Lenovo Touts UK Wins Against Ericsson in Wireless Device, FRAND Licensing Disputes

Yesterday, the UK’s High Court of Justice of England and Wales (EWHC) issued an approved judgment in Motorola Mobility, LLC v. Telefonaktiebolaget LM Ericsson ruling on the scope of a 2011 wireless device licensing agreement between Motorola (a Lenovo company) and Ericsson. According to a Lenovo press release following the decision, this ruling defines the scope of that agreement such that most Motorola devices are covered. This would represent the second legal victory in the UK in recent weeks for Lenovo, Motorola’s owner, following the UK Court of Appeal’s ruling that Ericsson breached fair, reasonable and non-discriminatory (FRAND) obligations related to 4G and 5G standard-essential patents (SEPs) asserted in separate litigation.

The EWHC’s judgment issued yesterday, authored by Mr Justice Meade, followed a preliminary issues trial focused on the scope of the global patent cross-licensing agreement that Motorola Mobility and Ericsson entered into in 2011, about three years before Lenovo purchased Motorola from Google. As Justice Meade noted, this particular ruling arises against the backdrop of a much larger global dispute between Lenovo and Ericsson and only concerns some Ericsson patents and Motorola devices, not any Lenovo products. However, Lenovo and Motorola Mobility had argued that differences in opinion over the 2011 license’s scope “is a major stumbling block to a global agreement being reached.”

Critical Clause in 2011 License Agreement Construed to Cover Actual Products

At particular issue in this ruling was clause 2.4A of the 2011 agreement, which defines the scope of the license granted by the agreement by limiting it to wireless mobile device, network and integrated digitally enhanced network (IDEN) products within the field of Motorola’s business operations, or fields within which Motorola could reasonably expect to operate. Clause 2.4A further identifies that “commercially reasonable updates or extensions” (CRUE) of the licensed products were also covered by the agreement.

In the event that Motorola was acquired, this clause further established that the rights under the agreement would no longer apply to: products developed prior to the acquisition by the acquirer or an affiliate; natural evolutions of the acquirer’s products that are not CRUE versions of the licensed products; and products developed after acquisition by the acquirer, if that limitation doesn’t restrict the sales of Motorola’s licensed products or CRUE versions thereof. Clause 2.4A is a one-way provision that only restricts licenses granted under the agreement to Motorola and places the burden on Motorola to prove that disputed products are not excluded from the agreement.

In construing the relevant clause of the 2011 agreement, Justice Meade began by noting several contextual details not in dispute, including previous licensing agreements between Motorola and Ericsson that were renegotiated to include 4G, extend the capture date to which patents claiming priority would be included in the agreement, and allow for assignment in case of a spin-out, which is what took place when Lenovo purchased Motorola in 2014.

As to the disputed scope of the license under clause 2.4A, particularly the provision’s reference to the licensed products or CRUE versions covered by the agreement, Ericsson generally argued that the language referred to actual products, whereas Motorola contended that they referred more abstractly to categories of products. Justice Meade’s interim conclusion on the meaning of clause 2.4A seemed to track with Ericsson’s position, limiting the license governed by the 2011 agreement to actual Motorola products or CRUE versions within Motorola’s field of business.

Rejected Limitations to Covered CRUE Devices is Another Positive Result for Lenovo

In his opinion, Justice Meade agreed with Motorola that Ericsson’s restrictive approach meant that Motorola devices would be unlicensed prior to the capture date included in the 2011 agreement. However, Justice Meade clarified that the EWHC’s construction of CRUE versions did not exclude Motorola products undergoing successive product improvements. Indeed, the EWHC’s opinion pointedly disagreed with Ericsson on several alleged limitations to CRUE, including origin products, successive and not single step changes, products from different franchises, and 5G products.

Lenovo’s claims that the majority of Motorola devices in question are licensed may comport with the EWHC’s decision, but there is some tension with Justice Meade’s language. For instance, although Justice Meade recognized that successive product changes providing a Motorola device with 5G functionality did not necessarily disqualify its CRUE version status, any 5G updates that required changes to power requirements and other specifications very likely took a product out of CRUE status.

The EWHC’s ruling on the scope of the 2011 license agreement comes about two weeks after the UK Court of Appeal ruled separately that Ericsson’s continued attempts to obtain injunctive relief against Lenovo breached its FRAND obligations related to SEP licensing. In an opinion authored by Lord Justice Richard Arnold, the Court of Appeal determined that Ericsson’s pursuit of equitable remedies despite Lenovo’s willingness to enter a license on court-determined FRAND terms breached the former’s good faith obligations under the IP rights policy adopted by the European Telecommunications Standards Institute (ETSI).

An order entered by the Court of Appeal following the FRAND ruling declared that Ericsson would be in breach of FRAND if it did not enter an interim cross-license with Lenovo within seven days of the FRAND ruling. Lenovo’s recent press release notes that Ericsson has not entered into this license and thus is considered an unwilling licensor under the Court’s order.