Samsung v. ZTE — UK High Court Sets $392 Million FRAND Balancing Payment, Discounting Sanctions-Tainted Prior Licenses

Background

Samsung and ZTE, two of the world’s largest telecommunications equipment and handset manufacturers, both hold large portfolios of standard-essential patents (SEPs) declared to the European Telecommunications Standards Institute (ETSI). They had a prior cross-license agreement (the “2021 PLA”) but were unable to agree on renewal terms—specifically, the price. Both agreed that Samsung, as the net payer due to its far larger mobile phone sales, would owe a lump-sum balancing payment. They could not agree on how much.

Samsung proposed a ceiling of $200 million. ZTE sought $731 million. Their inability to agree spawned litigation across multiple jurisdictions, including the UK, China (Chongqing), Germany, the UPC, Brazil, and the United States. The English Court of Appeal had previously set aside an interim license order, and a parallel FRAND trial in Chongqing covered only cellular SEPs. The UK trial before Justice Meade, held over three weeks in January and February 2026, addressed both cellular and non-cellular SEPs.

The Court’s Holding

Justice Meade set the FRAND lump-sum balancing payment at US$392 million for a court-determined global cross-license.

The core methodology was comparables-based. Both sides proposed prior license agreements as benchmarks, but the court had to navigate a critical complication: ZTE’s negotiating history was severely distorted by U.S. export-control sanctions imposed in 2018, which had crippled ZTE’s bargaining leverage. The court found that ZTE’s 2021 agreement with Samsung and its 2020 agreement with Apple were the best starting-point comparables—but both had been “severely affected by non-FRAND factors,” principally the sanctions overhang.

Key rulings:

• Sanctions as non-FRAND factors: The court discounted the prior ZTE–Samsung and ZTE–Apple licenses because they were negotiated “in the shadow” of U.S. sanctions, which depressed ZTE’s ability to bargain at arm’s length. The ZTE–Apple 2020 agreement was deemed the more useful comparable but required significant adjustments upward.
• ENI licenses rejected: ZTE relied on three Samsung licenses with other counterparties (the “ENI” licenses) where Samsung was the net licensee. Justice Meade rejected these as usable comparables because the counterparties had “different and much stronger portfolios” with numerous “litigation grade” patents and were the “toughest and most experienced licensors.”
• Top-down cross-check rejected: ZTE offered a top-down valuation as an alternative. The court found it unreliable.
• Non-royalty terms: Samsung’s proposed license structure—covering non-cellular patents and products—was the only FRAND structure before the court.
• No compulsion on ZTE: Samsung undertook to accept the court-determined license, but the judgment does not require ZTE to enter into it. ZTE has brought its own FRAND proceeding in China.

Key Takeaways

• Government sanctions can constitute a “non-FRAND factor” that makes otherwise relevant prior licenses unreliable as FRAND benchmarks. Courts may adjust comparable licenses upward when the licensee was negotiating under geopolitical duress.
• Portfolio quality matters: licenses negotiated by licensors with “litigation grade” patent portfolios and extensive enforcement experience are not appropriate comparables for a licensor with a weaker portfolio, even if the licensee is the same party.
• The FRAND lump sum of $392 million split the parties’ positions ($200M vs. $731M), but the court’s reasoning followed its own comparable-license analysis rather than splitting the difference mechanically.
• Multi-jurisdictional FRAND disputes continue to intensify, with parallel proceedings in the UK, China, Germany, the UPC, Brazil, and the U.S. all arising from a single license renewal.

Why It Matters

This is one of the first major FRAND decisions to treat international sanctions as a non-FRAND factor that distorts comparable licenses. For SEP holders and implementers, the ruling signals that UK courts will look behind the headline numbers of prior agreements to assess whether real-world bargaining conditions reflected a truly willing-licensor/willing-licensee dynamic. Companies operating under sanctions—or negotiating with sanctioned counterparties—should expect courts to scrutinize those agreements as potentially unrepresentative of fair market value.

The $392 million figure also demonstrates the enormous financial stakes in FRAND proceedings and the UK Patents Court’s continued willingness to set global license terms, even as parallel proceedings unfold in China and elsewhere. With ZTE pursuing its own FRAND determination in Chongqing and declining to commit to the UK court’s terms, this dispute is far from over.