Dispute resolution and remedies in SEP licensing
This guidance describes the dispute resolution services and remedies available for standard essential patents (SEPs) disputes.
Watch Standard Essential Patents (SEPs) Resource Hub: Part 3 on YouTube.
The guidance on SEP licensing provides information on the process and services available to support the negotiation of a successful SEP licensing agreement between parties. However, there is always a possibility that a disagreement may arise between parties which may delay or overtake the conclusion of a licensing agreement.
There are various routes available to help bring a licensing negotiation to a conclusion. It is important for parties to consider available means of resolving any disputes that are preventing a negotiation from progressing or being concluded, and where appropriate seek legal advice before deciding which form of dispute resolution is most appropriate.
Information provided in this guidance does not constitute legal, business, financial or other professional advice and should not be relied upon when taking business, legal or other decisions. The IPO is not responsible for the use that might be made of this information. Appropriate professional advice should be sought.
This guidance on Dispute Resolution and remedies concerning Standard Essential Patents (SEPs) licensing is not a substitute for proper legal advice. Every effort is made to ensure that the information provided is accurate and up to date as at the time of publication, but no legal responsibility is accepted for any errors or omissions.
Separately, the IPO offers general guidance on how to apply, manage and enforce your patents. For more information on those topics please visit the Intellectual property: Patents webpage.
1. Typical disputes in SEPs and FRAND licensing
Like other patents, a SEP confers intellectual property rights that can be bought, sold or licensed. However, a SEP may be subject to special voluntary commitments on the part of its holder to license the SEP on FRAND terms (see guidance on Technical Standards and Standard Development Organisations). A licence to a SEP grants the licensee permission to do something that would otherwise be an infringement of one or more of the rights conferred by the SEP, such as making, using, selling or importing the product or process which is the subject of the SEP without the consent of the patent owner.
Disputes can arise at any stage of the licensing negotiation, and can include the following:
-
disputes about the validity, essentiality, and/or alleged infringement of a patent (see guidance on Technical Standards and Standard Development Organisations)
-
disputes about FRAND terms and what constitutes FRAND in a particular context (this may include disputes about appropriate royalty rates)
-
breach of an agreement within a contract
-
issues around competition law
Where a SEP holder has indicated that they are prepared to licence their patented technology to others for use in the implementation of a standard, this is usually done as a voluntary commitment given to an SDO to licence their SEPs on FRAND terms and conditions. Licensing SEPs involves several key steps to ensure that an agreement is reached between SEP holders and SEP implementers (licensor and licensee) according to FRAND licensing principles. These are discussed in more detail in the SEP licensing guidance.
The information below will explain the various forms of dispute resolution that may be available to enable parties to understand which form(s) may be suitable for a SEP dispute. A business’ particular circumstances may be a relevant consideration in choosing a suitable method of dispute resolution. Seeking legal advice in relation to a dispute is recommended.
2. Different forms of Alternative Dispute Resolution (ADR)
There are various forms of dispute resolution available to parties other than court proceedings. Unlike court litigation, which is often initiated unilaterally by one party, engagement in other dispute resolution services only happens if agreed between both parties. Parties to the dispute choose the ADR route they consider to be most appropriate.
The following forms of alternative dispute resolution services may be appropriate for a SEP dispute:
-
Mediation
-
Early neutral evaluation (ENE)
-
Arbitration
(a) Mediation
Key features
-
a neutral and independent mediator encourages and facilitates discussions between parties
-
can be a quick resolution depending on the dispute
-
deals with cases at all levels of complexity
-
the mediator does not decide or advise on the case
-
a judge can require parties to resolve their dispute through meditation if they have not done so, before court action (as discussed Churchill v Merthyr Tydfil County Borough Council case)
Possible outcomes/remedies
-
although a non-binding form of dispute resolution, parties can agree to reach a binding settlement and record this agreement into a contract
-
parties may be unable to agree settlement terms, with the dispute remaining live
-
mediation does not provide any remedies such as damages or injunctions (although parties may, as part of any settlement, agree contractual terms which are akin to such remedies)
Mediation can be a quick, flexible, and a confidential way of resolving a dispute. It involves the appointment of a neutral person who acts as the ‘mediator’ to facilitate discussion and negotiation between both parties in a professional setting. The mediator does not decide on the dispute, nor can they enforce a remedy. The mediator’s role is not to offer advice to the parties but to guide the parties to the options available to them and encourage them to come to a suitable settlement agreement. For example, in the SEPs licensing journey, there may be an impasse or a disagreement in negotiations regarding what constitutes FRAND terms.
