Panasonic Holdings Corporation v Xiaomi Technology UK Limited & Ors

Panasonic v Xiaomi is a specialised but important Court of Appeal decision on standard-essential patents, FRAND licensing and cross-border litigation strategy. The majority held that Panasonic was acting inconsistently with its obligation of good faith under the ETSI IPR Policy by pursuing foreign injunction claims after asking the English court to determine global FRAND terms and after both sides had undertaken to enter into the court-determined licence.

The appeal was about interim relief, not the final long-term FRAND licence. Xiaomi wanted declarations that a willing licensor in Panasonic’s position would enter into an interim licence pending the Patents Court’s final FRAND decision. The majority agreed and allowed the appeal. There was a dissent.

The dispute sat within the world of telecommunications standards. Standards such as 3G and 4G allow products from different manufacturers to work together. That interoperability is commercially valuable because it supports competition, network effects and user confidence that devices will work across markets.

When a patent is essential to implementing a standard, the patent owner may be required under the ETSI framework to give an irrevocable undertaking to license that patent on FRAND terms. The system is meant to protect both sides. Patent owners should receive a fair reward, while implementers should have access to the technology at a fair price.

Panasonic had already chosen the English Patents Court as the forum to determine global FRAND terms for its SEP portfolio. That is commercially significant. It meant Panasonic was asking one court to decide the terms of a worldwide licence rather than forcing country-by-country enforcement everywhere the portfolio existed.

Xiaomi, for its part, had undertaken to enter into the licence the Patents Court would determine. It also offered to take an interim licence and pay royalties while waiting for the final FRAND ruling. So the case was not about an implementer refusing any licence at all. It was about what should happen in the gap before the final court decision.

At the same time, Panasonic was pursuing proceedings in Germany and related foreign forums seeking injunctions. Xiaomi said those proceedings were being used as pressure tactics to force a settlement on terms more favourable to Panasonic than the English court would set. That allegation became central to the appeal.

The Court of Appeal had to decide whether the English court should grant declarations that a willing licensor in Panasonic’s position would agree to enter into, and would enter into, an interim licence pending the Patents Court’s final determination of FRAND terms.

That required the court to examine Panasonic’s conduct under clause 6.1 of the ETSI IPR Policy. The majority treated FRAND as a process, not just an end-point. So the question was not only whether Panasonic would eventually grant a FRAND licence, but whether its conduct in the meantime was consistent with good-faith negotiation.

The court also had to consider utility and comity. Would declarations serve a useful purpose? And should the court refuse relief out of respect for foreign courts dealing with Panasonic’s infringement claims elsewhere?

For a business reader, the practical issue was this: once a SEP owner has asked the English court to set global FRAND terms, and the implementer is willing to take that licence, can the owner still use foreign injunction proceedings to improve its bargaining position before the English court finishes the job?

The Court of Appeal allowed Xiaomi’s appeal by majority. Arnold LJ gave the main judgment, with Moylan LJ agreeing. Phillips LJ dissented.

The majority held that Panasonic was in breach of its obligation of good faith under clause 6.1 of the ETSI IPR Policy by pursuing claims for injunctions in foreign courts despite having invoked the English court’s jurisdiction to determine FRAND terms for a global licence and despite both parties having undertaken to enter into the licence the Patents Court would determine to be FRAND.

A key part of the majority’s reasoning was that the focus should be on Panasonic’s conduct. The court said the real question was what legitimate purpose was served by Panasonic continuing the foreign proceedings when it was already certain that the parties would soon enter into a court-determined global FRAND licence and there was no suggestion Xiaomi could not pay whatever the Patents Court ordered.

The majority concluded that Panasonic was using the exclusionary force of foreign injunctions to try to force Xiaomi to accept terms more favourable than the English court would order. In the majority’s view, that was inconsistent with good-faith FRAND negotiation and amounted to hold-up rather than a legitimate attempt to secure payment.

The majority also held that a willing licensor in Panasonic’s position would enter into an interim licence with Xiaomi. It considered that granting declarations would serve a useful purpose by causing Panasonic to reconsider its position, even if Panasonic said it would not comply voluntarily. The majority rejected comity as a reason to refuse relief, noting that foreign courts would still make their own decisions.

