patents (SEPs) pending the determination of a global fair, reasonable, and non-discriminatory (FRAND) licence. The judgment, delivered by Lord Justice Richard Arnold on 3 October, was hailed as "groundbreaking" by Xiaomi’s legal team, led by Kirkland & Ellis.

The Dispute

The legal battle between Chinese tech giant Xiaomi and Japanese multinational Panasonic centers on licensing terms for Panasonic’s 3G and 4G patents. Proceedings began in July 2023, with Panasonic seeking an injunction and a declaration of infringement. Unable to agree on FRAND terms, the matter escalated to the UK courts, with parallel infringement cases also underway in the Unified Patent Court (UPC) and German courts in Munich and Mannheim.

Xiaomi had proposed taking an interim licence and paying royalties to Panasonic while waiting for the final decision from the Patents Court. However, Panasonic refused, prompting Xiaomi to seek court intervention.

Court of Appeal's Decision

The Court of Appeal, led by Lord Justice Arnold and supported by Lord Justice Moylan, found Panasonic’s refusal to negotiate an interim licence "indefensible." The court ruled that a willing licensor in Panasonic’s position would have entered into such an agreement, especially since both companies had agreed to follow the English court’s determination of FRAND terms.

The court criticized Panasonic for attempting to coerce Xiaomi into accepting more favorable terms through the threat of injunctions in foreign courts. It stated that Panasonic’s conduct violated its obligation under the European Telecommunications Standards Institute (ETSI) rules to negotiate in good faith and avoid pressuring Xiaomi through exclusionary measures.

Key Points of the Judgment

• Interim Licence: The court ruled that the interim licence should cover the period from 2011 until the conclusion of the FRAND trial, expected on 31 December 2024. The royalty payable would be calculated as a midpoint between Xiaomi's offer and Panasonic’s demand.
• Panasonic’s Conduct: The judgment condemned Panasonic’s use of injunctions in Germany and at the UPC to pressure Xiaomi into accepting terms more favorable than what the English court might order. It emphasized that any rational SEP holder would prefer to be paid sooner rather than later, further highlighting Panasonic’s reluctance to negotiate fairly.
• Breach of Good Faith: The court found Panasonic in breach of its good faith obligations under the ETSI IPR Policy by pursuing injunctions abroad while the English courts were determining the terms of the global licence.

Lord Justice Phillips, while agreeing that Panasonic's conduct was "indefensible," expressed doubt that Panasonic was obligated to enter into an interim licence on terms not yet proven to be FRAND.

Legal Representation

Xiaomi was represented by Kirkland & Ellis, with partners Nicola Dagg, Jin Ooi, and Steve Baldwin leading the case. Panasonic’s legal team included Blackstone Chambers' Andrew Scott KC and 8 New Square’s Isabel Jamal, instructed by Bristows.

Conclusion

The decision marks a significant moment in SEP litigation, with the UK courts stepping in to protect Xiaomi from undue pressure by granting an interim licence. This ruling sets a precedent for future FRAND disputes, emphasizing the importance of good faith negotiations and fair treatment of licensees in the global tech landscape. The FRAND trial is scheduled to begin on 31 October 2024, presided over by Lord Justice Meade.

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