Mediation cannot result in a resolution of the dispute unless the parties agree settlement terms which are incorporated into a legally binding settlement agreement.
The Intellectual Property Office (IPO) offers a mediation service that can help with disputes on licensing or infringement, though, it does not offer an essentiality assessment service.
For more information on the costs, process and how to book a mediation service, please visit the Intellectual property mediation webpage.
(b) Early neutral evaluation (ENE)
Key features
-
a non-binding dispute resolution service which allows parties to better understand the merits of their respective positions in a dispute.
-
a neutral and independent evaluator (usually a judge or lawyer) provides a non-binding opinion on one or more issues referred to them by the parties.
-
cheaper and quicker than going to court for resolution of a dispute.
-
can address technical and complex cases.
-
Judge has the power to refer parties to ENE without their consent.
Possible outcomes/remedies
-
the evaluator gives their opinion on the merits of the dispute.
-
the opinion is non-binding but is likely to influence the parties’ assessment of the risks which each party will incur if the dispute is not settled.
-
ENE does not provide any remedies such as damages or injunctions.
SEP disputes can include technical evidence and information which can be overwhelming and lead parties in the dispute to spend significant time, money and resources in assessing, formulating, and fighting a case. ENE could be a useful route for the parties to understand the merits of their position and save time and money required to take the case to trial.
For example, there might be in a situation where a potential licensee wants to challenge the FRAND offer received from a SEP holder as they may feel that it does not comply with its FRAND licensing commitments (see SEP Licensing guidance for more on FRAND terms). Instead of challenging this in court, a suitable option in the first instance could be for the potential licensee to request an ENE evaluator to assess the merits of the challenge and the likelihood of its success. Parties involved in SEP licensing disputes can utilise ENE to address a range of disputes including complex and technical issues involving larger businesses.
If there is an existing contractual relationship between the parties, it is likely that the contract will provide for ADR in one or more of its forms, and it may include a requirement for ENE. Whether or not the use of ENE has been agreed by both parties within a contract, the parties still have the flexibility to agree between themselves to refer a dispute to ENE.
The process of ENE involves appointing a neutral person known as the “evaluator” (parties can appoint someone privately or through the courts under the Civil Procedure Rules (CPR)). The evaluator is usually a lawyer or a judge who has the technical and legal expertise in relation to the subject matter of the dispute and provides a non-binding opinion on the merits of the case. An important difference to note between ENE and mediation is that ENE allows the neutral person to give the parties their opinion on the merits of the case. In contrast, a mediator’s role is to facilitate discussion and encourage parties to try and reach an agreement or settlement without addressing the merits of their positions. There are no remedies available to the evaluator to impose on the parties. However, the evaluators’ opinion can be used as the foundation for parties to attempt to settle their ongoing dispute.
There are various court-based schemes which offer ENE services. In addition, there are private institutions, barristers and The Chartered Institute of Arbitrators.
(c) Arbitration
Key features
-
an independent arbitrator or panel of arbitrators hears the dispute and decide on the case
-
can be quicker and cheaper than court litigation depending on the complexity of the dispute and positions of the parties
-
discussions and decisions do not necessarily go on the public record
-
arbitration procedures are tailored to the parties’ needs, and the parties are free to agree on the powers exercisable by the arbitrator(s) regarding remedies
-
parties have the freedom to choose appropriate arbitrators for specific issues with expert knowledge, especially in complex technical cases, such as SEPs
-
the parties can choose one or three arbitrators, or have the arbitrators elected by default
-
may be an attractive option to settle cross border disputes
-
arbitration could be less adversarial than court and allow parties to maintain more constructive dialogue despite disagreements
-
arbitration outcomes are often final unless the parties agree in advance to allow the outcome to be appealed, or unless one of the rare circumstances discussed below occurs.
