English Court of Appeal limits use of interim FRAND licence declarations in SEP disputes

In Samsung v ZTE, the Court of Appeal allowed ZTE's appeal, setting aside Mr Justice Mellor's declarations relating to his finding of bad faith and Samsung's proposed interim licence. The Court of Appeal confirmed that interim licence declarations may be a legitimate remedy in appropriate cases, with Lord Justice Birss drawing a direct analogy with the provision of security under the Huawei v ZTE guidelines.

However, in the absence of a "legitimate and substantiated objection to the forum in question", a standard essential patent (SEP) owner does not act in bad faith merely by pursuing a litigation strategy that puts pressure on an implementer to accept a final fair, reasonable, and non-discriminatory (FRAND) determination in the SEP owner's preferred forum.

The Court of Appeal distinguished this case from previous cases in which interim FRAND licence declarations had been made, as those cases had involved behaviour designed to extract supra-FRAND rates, which was found to be in bad faith. The fact that the English courts were first seised in this matter was not a sufficient basis for concluding that ZTE had acted in bad faith by bringing proceedings in the Chongqing Court in China.

The court was keen also to emphasise a wish to "avoid creating an impression of a lack of comity". This is unsurprising given that issues of jurisdiction and comity have been at the fore in other recent SEP disputes, for example, with the Unified Patent Court recently granting an anti-interim-licence injunction and the English Patents Court responding with anti-anti-suit relief in a dispute between InterDigital and Amazon.

English or Chinese courts?

Samsung commenced English proceedings in December 2024 seeking a global FRAND determination and an interim licence. Although ZTE did not challenge the jurisdiction of the English courts, it brought parallel global FRAND proceedings in the Chongqing Court and pursued infringement actions in multiple jurisdictions. In response, Samsung brought its own infringement actions.

Both parties agreed that there should be an interim cross-licence and agreed on the terms, including the amount that should be paid. The only disagreement was which court should determine the adjustment to effect a final FRAND cross-licence: the English court (Samsung's preference) or the Chongqing Court (ZTE's preference).

At first instance, Mr Justice Mellor had granted Samsung four declarations: (1) ZTE was in breach of its obligation to act in good faith (by seeking to pressure Samsung into accepting the jurisdiction of the Chongqing Court), (2) what the terms of an interim licence would be, (3) that the interim licence should be subject to adjustment by the English Patents Court, and (4) that it would be a breach of ZTE's FRAND commitments for it to refuse to enter the interim licence.

The Chongqing Court had held substantive hearings in September and October 2025 and it is, therefore, a possibility that it might issue its final FRAND determination before the start of the English FRAND trial in January 2026 (or, at any rate, before the English judgment is handed down).

The appeal 

ZTE appealed on four grounds, though ground 3 was not considered by the court as it was not developed by ZTE at the hearing.

Grounds 1 and 2: Bad faith and the relevance of the court first-seised

The court considered the first two grounds of appeal in tandem with two additional grounds on which Samsung contended the first instance order should stand. ZTE's central argument was that the judge erred in treating the English courts being first seised as determinative in his bad faith analysis. Samsung disagreed and further argued that the first instance decision should be upheld because international arbitration practice supports selecting a neutral forum to determine FRAND rates and ZTE’s interim‑licence proposal amounted to a forum non conveniens application "by the back door".

The Court of Appeal was clear to distinguish earlier case law where SEP owners had been found to be acting in bad faith by attempting to force implementers to accept supra-FRAND terms by pursuing injunctive or equivalent relief abroad. Here, in contrast, the Court of Appeal held the judge's decision to grant the first declaration was based "solely" on the conclusion that ZTE was acting in bad faith by bringing foreign claims to force Samsung to agree to a FRAND determination in Chongqing.

