In a dispute that dates back to 2019, UK High Court Judge Marcus Smith had determined in a 2024 decision that a global FRAND licence to Optis should cost Apple a lump sum of $56.43 million, covering 11 years of past and future handset sales — a figure that equated to just $0.02 per unit.
In a unanimous decision, UK appeals judges overturned the 2023 ruling, holding that the judge had wrongly discarded expert evidence and created a flawed methodology that underestimated the value of Optis’s patent portfolio.
The Court of Appeal set aside the $56.43 million figure and reinstated a comparables-based approach, concluding that the correct licence fee was $502 million, a near tenfold increase.
With interest, Apple’s total liability exceeds $700 million — making it potentially the highest-value court-determined FRAND licence on record.
The case dates back to 2019, when Optis Cellular Technology filed a lawsuit against Apple in the UK, claiming infringement of eight of its UK patents.
The firm also filed suit in the US District Court for the Eastern District of Texas, which hears the vast majority of patent cases in the country, alleging similar infringements.
Beyond infringement, Optis sought declarations about the terms of a FRAND licence, which requires holders of standard essential patents to offer access to their technologies on fair, reasonable, and non-discriminatory terms.
By obtaining a court-declared FRAND licence, Optis sought to set binding, enforceable terms for Apple’s continued use of its SEP portfolio and unlock the right to a so-called FRAND injunction, effectively restraining Apple’s UK sales unless it agreed to the court-determined licence.
A series of technical trials took place between 2020 and 2022 to assess the validity, essentiality, and alleged infringement of Optis’s patents, several of which were ultimately upheld following several Apple challenges.
From validity to licencing terms, Optis argued that a licence it had previously granted to Google — involving a much higher implied per-unit rate — should serve as the benchmark.
Apple countered that its products command a premium price for reasons unrelated to the SEPs, and that a flat per-unit royalty (rather than a percentage of selling price) was more appropriate.
Both sides put forward complex calculations involving “unpacking” prior deals to extract per-unit rates and then “packing up” to reach a lump sum.
Ultimately, Judge Smith rejected the accountancy evidence from both sides, dismissing the unpacking process as overly subjective.
Instead, he devised his own methodology based on averaging lump sums from 20 historic licences, including one with Google and several in which Apple was the licensee.
Optis appealed the 2024 decision, taking issue with his method, arguing it resulted in a lower-than-expected value.
In a unanimous judgment issued this week, Lords Justices Birss, Arnold and Newey held that Justice Smith had been wrong to discard the expert valuation evidence and instead create his own averaging method, describing the judge’s reasoning as procedurally unfair and “fatally flawed”.
Crucially, the Court found that key criticisms levelled at the experts, including claims they strayed outside their expertise and failed to exercise independent judgment, had never been put to them in cross-examination, making the judge’s wholesale rejection unjustified.
Instead of remitting the case to the High Court, the Court of Appeal accepted Optis’s expert evidence and concluded that the correct licence fee was $502 million.
Gary Moss, chairman who led the EIP team representing Optis, said: “This judgment will go some way to reestablishing the English courts as an appropriate jurisdiction in which SEP holders can litigate FRAND issues.”
