High Court finds that there is no proprietary estoppel for “late” declarations of standard essential patents under English law – Optis and Unwired Planet v Apple

The Court addressed the question of whether, when a patent is valid and infringed but declared “late”, there is a proprietary estoppel in the favour of an implementer, which prevents the patent holder from enforcing it, or restricts the relief that the patent holder can obtain. The patent family at issue was originally filed by Ericsson on 8 January 2008. On the same day, Ericsson made a related technical contribution to the European Telecommunication Standards Institute (“ETSI”). The relevant part of the ETSI standard (Technical Specification TS36.322) was later “frozen” on 11 December 2008, but the patent family was not declared by Ericsson to ETSI until 20 May 2010, i.e. 17 months after the relevant “freeze date”.

Apple brought two separate arguments as to why it should be entitled to proprietary estoppel as a defence to infringement of the relevant patent (which was found valid by the Court):

1. Apple’s primary “no-IPR” case, which alleged that ETSI and members of the relevant ETSI “Working Group” were under an assurance that Ericsson had no intellectual property rights (“IPR”) over the contribution to ETSI, and therefore ETSI lost the chance to seek an alternative, unpatented solution.
   
   
2. Apple’s secondary “loss of process” case, which alleged that, even if there was no likelihood of the assurance making any difference, in terms of a non-patented solution being sought or found, ETSI’s rules and procedures were not followed (specifically Clause 4.1 of ETSI’s IPR Policy^[2]), and that the “loss of the benefit” of this process is enough to give rise to an estoppel defence.

The “No-IPR case”

The Court summarised the three basic elements of proprietary estoppel to be: (i) assurance; (ii) reliance; and (iii) detriment in consequence of the reliance. All three elements are necessary, but not always sufficient on their own (for example, in some cases, a representation or assurance would also need to have been sufficiently clear and unequivocal). 

The Court determined that Apple’s estoppel defence failed on all three required elements.

Assurance

Apple argued that assurance existed, by Ericsson: (i) “acquiescing in the belief of” the members of the relevant ETSI Working Group that there was no IPR in the contribution; or (ii) having made an implicit assertion (by silence) that there was no such IPR.

However, on the basis of the evidence of Optis’s ETSI expert, Ms Johanna Dwyer, the Court found that the great majority of companies declared patent families to the 3GPP standards after the freeze date (specifically the “Stage 3” freeze date) of the relevant release of the standards, and that this behaviour was widely known to ETSI participants.

The Court found that no member of the relevant ETSI Working Group could reasonably have been under the impression that Ericsson’s contribution was IPR-free, and no member in fact was. Therefore, there was no assurance that Ericsson’s contribution was IPR-free for Apple to rely on.

Reliance and detriment

The Court made a finding of fact that ETSI Working Groups did not assess technical contributions by reference to whether they were, or were likely, to be covered by IPR.^[3] It found that it was a “fact of life” that ETSI standards would be subject to IPR, and the ETSI Working Groups only considered the technical merit of the contributions they discussed. As such, the Court found that there could be no reliance on any assurance made by Ericsson.

As to the hypothetical question of whether there would have been any detriment, since the judge had already found that there was no technically equivalent solution to Ericsson’s contribution, it was held that there was zero chance that another contribution would have been chosen, and so there could be no detriment.

Unconscionability

In cases which consider proprietary estoppel, the Court typically considers whether the behaviour of the “assurer” is unconscionable, as a cross-check on the usual test. On this, Optis raised a “clean hands” point, arguing that it would be inequitable for Apple to rely on proprietary estoppel, as, if Ericsson’s behaviour had been unconscionable then so too had Apple’s, as Apple regularly declared patent families after the relevant freeze dates. However, this argument was not fully resolved, as the Court found that: (i) Ericsson did not behave unconscionably; and (ii) the cross-check only arises when there is a provisional conclusion that the three key elements of proprietary estoppel are present. 

The “Loss of process” case

Apple’s secondary case was that proprietary estoppel arose due to Ericsson’s alleged breach of the ETSI IPR Policy, particularly Clause 4.1. 

On an analysis of the history of ETSI’s IPR Policy, the Court found that, although ETSI “encouraged” early disclosure, ETSI has consistently taken the approach that “late disclosure” is only a problem if a licence was not available for the IPR concerned, or not available on FRAND terms.

As the ETSI IPR Policy is governed by French law, in order to interpret Clause 4.1, the Court determined that it was required to make an assessment of the “common intention of the parties”, rather than stopping at “the literal meaning of the words”.^[4] In view of the historical context of the ETSI IPR Policy and the behaviour of declarants, the Court found that making declarations before relevant standard release freeze dates was not a hard-edged rule. Therefore, Apple’s literal construction of Clause 4.1, which included a definite time limit for each sentence of the Clause, was rejected. Ericsson’s approach to declaration timing was found to be “well within the range of what ETSI declarants generally did”, and that it would have been reasonable for Ericsson to believe that its behaviour complied with Clause 4.1.

With no breach of Clause 4.1, Apple’s secondary case failed. However, the Court opined that Apple’s case would have failed even if Clause 4.1 had been breached, as:

1. a bare breach of a contractual obligation owed to someone else is no substitute for the test for proprietary estoppel (especially in situations where the breach occasioned no loss); and
   
   
2. as a remedy, it would have been disproportionate for a breach of Clause 4.1 of the ETSI IPR Policy to prevent Optis from enforcing the patent or seeking an injunction.

Transfer of the benefit of proprietary estoppel

The Court opined that, even if it was wrong on the existence of proprietary estoppel, there are several reasons why it is unlikely that the benefit would have transferred from ETSI to Apple. For example, because it is not possible to see how ETSI could have a duty to all of its members in this respect.

[1] Optis and Unwired Planet v Apple, Case No. HP-2019-000006, [2021] EWHC 1739 (Pat).

[2] Clause 4.1 of ETSI’s IPR Policy reads: “… each MEMBER shall use its reasonable endeavours, in particular during the development of a STANDARD or TECHNICAL SPECIFICATION where it participates, to inform ETSI of ESSENTIAL IPRs in a timely fashion. In particular, a MEMBER submitting a technical proposal for a STANDARD or TECHNICAL SPECIFICATION shall, on a bona fide basis, draw the attention of ETSI to any of that MEMBER’s IPR which might be ESSENTIAL if that proposal is adopted.” (Underlined and italicised emphasis added).

[3] The Court also found that it would have been impossible to have checked anyway, as: (i) ETSI members often declared patents after the relevant freeze dates; (ii) that declarations often relate to ungranted patent applications; and (iii) there is a lag between a declaration being made and it appearing in ETSI’s IPR database.

[4] Following Article 1156 of the 1804 French Civil Code.