Summary
The Court of Appeal has cancelled a RAND trial because it would serve no useful purpose where an undertaking was given not to enforce the right to a FRAND licence in respect of a UK patent which had been held valid and enforceable.
Background
The European Telecommunications Standards Institute (ETSI) sets standards for mobile telephones. Members are obliged to inform ETSI about any essential intellectual property rights (IPRs) which they own, known as standard essential patents (SEPs). They must agree to license these rights to users of the standard on fair, reasonable and non-discriminatory (FRAND) terms.
The Court of Appeal has confirmed the High Court's jurisdiction to award a licence rate for a global patent portfolio, and also to order an injunction in respect of unlicensed infringements for SEPs (Unwired Planet International Ltd v Huawei Technologies Co Ltd, see Briefing "Patent licensing and FRAND: a new approach", www.practicallaw.com/w-011-0614). Leave to appeal Unwired Planet to the Supreme Court has been granted.
Facts
T owns a portfolio of SEPs, which it declared essential to telecommunications DSL standards. Z implements technology in the DSL area and takes advantage of the standards.
A technical trial dealt with the validity, essentiality and infringement of particular patents, and a non-technical trial was to deal with the RAND dispute. Z admitted that there was a real issue regarding the scope and effect of a RAND licence, and undertook to take a licence on agreed or court-determined RAND terms if any patent were found to be valid and infringed.
In the technical trial, one of the patents was found to be valid and infringed, but that patent would expire before the non-technical trial was due to take place. The court ordered an inquiry as to damages for infringement of the valid patent. The court rejected Z's argument that there was no longer any need for the non-technical trial.
T then issued fresh proceedings on two further SEPs relating to the same overall group of standards. Z applied to strike these out as an abuse of process. Z also applied to cancel the non-technical trial on the ground that they had waived their rights to enforce T's RAND obligations to license them in respect of the UK generally. The court held that the second action was not an abuse of process and refused to stay the non-technical trial. Z appealed against the refusal to stay.
Z informed T that, if the RAND trial did not go ahead, they would pay the liquidated sum claimed by T as damages in the action together with any additional interest.
Decision
The court allowed the appeal.
The court has a broad, flexible jurisdiction to grant declaratory relief, but must scrutinise claims and reject declaratory relief where it would serve no useful purpose. The court should consider whether granting relief would serve the aims of justice. Finally, the court must ask whether there were special reasons why the court should or should not grant the declaration.
Before Z waived their right to a RAND licence, the court's declaratory jurisdiction was properly invoked as part of resolving Z’s defence to the grant of the usual relief for patent infringement. Following the waiver, insofar as the declaration sought simply to determine the scope and terms of the licence which T was bound to offer to Z, it would no longer serve a useful purpose. For the same reason, Z had no interest in a determination by the court as to whether T was obliged to grant them a licence for the purposes of resisting that relief. As a consequence, relief had been granted in respect of the patent, and Z had offered to pay the full amount of the damages claimed if the RAND trial did not go ahead.
Under the Unwired Planet decision, it might not be open to Z selectively to claim the right to be granted a RAND licence. If the licence was a unitary, portfolio, worldwide, group to group licence, arguably Z had to take it as a whole or not at all. It did not follow that Z was somehow prevented from saying to T, and the court, that it no longer relied on any licence to which it was entitled to resist the grant of relief for infringement of the UK patents. Such a waiver ought not to be treated as ineffective or invalid. Unwired Planet did not suggest that a patent owner had an independent right to come to the court for a declaration as to the scope and extent of the licence he was required to offer to an implementer, when the implementer expressed no interest in taking such a licence.
T had added a claim for a declaration that Z were not willing licensees, and, by reason of their conduct, were not entitled to a RAND licence. By requesting the court to make such a declaration, T argued that there remained a live dispute concerning RAND conduct that would necessitate the RAND trial in any event. Such a declaration may also have had effect as res judicata in proceedings in foreign jurisdictions, were T to seek to obtain injunctive relief for infringement of patents there.
T argued that Z could achieve, by their strategy of selective, country-by-country waiver, a situation in which T were forced to sue them on a country-by-country basis, which would undermine the Unwired Planet approach to RAND licensing. This was not a real concern because the circumstances which made it commercially possible for Z to waive their right to enforce the RAND obligation in the UK, were unlikely to be commonplace. The patent on which they had lost had already expired in the intervening months between the first instance judgment and the appeal, and they had assessed the risks of being found to infringe any other T patents.
So, questions on which the court's declaratory judgment was sought were better decided by any foreign court in which the issues arose.
Comment
This decision is unusual in that Z boldly changed strategy, voluntarily submitting to an injunction once the technical trial resulted in the possibility of any injunction lasting only three months. This decision was presumably part of a wider global strategy and their view of the possible outcome of the second SEP action, which they failed to have struck out. These circumstances are unlikely to be common. The decision to stay a lengthy and expensive RAND trial which had no clear useful purpose is also in line with the overriding objective.
Of wider significance is how this decision might interplay with the Unwired Planet pending appeals due to be heard by the Supreme Court in October 2019 . Defendants in those cases have criticised the current developing law as amounting to jurisdictional expansionism which should be overturned. The Supreme Court may be assisted by the analysis here. Specifically, the extraction of principles from the Unwired Planet Appeal decision makes clear the limits of the prevailing law, and that the effect of the test will always depend on the facts. FRAND does not only operate on a global scale, and a national licence can be FRAND in appropriate circumstances. This decision illustrates the bounds of the developing case law under Unwired Planet, showing it is not uncontrolled expansionism.
Case: TQ Delta LLC v ZyXel Communications UK Ltd & another [2019] EWCA Civ 1277
