In InterDigital Technology Corporation & Ors v Lenovo Group Ltd & Ors [2024] EWCA Civ 743both parties appealed a decision by Mellor J about what Lenovo should pay for a licence. The licence was on fair, reasonable and non-discriminatory (FRAND) terms of InterDigital’s portfolio of patents which have been declared essential (standard-essential patents or SEPs) to the European Telecommunications Standards Institute 3G, 4G and 5G standards.
In the High Court, the judge held that Lenovo should pay a lump sum of $138.7 million for a licence covering sales by Lenovo from 1 January 2007 to 31 December 2023 together with interest at 4% compounded quarterly amounting to $46.2 million, a total of $184.9 million.
InterDigital claimed that the judge should have held that Lenovo must pay a lump sum of $388.5 million together with interest at 4% compounded quarterly amounting to $129.3 million, a total of $517.8 million.
On the other hand, Lenovo claimed that the judge should have held that nothing was payable for the period before 27 August 2013, and therefore the lump sum payable was $108.9 million. It also claimed that the judge should not have ordered the payment of interest at all, alternatively that any award of interest should be at a lower rate, simple interest and/or for a shorter period.
The bases for these claims all related in one way or another to a common underlying question, which was the correct treatment of past sales by implementers such as Lenovo when determining what terms were FRAND. InterDigital contended that, although the judge found that licences granted by InterDigital to other implementers in the past had been affected by non-FRAND factors, the judge wrongly failed to take those factors into account when setting the lump sum payable by Lenovo. Lenovo argued that the judge was wrong to hold that Lenovo should pay a royalty for sales before a relevant limitation period and that the judge was wrong to hold that Lenovo should pay interest for past sales.
InterDigital also stated that the judge should have made a declaration that InterDigital was a willing licensor. This raised the issue of whether InterDigital was indeed a willing licensor, and about what purpose would be served by making the declaration sought.
The Court of Appeal decision
Limitation periods
The Court of Appeal said that the judge was correct to rule that limitation periods had no part to play in the assessment of FRAND terms and therefore to require Lenovo to pay royalties in respect of all past sales. Limitation was irrelevant to the determination of FRAND and the lump sum should therefore reflect all past sales by Lenovo.
Interest
The first instance judge accepted that in n appropriate case, the court could withhold interest on royalties, but did not consider that this was the appropriate response to InterDigital’s conduct in this case. The Court of Appeal said that this was an evaluative decision which the judge was well placed to make. Lenovo had not demonstrated any flaw in the judge’s reasoning which justified the Court of Appeal intervening. The judge’s conclusion was amply justified and the decision as to the appropriate interest to award was an evaluative decision which had a proper evidential foundation. The payment of interest did not depend on the SEP owner having made an offer which is FRAND. Furthermore, neither side’s offers were FRAND. Therefore, the Court of Appeal dismissed Lenovo’s appeal against the judge’s decision as to interest.
Unit rate
The Court of Appeal said that the first instance judge had erred in relation to calculating the unit rate and therefore would allow InterDigital’s appeal to the extent of substituting the figure of $0.30 for the figure of $0.24 per unit derived by the judge. In addition, InterDigital’s argument that a correction was required to the adjustment ratio was justified. However, it did not follow that the future-only adjustment ratio should be used.
The High Court judge’s principal reason for rejecting InterDigital’s top-down cross-check was that it was inconsistent with the result of the comparables analysis and the Court of Appeal agreed that the comparables analysis was a much more reliable basis for estimating FRAND than InterDigital’s top-down cross-check. The judge’s finding that InterDigital was not a willing licensor was based on his finding that it had consistently sought supra-FRAND rates from Lenovo. That finding was necessarily influenced by the judge’s decision about what the true FRAND rate was. As the Court of Appeal concluded that the FRAND rate was higher than the judge’s rate, that inevitably placed a question mark over the judge’s finding. However, it did not necessarily follow that InterDigital was a willing licensor. In any event, even if InterDigital were a willing licensor, InterDigital had not identified any purpose that would be served in the courts making a declaration to that effect. In the circumstances that now prevailed, the past willingness or otherwise of both InterDigital and Lenovo was simply irrelevant.
