BREAKING NEWS: Mr Justice Mellor hands down $138.7 million FRAND judgment for Interdigital in Lenovo spat

[Henry Yang]

Mr Justice Mellor has today handed down the judgment in Interdigital v Lenovo FRAND trial [2023] EWHC 539 (Pat) determining that the FRAND royalty to be paid by Lenovo to Interdigital for a license to their SEP portfolio is $138.7 million. The FRAND trial was part of the six trials between Interdigital and Lenovo, the other five of which were technical trials A, B, C, D, and E (although two were stayed).

 

The two main issues in this judgment are: 

1. What is the FRAND rate?  Whether Interdigital’s January 2020 offer was FRAND and if not, what terms would be FRAND for Lenovo.
2. What is the remedy (aka type of injunction)?  What remedy is appropriate and in particular, whether Interdigital is entitled to an injunction in respect of its Asserted Patents in so far as they are held valid and essential.  This turned on the conduct of Lenovo (did their conduct amount to that of an "unwilling licensee"?).

The main conclusions of this 225-page long judgment are as follows:

"944.  The result of my comparables analysis above is that the lump sum which Lenovo must pay to InterDigital for a FRAND licence down to 31.12.2023 is $138.7m.

945.   I find no value in InterDigital’s Top-Down cross-check in any of its guises.

946.   Based on the outcome from my comparables analysis, I find that neither InterDigital’s 5G Extended Offer nor Lenovo’s Lump Sum Offer were FRAND or within the FRAND range.

947.   In large part, I reject InterDigital’s case on conduct. Ultimately, however, Lenovo will be put to their election, at which point they will demonstrate whether they are a willing licensee or not." 

Immediate Impressions

Although this Kat is spending some quality time with the judgment, Merpel is always quick to judge.  Her immediate impression is that the Judge was at pains to refer to this decision and case as "this type of FRAND case".  He noted that this type of FRAND case really is not suited to the adversarial process [53].  Delving behind the comments by the Judge throughout the decision really seems that the point here was had the parties explored the middle ground between them and not become entrenched in their positions then this case need not have been before the Judge at all.  Given that Lenovo's case was $80m (plus or minus 15%) and the low range of Interdigital's was $337m, why did the parties not do what the Judge raises through out and explore the middle ground which is not far off from the Judge's finding?    

From [948], the Judge also sets out a number of points about the management of FRAND trials including:

• the need for forensic accountancy experts to use the same data sources
• the need for close case management in relation to supporting arguments like top-down cross-check (and the hedonic price regression which should have been flagged by both parties for what it was, an experiment)
• the PTR should be what a PTR is meant to be - identifying the issues the Trial Judge needs to determine at trial
• the need for realistic trial estimates; the Judge commented that cross-examination of important witnesses and submissions on important issues was curtailed or did not occur at all, which became even more acute when he was writing the judgment (which also flags how far this decision really goes into the general FRAND landscape, especially when coupled with the fact that the calculation is parasitic on one comparable license - more on that later)
• the need for litigants to focus on what issues really matter
• the need for consideration of a regime whereby comparable licenses are disclosed at a start of an action under a suitable confidentiality regime and then only if negotiation with the benefit of these licenses is not fruitful, will the action proceed
• the criticism of Lenovo's legal team as to the management of one of their expert witnesses and the introduction of new evidence during cross-examination, with the warning that this should not happen at any trial

But for now, this Kat will continue to digest this judgment and provide a follow-up analysis of the decision.