As ZTE's objective was to assert its forum preference, not to extract supra‑FRAND rates, the Court of Appeal unanimously held that, though it considered the behaviour to be "unattractive", absent a substantiated objection to the foreign forum (which there was not in this case), the approach was not sufficient to justify a finding of bad faith. There could be no objection of principle to a party's desire to litigate in its home courts. Indeed, jurisdiction rules are often based on a defendant's domicile, and when considering forum a party's location is a factor in favour of a forum, not against it.

Although Samsung argued that ZTE's proposed interim licence terms amounted to a forum non conveniens challenge by the back door, the Court of Appeal rejected this as it was undisputed that the English courts have jurisdiction to determine Samsung's claims for a global FRAND determination. It did not follow, however, that ZTE is obliged to commit to an English determination in preference to any determination by the Chongqing Court.

Samsung's jurisdiction challenge before the Chongqing Court had failed and that court was already engaged in its own FRAND determination. This was true even if, in the Court of Appeal's view, the Chongqing proceedings as "unnecessary and duplicative", which have led to "a significant increase in costs for both parties for no good reason", and that they created "a real risk of inconsistent decisions", given that would apply either way depending on which court was first seised.

Ground 3: Unduly extensive relief

This ground was not pursued. However, Lord Justice Birss stated that he would have like to have heard "full argument" about the merits and proportionality of declarations designed to force a party to do or not do something they are unwilling to do. Although this issue will be fact specific, whether specific performance can be ordered via an interim licence declaration will be an issue for another day.

Ground 4: Comity

The Court of Appeal noted that there was a "real concern" about comity in this case, although it did not need to decide the ground given its conclusions on bad faith.

In a short supplemental judgment, Lord Justice Birss commented that the consequences of how to deal with more than one court being seised with determining what is FRAND will have to be "worked out internationally over time on a case-by-case basis". However, the "helpful possibility" of an interim payment or security from the implementer, and the interim licence implicit in that, "ought not to be turned into a tool to force that issue". In "most cases" all that was needed was a simple determination of appropriate financial terms, with a true-up/true-down mechanism for the final agreement.

Lord Justice Birss highlighted also that the interim licence framework is contemplated by the Court of Justice of the EU in Huawei v ZTE in the form of  an implementer providing appropriate security. This would mean that the implementer would get a form of licence pending the resolution of the dispute in return for their financial commitment. 

Osborne Clarke comment

This decision provides clear guidance on when certain types of interim licence declaration should be granted in SEP disputes. Where both parties are, in principle, willing licensor or licensees and the dispute is over forum for the final FRAND determination, the court is highly unlikely to deploy interim declarations to force an outcome on forum, though whether it would determine jurisdictionally neutral terms for an interim licence remains an open question.

In contrast, the court may be more interventionalist where a party acts in bad faith, for example by attempting to extract supra-FRAND rates through injunctive relief, or where there are legitimate and substantiated objections relating to a SEP owner's preferred forum.

In the absence of a global dispute resolution mechanism for SEP disputes, the Court of Appeal acknowledged that how to deal with more than one court being seised will have to be worked out over time, but did not provide an answer. As Lord Justice Arnold noted, if jurisdiction is not ceded to the court first seised, there is no guarantee that it will be the first to deliver its decision – that is a real possibility in this case.

It remains to be seen how the English courts will manage the interplay with a decision from the Chongqing Court, particularly if it is handed down before the English FRAND trial begins or the English judgment is handed down. There are perhaps echoes of an old judgment by Mr Justice Henry Carr (in Conversant v Huawei & ZTE), where he observed that perhaps the English court could take into account a foreign FRAND determination. Equally, it may simply come down to the practical question of which FRAND determination has to be accepted first to avoid a commercially undesirable alternative.

This decision will be welcome news for SEP owners, with clearer guidance on what behaviour amounts to bad faith and the availability of interim licence declarations. However, in some respects, this decision raises more questions than it answers. Would the English courts be willing to order specific performance when granting interim licence declarations where there is bad faith behaviour? How will courts deal with conflicting global FRAND decisions? What would the English court do if a party violated an interim licence? It is clear that the issues of jurisdiction and comity will continue to dominate SEP disputes for the foreseeable future.