You gotta have faith: Court of Appeal unanimously allows appeal against declarations of bad faith

31/10/25

The Court of Appeal (Peter Jackson, Arnold and Birss LJJ) has allowed ZTE’s expedited appeal ([2025] EWCA Civ 1383) against declarations of bad faith made by the High Court at the request of Samsung ([2025] EWHC 1432 (Pat): see News Item). 

The judgment appears to mark the outer limits of the new and fast-developing FRAND interim licence regime.

The appeal arose in the context of a global standard essential patent (“SEP”) licensing dispute between Samsung and ZTE, a major Chinese SEP-owner.  It is common ground that the parties need a licence to use each other’s patented cellular technology, and that Samsung will be the net payor under that licence, but they have not been able to reach agreement on terms. 

Samsung has brought proceedings against ZTE in the English High Court, seeking a determination of fair, reasonable and non-discriminatory (“FRAND”) terms for a patent licence; the English FRAND trial is listed for early 2026.  ZTE brought proceedings against Samsung for the same purpose in the Chongqing Court, and the Chinese FRAND trial concluded in October 2025.

Following the Court of Appeal’s judgments in Panasonic v Xiaomi [2024] EWCA Civ 1143 and Lenovo v Ericsson [2025] EWCA Civ 182, Samsung asked the English court to determine terms for an interim FRAND licence.  Samsung argued that the interim licence terms should be subject to adjustment by reference to the determination of the English court.  ZTE offered an interim licence on materially the terms sought by Samsung, subject to adjustment by reference to the determination of the Chongqing court. 

Both sides are pursuing injunction applications against the other in various jurisdictions around the world, but have offered to drop those applications if the other party accepts their preferred jurisdiction for the determination of FRAND.

At first instance, Mellor J found that ZTE was acting in bad faith by refusing to sign up to the interim licence terms offered by Samsung, which would have required ZTE to commit to take a licence on the terms to be set by the English court.  Samsung subsequently relied on these declarations to seek ZTE’s expulsion from ETSI, the cellular standardisation body, until a German court granted ZTE an injunction requiring Samsung to withdraw its complaint.

ZTE appealed, arguing that the first instance judgment wrongly proceeded on the implicit premise that an English FRAND determination was the default, and a party’s preference for a determination in a different court was a deviation that required specific justification. 

Although the Court of Appeal had found in prior cases that it was bad faith to use injunction applications in order to obtain higher royalties, this logic did not apply to the use of injunctions to promote a jurisdictional preference (a practice in which both ZTE and Samsung were engaged).

The Court of Appeal unanimously allowed the appeal.  Birss LJ found that “there is no bad faith here” [88], and Arnold LJ held that “unless there is a legitimate and substantiated objection to the forum in question, it does not constitute bad faith for a SEP owner to seek to force an implementer to accept determination of FRAND terms by the SEP holder’s preferred court” [70].  Arnold LJ considered that “Samsung have not seriously attempted” to substantiate their objection to ZTE’s preference for FRAND terms to be set in China [72].  Similarly, the fact that the English courts were first seised of the FRAND dispute was not a sufficient basis to conclude that ZTE had acted in bad faith [74].

It was therefore not necessary to decide ZTE’s argument that the first instance judgment reflected a breach of comity, although the Court recorded that “comity is a real concern in this case” ([78], Arnold LJ; see also [88], Birss LJ).

The judgment can be found here.