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Last week, the UK High Court handed down its judgment in Samsung v ZTE, determining the FRAND terms of a cross-licence renewal between Samsung and ZTE. It is the fourth FRAND determination, and the first FRAND determination in relation to a cross-licence, given by the English courts. Although the renewal would be a cross-licence, the court ordered Samsung to pay ZTE a lump sum of $392 million as a balancing payment under the renewal. Samsung will be the net payer since Samsung’s mobile phone sales are by far the dominant economic driver and the critical factor was how much should be paid for them.
The judgment is significant as it offers guidance on how the most suitable comparable licences should be identified and how they should be adjusted for ‘non-FRAND factors’. It also discusses rejecting the top-down cross-check proposed by ZTE, which was a key topic in the Optis v Apple Court of Appeal decision.
Samsung’s primary position was that the most appropriate comparables to use were ZTE's own out-licences (i.e. licences of its portfolio), specifically the previously concluded cross-licence between ZTE and Samsung and an out-licence between ZTE and Apple. ZTE’s position was that the most appropriate comparables were three licences that Samsung had concluded with other counterparties, Ericsson, Nokia and InterDigital, in which Samsung was the net payer, so the key portfolios were those of the counterparties.
The court held that the comparables put forward by ZTE were not useable for two main reasons:
(i) the portfolios of the counterparties were very different from ZTE’s; and
(ii) the counterparties’ significant expertise at out-licensing and, particularly, their willingness and ability to litigate likely injected a substantial non-FRAND factor, namely that Samsung had paid in substantial measure to avoid injunction risk, which the court found would be difficult to quantify reliably.
It held that the comparables put forward by Samsung (ZTE’s own out-licences) were the only appropriate comparables, though they were severely affected by non-FRAND factors. Even though the previous cross-licence between Samsung and ZTE had the advantage of being a licence of the same portfolio with the same parties, the court proceeded with the licence between ZTE and Apple as the best comparable for three main reasons:
(i) the licence was less affected by non-FRAND factors so required less adjustment, and less subjective adjustment;
(ii) the licence did not have the complication of being a partial licence of 5G (which was the case with the previous cross-licence); and
(iii) this consequently led to less difficulty when unpacking the licence.
The court went on to explain that, if it had tried to use both comparable licences together in determining the appropriate FRAND rate, the relative unreliability of the previous cross-licence would have affected the overall result, meaning that the court would have faced the difficult task of blending the comparables together, for which neither side argued nor gave the court a roadmap.
The non-FRAND factors did not exclude the comparables put forward by Samsung, but they required adjustment in light of such factors. The court explained that the non-FRAND factors affecting the comparables put forward by Samsung arose from ZTE’s weaker negotiating position, not deliberate bad faith or delaying tactics by Apple or Samsung. These factors included:
(i) ZTE had gone into negotiations making it clear that it wanted a quick deal and would take a lower price to get cash quickly;
(ii) ZTE’s management decided that it had to prioritise establishing licensing business to create an inflow of cash in light of US sanctions;
(iii) ZTE had minimal experience in out-licensing its portfolio and was ill-prepared to license its 5G patents, yet it was negotiating against two of the most experienced and toughest licensee-side negotiating teams; and
(iv) ZTE would have been perceived as having only low willingness to litigate its patents by infringement proceedings, whereas Apple and Samsung were much better placed to defend such claims.
The court held that, because of these non-FRAND factors, ZTE only realised a low price and did not get the objectively appropriate FRAND price as would have been agreed between willing parties not under extraneous pressure. It was therefore entitled to insist on full FRAND value.
To correct these non-FRAND factors, the court made certain upward adjustments to the royalty payment under the ZTE-Apple licence as the best comparable:
(i) a 12.5% upward adjustment to reflect that Apple obtained such a reduction as one of ZTE’s very first licensees; and
(ii) a 5% upward adjustment to reflect that ZTE had to carry on negotiations in respect of its 5G patents despite being ill-prepared to do so, as Apple had insisted on the inclusion of 5G, which advantaged Apple.
