Optis Cellular Technology LLC and others (Respondents) v Apple Retail UK Limited and others (Appellants) No 1

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Case summary

Case ID

UKSC/2025/0144

Parties

Appellant(s)

(1) Apple Retail UK Ltd; (2) Apple Distribution International Ltd; (3) Apple Inc.

Respondent(s)

(1) Optis Cellular Technology LLC; (2) Optis Wireless Technology LLC; (3) Unwired Planet International Ltd

Issue

What is the correct approach that UK courts should adopt when determining fair, reasonable and non-discriminatory (“FRAND”) terms for global portfolio licences of standard essential patents? Did the Court of Appeal err in reaching its own determination of the FRAND rate in this case, instead of remitting the matter for re-assessment? Did the Court of Appeal err in its approach to the question of payment of royalties on past sales in FRAND licences? Did the Court of Appeal err in its consideration of the effects of parallel foreign patent infringement proceedings?

Facts

Standard essential patents (“SEPs”) are patents which protect technology that is essential to implementing standards set through international standard-setting organisations. In this case, the Respondent (“Optis”) owns a portfolio of patents that have been declared to the European Technology Standards Institute (“ETSI”) to be essential to the mobile telecommunication standards established by that body. The Appellant (“Apple”) sells products, such as the iPhone, which implement those standards. Importantly, when a patent owner informs ETSI that its patent is essential to a particular standard the owner gives an undertaking that it is prepared to grant licences on FRAND terms to those wishing to implement the standards. As a matter of principle, FRAND is broadly understood as the fair, reasonable, and non-discriminatory terms (including a royalty rate) which a willing licensee and willing licensor would agree. This appeal concerns the correct approach to determining what terms of a mobile telecommunications technology SEP licence are FRAND. In Unwired Planet v Huawei [2020] UKSC 37, the Supreme Court confirmed that the UK courts have jurisdiction to determine FRAND terms of global licences to multinational portfolios of SEPs. In the present case Optis and Apple could not agree on the terms of a FRAND licence (i.e. under which Optis would license its SEPs to Apple). Following the first in a number of trials in the Patents Court (which trials and their appeals established that all of the asserted SEPs were valid and 6 out of the 7 asserted SEPs were essential and infringed by Apple), Apple committed, initially conditionally on the outcome of a trial and appeal on a point of law, to entering into the FRAND licence determined by the UK court. Accordingly, the terms of the licence were settled by the court. At first instance, the judge rejected the expert accountancy evidence provided on behalf of both parties and adopted a method of valuing the FRAND rate that ultimately resulted in a lump sum licence fee of $56.43 million plus interest. By contrast, the Court of Appeal disagreed with the judge’s rejection of that expert accountancy evidence and the judge’s methodology for calculating the FRAND rate and instead adopted and applied what it referred to as a comparables based approach in the sense of identifying the best comparable patent licences, excluding others and working from there. Reversing the judge’s decision and applying its preferred methodology, the Court of Appeal determined that a royalty of $0.15 per unit was appropriate, producing a total lump sum payment to Optis of $502 million, plus interest. In view of the Court of Appeal’s recent case law following the first instance decision, Apple had to concede before the Court of Appeal that it should pay royalties on all past sales back to 2013, reserving its position before the Supreme Court. The Court of Appeal also determined some ancillary issues about the non-royalty terms of the global patent licence and the parallel patent infringement proceedings in the US, deciding that, in the particular circumstances of this case, those proceedings should be used to set a “floor” for the global royalty. Apple now seeks permission to appeal to the Supreme Court against the orders giving effect to the Court of Appeal’s ruling.