Arnold LJ also addressed interim terms. He said the court was capable of deciding what terms of an interim licence were FRAND for this purpose, and concluded that neither side’s exact proposal had to be adopted. He identified interim terms based broadly on Panasonic’s final licence proposal with two modifications, including a shorter period and a royalty figure set midway between the parties’ competing positions for the interim period, subject to later adjustment when the Patents Court determined the final licence.

Phillips LJ agreed that Panasonic’s conduct was indefensible, but disagreed on remedy. He would have dismissed the appeal. In his view, Panasonic had not undertaken to grant an interim licence pending determination of what was FRAND, and a final declaration at that stage was not the right response. He suggested that anti-suit relief might have been the more conventional interim remedy.

This is not a general business case about ordinary contract negotiations. It is a specialised decision for businesses involved in standards-based technology, especially those dealing with SEP portfolios, FRAND licensing and multi-jurisdictional patent enforcement.

If you are an implementer, the case shows the value of making your willingness clear. Xiaomi’s position mattered because it had undertaken to enter into the final court-determined licence and had offered an interim licence with royalty payments in the meantime. That made it easier for the majority to see Panasonic’s foreign injunction strategy as pressure for a better deal, not a necessary response to non-payment.

If you are a SEP owner, the case is a warning about consistency. If you ask the English court to determine global FRAND terms, your conduct elsewhere may be judged against that choice. Parallel foreign proceedings may still exist, but if they objectively look like a way to extract terms more favourable than the English court’s FRAND outcome, they may damage your position.

The majority also treated FRAND as a process. That means courts may look beyond the final licence terms and examine negotiation behaviour, interim proposals, payment offers and the practical effect of litigation tactics. A party’s subjective belief that it is acting properly may not be enough if the objective effect points the other way.

For most SMEs, the direct relevance will be limited. But for businesses importing, manufacturing or selling connected devices, or licensing telecoms technology, the case is a reminder that SEP disputes are operational as well as legal. Product teams, finance teams and litigation teams need a joined-up strategy.

The judgment is a reminder that courts in SEP disputes look closely at documents, undertakings and commercial behaviour. The majority did not decide the case in the abstract. It looked at what Panasonic and Xiaomi had actually done.

Several points were especially important. Panasonic had invoked the English court’s jurisdiction to determine global FRAND terms. Both sides had undertaken to enter into the licence the Patents Court would determine. Xiaomi had offered to take an interim licence and pay royalties pending that decision. Panasonic was still pursuing foreign injunction proceedings. The majority treated those facts together as showing inconsistency in Panasonic’s position.

The court also noted that Panasonic candidly accepted that its objective in the foreign proceedings was to obtain injunctions in order to achieve a negotiated settlement rather than wait for the Patents Court’s determination. That was commercially significant because the majority saw no legitimate reason for that strategy if Panasonic was already assured of receiving FRAND remuneration soon.

The majority also considered Panasonic’s revised non-enforcement proposal, but did not treat it as an answer to the core problem. In Arnold LJ’s view, it showed that Panasonic appreciated there should be an interim arrangement rather than continued litigation in multiple jurisdictions, while the real dispute was over terms.

If your business is in a standards-based technology market, use this case as a process check. The point is not that every dispute will follow the same path. The point is that your conduct, records and cross-border strategy can shape how a court sees the dispute.

This checklist is most useful for businesses dealing with telecoms standards, connected devices and portfolio licensing. It is much less relevant to ordinary trade mark, copyright or non-SEP patent disputes.

The Court of Appeal judgment was handed down on 3 October 2024. It was an appeal from orders made by Leech J dated 5 and 22 July 2024 in the Patents Court. The appeal was heard on 19 September 2024 and was expedited because the issue was urgent.

This guide focuses on the Court of Appeal decision itself. It does not set out the final long-term FRAND terms for the parties' licence, because that was not the issue finally determined on this appeal.

The decision was not unanimous. Arnold LJ gave the main majority judgment, Moylan LJ agreed, and Phillips LJ dissented on the remedy and would have dismissed the appeal.