The combined effect of these adjustments is that the lump sum paid should notionally be treated as 21% higher. The court also held that the general pressure on ZTE from US sanctions and its need for quick cash was best reflected as a past sales discount of 80% notionally having been given to Apple, which was factored into the mathematics of the unpacking exercise of the ZTE-Apple licence.
The court’s methodology drew a distinction between the unpacking stage (i.e. calculating the effective rates implied by the comparable licences) and the repacking stage (i.e. adjusting the implied rates and applying them to the relevant expected sales or revenues covered by the court-determined licence to give a lump sum figure). Distinct from the non-FRAND factor adjustments made during the unpacking stage, the court noted two necessary adjustments for the repacking stage in order to determine the rates for the court-determined licence. The first was a portfolio adjustment to account for differences in ZTE’s portfolio strength as at the execution date of the licence being unpacked and the valuation date of the court-determined licence. The second was a geographic adjustment, whereby the Court applied a downward adjustment of 50% to account for the difference in balance of sales in emerging versus developed markets.
The court agreed with Samsung that unpacking should be by dollar-per-unit and rejected the uncapped ad valorem approach put forward by ZTE. The court agreed that the uncapped ad valorem approach does not reflect commercial reality and produces distortions when repacking across different average selling prices. It noted that the dollar-per-unit approach is more sensible and accords with what has been done in previous cases such as InterDigital v Lenovo.
While both parties based their valuations primarily on comparable licences, ZTE additionally advanced a top-down analysis as a cross-check. The court explained that although it is entitled to use the top-down cross-check, it is not obliged to do so. It rejected the top-down cross-check because ZTE's portfolio could not safely be assumed to be average or comparable with other large portfolios and, in this case, the top-down cross-check was excessively sensitive to its underlying assumptions and consequently produced such widely varying results that it was incapable of assisting in choosing between the parties’ competing positions, even as a check.
The parties agreed that the FRAND rate determined by the court should be stated as a lump sum. Considering the adjustments explained above, the court concluded that a lump sum of $392 million payable by Samsung to ZTE as a balancing payment for the renewal of the cross-licence is FRAND. Samsung’s position was that a FRAND lump sum royalty was no more than $200 million, whereas ZTE's position was that $731 million was the appropriate FRAND lump sum royalty.
As with previous UK FRAND determinations, the court held that interest is payable on all past sales and held that 5% is a realistic commercial rate supported by the provisions of the comparables.
The $392 million FRAND lump sum royalty determined by the High Court is another instance of English Courts determining a FRAND rate which is significantly closer to that contended for by the (net) licensee, similar to the position in InterDigital v Lenovo. This signals that the UK can continue to be considered a more favourable jurisdiction for implementers when it comes to FRAND determinations.
The decision also highlights the fact that the English courts will not immediately ignore comparable licences affected by non-FRAND factors but will instead calculate and apply evidence-based adjustments where parties face extraneous pressure and unequal negotiating positions. Moreover, this decision is another example of the courts taking a cautious approach to the top-down analysis. While the decision does not close the door on its use, it highlights that it is unlikely to be used, even as a cross-check, where results are highly sensitive to underlying assumptions or where the licensor's portfolio cannot safely be assumed to be average or comparable relative to the broader SEP stack.
A notable feature of this dispute is that ZTE had commenced parallel proceedings in the Chongqing court in China seeking a global FRAND cross-licence (as well as infringement proceedings in the German courts). Although Samsung had undertaken to enter into a UK court-determined licence, ZTE had not (since otherwise it would effectively have had to abandon the Chongqing proceedings). On the same day that this judgment was handed down, we understand that the Chongqing court also handed down its FRAND decision finding that ZTE’s offer of $731 million over a six-year term was FRAND. Therefore, while Samsung is bound by its undertaking to the English courts to accept the UK FRAND determination, ZTE is not and it remains to be seen how the conflict between the two decisions will be resolved. This is another example of the continued jurisdictional tensions in the SEP/FRAND space, which the court alluded to in its judgment, explaining that “this profusion of litigation is a symptom of a dysfunctional system, whose critical problem is the lack of a dispute resolution mechanism within the ETSI rules”. However, as things stand, there appear to be no plans on the part of SSOs to include such mechanisms in their IPR policies.
8 May 2026
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