Possible outcomes & remedies
-
arbitrator(s) give a decision (known as an “award”) on points in dispute which is final and binding on the parties. The award includes the reasons for the decision of the arbitrator(s) and the orders made by the arbitrator in light of that decision.
-
arbitrator(s) can order the losing party to pay costs for the other party in addition to awarding other remedies, including the grant of financial remedies, ordering the parties to do or refrain from doing something, or ordering the specific performance of obligations under a contract which a party has failed or refused to perform
-
commercial remedies are usually enforceable through most courts in the world
A key reason parties may wish to use arbitration in preference to other forms of ADR, is that any decision made by the arbitration panel is typically binding on the parties.
Arbitration offers a private and confidential forum where parties can openly discuss their case without those discussions, or the final award being made public. In the context of SEPs, this may apply to a situation where a dispute is about pricing, and you wish to keep this private due to its commercially sensitive nature and the effect it could have on your business. This concern can be mitigated by using arbitration.
SEPs often involve patent families that are protected across multiple jurisdictions. Engaging in SEP litigation in multiple countries can be expensive and time consuming. If the contract under which the parties have agreed for their dispute to be resolved by arbitration states that any finding can be binding internationally, then an arbitration finding can have global coverage. Although in some circumstances arbitration can be lengthy and costly, depending on the complexity of the case, it is still likely to be quicker than court litigation.
Arbitration is usually agreed between the parties in an existing contract in anticipation of the possibility of a dispute. In cases where no existing contract is yet in place, you can agree to resolve the dispute through arbitration and set up a separate arbitration agreement for this purpose. An arbitration agreement is a contract that evidences the fact that the parties have agreed to resolve the dispute using arbitration and provides clarity on who the parties to the arbitration are, the issues in dispute which the parties have agreed to be resolved by arbitration, the arbitration institute to be engaged, and the language, governing law and jurisdiction (seat) of the arbitration. It may also set out rules about appointing arbitrators and their required qualifications, and it may include provisions on how costs are apportioned, etc. It is worth noting that different arbitration institutes may have different rules and procedures regarding how the arbitration should be conducted in the absence of an agreement or a selected arbitration panel. It is important that you find this information out when deciding which arbitration institute you will use.
Once agreement is reached on the use of arbitration, the process is usually commenced by submitting the dispute to an arbitration institute and then appointing one or more arbitrators (who will hear and decide the dispute). The panel of arbitrators should be neutral, and impartial, and often experts in the subject matter.
An arbitration panel has the power to grant final remedies unless the parties have agreed to something else. The following are final remedies which the arbitration panel can grant:
-
give a declaration on any point which is in dispute
-
order the losing party to pay for the cost of arbitration including the arbitrators fees, and expenses
-
an injunction ordering a party to do or not to do something
-
an order for specific performance i.e., requesting a party to carry out an action in their contracts or to enter into terms (e.g. for a licence)
Arbitration agreements normally provide for the awards to be final and binding, although it is possible for the parties to agree that an award may be challenged in accordance with an agreed arbitral appeal process. A party may have the ability to challenge an arbitration panel’s award in court, but must prove one or more of the following:
-
the panel did not have the jurisdictional powers to make the decision;
-
the panel made a mistake on the application of the relevant laws; or
-
the process of the arbitral proceedings was significantly flawed
Any challenge to an arbitrators’ final award is also subject to strict time limits. UK legislation provides that any challenge must be made within 28 days of the date of the award.
Factors such as choosing the arbitrators, how many arbitrators there should be, and where the arbitration should take place, are some of the things you will need to consider before deciding if arbitration is right for you. You should seek professional or legal advice on whether arbitration is best suited for your circumstances and the issues to be resolved as part of the FRAND licensing negotiation.
