Last week, Sun Patent Trust sued Xiaomi in France for infringement of patents claimed to be essential to the LTE-Advanced standard. In its suit, Sun Patent Trust asked French courts to set a global FRAND rate—something that has never occurred before. In the event this case advances to a final decision, it will have a significant impact on standard-essential patent (SEP) practitioners. With few jurisdictions demonstrating a willingness to set a global FRAND rate for SEPs, France’s self-inclusion on this list has the potential to make it a destination-venue for resolving global SEP disputes.

Background

Sun Patent Trust owns 167 patent families related to the LTE-Advanced standard, which is related to advanced 4G cellular communication. After the collapse of nearly a half-decade of licensing negotiations with Xiaomi, China’s largest smartphone manufacturer, Sun Patent Trust brought suit against Xiaomi in France. 

Sun Patent Trust argues that the French court has jurisdiction to set a global FRAND rate because ETSI, the global standard-setting organization for telecommunications, is headquartered in France. The Paris Judicial Court has cited the presence of ETSI in France as the basis for the Court’s jurisdiction on at least two occasions, and, notably, one of those instances involved Xiaomi arguing that the Court had jurisdiction to set a global FRAND rate. Both of the cited cases settled before the French court could make any rulings, positioning Sun Patent’s Trust’s case against Xiaomi to be the first time a French court declares a global FRAND rate.

Takeaways

There is a long way to go before a French court determines a global FRAND rate, but the prospect of it occurring is significant. To date, the UK is the only European country whose courts have set a global FRAND rate, and, more broadly, China and India have displayed a willingness to do the same. The willingness of these courts to set global FRAND rates has transformed them into popular venues for resolving SEP licensing disputes. If Sun Patent Trust’s suit against Xiaomi results in the setting of a global FRAND rate, it could serve as the catalyst for French courts becoming an attractive destination for global SEP licensing disputes as well. 

On a tactical level, it remains to be seen which SEP litigants—holders or implementors—might benefit more from litigating FRAND disputes in French courts. Given the infancy of Sun Patent Trust’s suit and lack of any other meaningful SEP decisions from French courts, it is unclear how SEP disputes will be handled. SEP litigants should also keep in mind that France is a civil law system, while the UK and the US are common law systems. French higher court decisions can be highly persuasive on lower courts, but these decisions have no formal binding authority—except as to the parties involved in the litigation. As such, one instance of a French court adjudicating a FRAND rate could have little bearing on future French litigation involving, for example, SEPs related to standard-setting organizations other than ETSI.

More broadly, the outcome of the French court decision—even if it results in a global FRAND rate—will raise questions of international comity. Put another way, will the courts of other nations recognize a global FRAND rate set by a French court? For example, just last month, a German court declined to follow a FRAND determination made by a UK court in an SEP infringement suit between InterDigital and Lenovo. In that case, the German court found that the global FRAND rate set by the UK court was unreliable and granted an SEP injunction against Lenovo. This result underscores the uncertainty that might accompany any global FRAND rate that the French court may determine in the case of Sun Patent Trust and Xiaomi.

For now, Sun Patent Trust’s suit against Xiaomi may raise more questions than provide answers, but one thing is for sure: it is a case worth monitoring as it has the potential to reorient SEP litigation tactics on a global scale. A global FRAND rate set by the Paris Judicial Court could have a significant influence on where SEP litigants attempt to resolve global SEP licensing disputes.