The global 5G SEP licensing dispute between Nokia and OPPO has made new progress. On July 3, the Delhi High Court ruled: “Considering OPPO’s status as a pre-licensed party, its admission that its phones use Nokia’s patents, its willingness to renew the 2018 agreement and pay the interim payment by June 2021 at the latest, OPPO’s fact of seeking FRAND rates from Chinese courts and the consistent practice of this court and OPPO’s financial situation, the court finds that the trial court’s judgment is contrary to facts and established legal principles. Therefore, this appeal is allowed and the impugned order is set aside.” 

Based on this, the Delhi High Court issued an interim order requiring OPPO to deposit within four weeks the final payment due to India under the 2018 Nokia-OPPO patent license agreement, which is 23%. It is understood that the ruling was made based on the lower court’s rejection of Nokia’s request for OPPO to pay a security deposit in November last year. Nokia appealed the lower court’s ruling in November last year.

The judgment shows that after the parties failed to execute a new/second license agreement, Nokia filed a lawsuit alleging that OPPO infringed three of its standard essential patents on the grounds that OPPO manufactured, sold and so on cellular devices compliant with 2G, 3G, 4G and 5G telecommunications standards without authorization. These standard essential patents are Indian Patent No. 286352 for “System and Method for Providing AMR-WB DTX Synchronization”, Indian Patent No. 269929 for “Method for Multiplexing Data Non-Associated Control Channel” and Indian Patent No. 300066 for “Signaling of Additional Modulation Information for High Speed Downlink Packet Access”.

Nokia pointed out that according to international and local legal provisions, in almost all cases, implementers of standard essential patents must pay security deposits at the interim stage (PRO-TEM). Nokia has sought an interim security deposit based on OPPO’s latest counter-offer for global licensing or royalty payments proportionate to the 2018 agreement.

OPPO claimed that it had submitted three bank guarantees to Nokia, which have not been rejected so far. OPPO said that it had provided bank guarantees for its counter-offers on November 15, 2021 and March 15, 2022, which also included a standstill clause for non-standard essential patents. Therefore, the bank guarantees should provide sufficient security for both lawsuits involving standard essential patents [CS(COMM)303/2021] and non-standard essential patents [CS(COMM)304/2021].

The court held that the aforementioned bank guarantees provided by OPPO in Germany were in line with the general directions given by the European Court in Huawei v. ZTE , rather than any specific directions passed by any court. The court further held that the bank guarantees could only be encashed if a FRAND agreement had been signed and there was a breach of payment obligations under the unsigned agreement.

Therefore, the court agreed with Nokia’s senior counsel’s view that the German bank guarantee was a “smokescreen” as it would only come into effect after signing a license agreement - meaning that it did not provide any security at all before signing a license agreement. It should also be noted that the above bank guarantees are not subject to the jurisdiction of the Delhi High Court.

In addition, although the German court did not explicitly assess the adequacy or sufficiency of the bank guarantee, its inadequacy in the past can be clearly seen from the following facts: despite providing bank guarantees, the German court found OPPO to be an unwilling licensee and permanently restrained it from manufacturing and selling its devices in that country.

The court held that in order to balance fairness between parties, it had the right to issue an interim order as a temporary arrangement without going into details of the case where facts permitted. At the same time, this view promoted a modern and fair patent system that encouraged originality, creativity and intellectual activity and provided a favorable environment for knowledge transfer. The Delhi High Court further held that an interim security order was different from an injunction as it did not prevent the manufacture and sale of infringing devices. In the facts of this case , an interim security order balanced out implementers’ asymmetric advantage over standard essential patent holders .