3. Court litigation
Key features
-
a court’s decision is binding and enforced on parties (the court being the only final adjudicator of any dispute)
-
parties may wish to go to court to challenge the validity, essentiality, and/or alleged infringement of a SEP or to request a court to determine the terms of a FRAND licence
-
court litigation involves a thorough examination of all the evidence
-
decisions are often published and freely accessible via The National Archives
-
a party may be able to appeal to a higher court
Possible outcomes/remedies
-
a court can order the infringing party to pay damages
-
a court can make orders requiring the losing party to make a substantial contribution to the winning party’s legal costs
-
a court can issue an injunction to prevent a business/individual from doing something
-
a court can penalise bad behaviours or the misconduct of a party, normally by making adverse costs orders against them
-
a court can set the royalty rate for a FRAND licence
-
a court can declare that a patent which has been disclosed as a SEP is either essential or not essential to the standard in question
-
a court can issue an anti-suit injunction to prevent parallel litigation on the same matter in another jurisdiction or where a court in one jurisdiction risks undermining the court of another
There may be instances where ADR is not suitable, or you and the other party could not come to a mutual agreement on ADR terms. A situation may arise, where you offered to resolve a dispute through arbitration, but the other party does not want to participate.
There may be other reasons for seeking court intervention in a licensing negotiation. For example, in the context of a FRAND licensing negotiation, a situation may occur where both parties cannot agree on whether a patent is essential (please see the Standardisation guidance for information on essentiality) and therefore whether it should be included in a licence. The concerned party can request that a court consider relevant evidence relating to the patent(s) in question to decide on validity, infringement and essentiality. Another example could be where neither party could come to an agreement, even after using ADR on what is a FRAND rate. In those circumstances a court may be asked to have a role in to determining the validity, infringement and/or essentiality of SEPs, and a FRAND licence rate.
A court may ask the parties as to why they have not utilised ADR services and may encourage them to try to resolve their disputes through ADR procedures first.
For example, the Civil Procedure Rules (CPR) in the UK outlines a set of rules that manage how litigation is conducted in England and Wales. See: Practice Direction - Pre-action Conduct and Protocols - Civil Procedure Rules (justice.gov.uk). These rules aim to ensure that cases are dealt with efficiently, and at a reasonable cost.
A judge can also order parties to attempt ADR, though the parties cannot be forced to agree to binding arbitration. Failure to engage in ADR or without good reason may result in sanctions, such as costs awards ordered against the non-engaging party, during or at the conclusion of court proceedings.
The Civil Procedure Rules also provide the courts with powers to order parties to disclose, and to allow the other party to inspect, certain documentation relevant to their dispute (these processes are respectively called ‘disclosure’ and ‘inspection’). The court may order the parties to give disclosure before a claim has been commenced, although such orders are normally made only after a claimant has commenced a claim and the defendant has filed its defence. The disclosure rules facilitate the exchange of documentation which is material to the issues in dispute. This helps the parties assess the merits of their position on a more informed basis and may speed up the dispute resolution process by encouraging settlement and consequently remove the need for a trial. This may save significant time and money.
Further information on this can be found under the CPR; please follow the IPO Patents Court webpage for more information on the rules and processes of the courts.
In the United Kingdom, there are various courts that hear a diverse range of disputes. It is important to be aware which courts hear patent-related disputes as there are specialist courts dedicated to hearing disputes relating to patents.
For complex cases that are likely to result in a trial lasting for more than 2 days, which is common in SEP cases, it is likely that it will be heard in the Patents Court which is part of the High Court of England and Wales. Either party can appeal any decisions made by the Patents Court to the Court of Appeal, although permission is not granted as of right and will only be granted if appropriate grounds for appeal exist, and then (if appropriate) to the Supreme Court which is the highest court in the United Kingdom.
Prior to commencing any court proceedings, it is recommended that you seek independent legal advice including in relation to the most appropriate court for any dispute to be heard in.
Typical court remedies for patent infringement and in SEP cases
Where a court concludes that patent infringement has taken place, there are several remedies available for the court to impose on the infringing party as described below.
In order for a remedy to be ordered by a court, the party seeking the remedy must have requested it as part of its claim.
