Apple owes Texas IP-owning firm $502m for infringing 4G patents, UK Court of Appeal rules in major FRAND case

The UK Court of Appeal has published its ruling in the long-running court battle between Texas-based IP owner Optis Cellular Technology and Apple, upholding a 2022 UK High Court ruling that Apple had infringed two of Optis’ 4G patents.

The Court of Appeal has also significantly increased the what Apple will have to pay Optis from the High Court’s $56.4m to $502m, which with interest could end up around $700m.

The case involves the calculation of Fair, Reasonable and Non-Discriminatory (FRAND) licensing rates for Standard Essential Patents (SEPs).

What are Frand and SEPs, and why do they matter?

SEPs are patents that protect technology which has been declared essential in a technical standard or specification developed by a Standard Development Organisation (SDO) or Standard Setting Organisation (SSO).

The idea behind them is to ensure that devices in a sector such as telecoms and mobile phones are capable of communicating with each other. Without SEPs, for example, mobile phone networks would not exist in their current form and every manufacturer would have to create its own network.

Obviously, owning an SEP can give a company a lot of power in its marketplace, To reduce the likelihood of abuse or price-gouging, SDOs/SSOs will usually ask patent holders to commit to licensing their IP on Fair, Reasonable and Non-Discriminatory (FRAND) terms as a condition of having their patent named as an SEP.

FRAND licensing agreements are supposed to mean SEP holders get fair compensation for the value of their patents, while also reducing the likelihood of SEP holders engaging in anticompetitive behaviour or over-charging.

It is not uncommon, however, for disputes over what fees should be paid for SEPs to end up in the courts in different legal jurisdictions. Indeed, there is something of a competition between countries at the moment to establish which jurisdictions should be effectively setting FRAND licensing rates. This latest decision in the Optis v Apple battle is, as far as the judges involved are concerned, applicable worldwide.

It is worth noting that the licensing fee per unit involved has been set by this ruling at $0.15, after considerable effort by the judges to explore various rates paid in the industry worldwide.

The UK government published a guide to SEPs here.

Optis vs Apple

Optis originally sued Apple in 2019 in the US and the UK. Optis originally won $506m in damages in the US court case, but this was overturned on appeal. In the UK, Optis has won – so far. In the 2022 ruling, the judge decided that Apple should pay $5m a year in fees over an 11 year period during which it was held to be infringing for a total of $56.43m. As mentioned above, the Court of Appeal has increased that sum nearly ten-fold. Its reasoning is set out in the lengthy ruling just published – see this analysis of it by Bird & Bird here.

It is not yet known if Apple will now appeal the latest ruling to the UK Supreme Court.