Damages
If a patent owner successfully establishes infringement of its patent in a SEP dispute, it can seek damages. Damages are intended to compensate the patent holder for what it has lost because of the infringement of their valid patent.
Delivery up or destruction
Where appropriate, a court may order a party to ”deliver up” or destroy infringing products which are in their possession or control following a finding of infringement of a patent.
Injunctions
Injunctions are a type of court remedy where a judge orders a party to do something or to refrain from doing something. In the context of SEPs, this will most likely be a final injunction requiring a party to refrain from infringing the SEP, i.e. using the technology which is protected by the SEP without having a licence to do so from the SEP owner. Where infringement is established and validity is upheld, a final injunction will normally be granted to prevent further infringement of the patent for as long as it remains in force or until such time as the infringer enters into a licence. The guidance below describes injunctions available in SEP disputes.
This guidance focuses on applications which are made to the court for injunctions, and does not address the position where a threat of an injunction has been made by a party to the dispute. That is, for example, where a threat of an injunction may force a prospective licensee to accept a higher, or “non-FRAND-rate” to avoid the possibility of an injunction.
Injunctions in SEP cases
Obtaining an injunction in SEPs cases is different compared to ordinary patents cases due to the nature of SEPs and the FRAND licensing commitment given by a SEP holder to an SDO. This starting point means that courts are guided to carefully balance the interests of both parties before granting any remedies.
In SEP cases in the UK, the courts may issue a final injunction when (i) a SEP has been found to be valid and infringed, (ii) the potential licensee is not prepared to enter into a licence on terms determined to be FRAND by the court, and (iii) the SEP holder has committed to grant a licence on those terms. The FRAND commitment in SEPs licensing is further explained in the SEP licensing Guidance.
The order for an injunction may in certain circumstances be ‘stayed’, i.e., suspended until a separate FRAND determination has been made by the court or where the case has been appealed (although an injunction to restrain patent infringement is not automatically stayed just because a judgment is subject to an appeal). If a defendant then refuses to enter into a licence on terms which the court has to be FRAND, the ‘stayed’ injunction will then take effect.
In SEP cases in the UK, under current caselaw, there is only one type of injunction, which is a modified form of a permanent injunction: one where you have an injunction after finding of valid, infringed and essential patent which can be lifted if the party then enters into a licence (known as a FRAND Injunction) as outlined below.
For more information on relevant cases please visit the UK SEPs Case Law guidance in the Resource Hub.
Anti-suit injunctions (ASIs)
In addition to the remedies discussed above, a party may request an ASI. ASIs are a court order preventing a party from either commencing or continuing proceedings in a foreign court.
Generally, ASIs are very uncommon and have not been granted in SEP cases in the UK (please see case law guidance). Before granting an ASI, the UK courts consider if it would be in the parties’ interest to grant one. It is ultimately up to the courts to decide whether to grant an ASI or not.
For further information on court remedies and proceedings for patent infringement please visit the Manual of Patent Practice.
4. List of domestic and international ADR services for SEPs
Below is a non-exhaustive list of domestic and global institutions that offer ADR services. There is more general information in the SEP Resource Hub guidance on international signposting.
5. Caselaw
Resource Hub guidance contains a number of references to SEP cases. For more information on those cases related to SEPs, please visit the SEPs Resource Hub guidance on UK SEPs caselaw.
6. Further IPO SEPs Resource Hub Guidance
- Introduction
- Technical Standards and Standard Development Organisations
- Standard Essential Patent licensing
- International Signposting
- UK SEPs Case Law
- Glossary of terms
7. Disclaimer
This guidance on Dispute Resolution and remedies concerning SEPs licensing does not constitute legal, business, financial or other professional advice and should not be relied upon when taking IP related, business, legal or others decisions. Appropriate professional advice should be sought. This guidance is not a substitute for proper legal advice. Every effort is made to ensure that the information provided is accurate and up to date as at the time of publication, but no legal responsibility is accepted for any errors or omissions.
The IPO provides guidance on how to find specialist and legal IP support: