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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Conversant Wireless Licensing SARL v Huawei Technologies Co. Ltd & Ors [2018] EWHC 2549 (Ch) (02 October 2018) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2018/2549.html Cite as: [2018] EWHC 2549 (Ch) |
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2018] EWHC 2549 ( Ch) | ||
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY LIST (
ChD)
PATENTS
COURT
7 Rolls Building, Rolls Building Fetter Lane, London EC4A 1NL |
||
2018 |
B e f o r e :
____________________
| CONVERSANT WIRELESS LICENSING S.A.R.L. (Incorporated under the laws of Luxemburg) |
Claimant |
|
| - and - |
||
| (1) HUAWEI TECHNOLOGIES CO. LTD (a company incorporated under the laws of the People's Republic of China)(2) ZTE CORPORATION(a company incorporated under the laws of the People's Republic of China)(3) ZTE (UK) LIMITED |
Defendants |
____________________
MR MICHAEL BLOCH QC (instructed by Bristows LLP) for the ZTE Defendants
Hearing dates: 7 and 8 August
2018
____________________
Crown Copyright ©
Mr Justice Henry Carr:
Introduction
China
by the Third Defendant ("ZTE
China").
The substance of the application was compromised following the hearing but, nonetheless, I am asked to determine the costs, everything else having been agreed.
EWHC
2988 at [83] – [97]. He explained that standards exist in mobile phones so that different manufacturers can produce equipment which is interoperable. In this way, manufacturers can compete with each other, and the public can be sure that a 4G phone (for example) will work with any 4G network. The public want up to date technological developments, and the standards will therefore incorporate patented inventions. Inventors must be entitled to a fair return for use of their inventions. However, for the standards to permit interoperability, inventors should not be able to prevent others from using patented inventions incorporated into the standards. A balance is achieved by requiring implementers who use such patented inventions to take an appropriate licence and pay a fair royalty. The appropriate licence is one which is fair, reasonable and non-discriminatory ("FRAND").
China,
which manufactures and sells mobile telephone devices worldwide. Conversant claims to have made a number of offers for a global licence to ZTE
China
that are FRAND. ZTE
China
denies that any of these offers were FRAND. Conversant alleges that no meaningful progress has been made with the ZTE Defendants, who continue to infringe, without taking a licence.
2018,
and in respect of which judgment is pending.
The Jurisdiction Judgment
challenged
the jurisdiction of the English Court on the ground that the claims made by Conversant were not justiciable because they were in substance claims for infringement of foreign patents, the validity of which was in dispute, or that the court should decline jurisdiction on the basis of forum non-conveniens because England was not the proper or appropriate forum.
China
was said to be the appropriate forum. By a judgment dated 16 April
2018:
[
2018]
EWHC
808 ("the Jurisdiction Judgment") this court rejected the Defendants' applications and held that England was clearly and distinctly the most appropriate forum in which to bring these claims. I granted permission to appeal, and the appeal from the Jurisdiction Judgment is pending ("the Jurisdiction Appeal").
China.
I stated that:
"There is nothing to prevent HuaweiChina
and ZTE
China
from continuing in
China
with
challenges
to validity in respect of the
Chinese
patents. If all the
Chinese
patents are invalid or not infringed, then any FRAND licence will need to provide that no royalties should be payable in respect of them, either for the past or the future. If the Defendants are successful in respect of all such patents, then, on the figures provided to me, a large proportion of the royalties which would otherwise be payable will fall away. Furthermore, if the
Chinese
courts determine a FRAND royalty rate for the
Chinese
patents which are valid and infringed, the English court may well decide to include this rate for
China
in any global FRAND licence that it determines."
The Shenzhen Proceedings
China
have brought proceedings in the Shenzhen Intermediate People's Court (the "Shenzhen Proceedings") that ask the Shenzhen court to determine the FRAND royalty rate for the
Chinese
SEPs in Conversant's portfolio. Although Conversant has been aware of the Shenzhen Proceedings since January
2018,
the Shenzhen court did not serve them on Conversant until 11 July
2018.
China:
i) sought a declaration that licence offers made by Conversant violated the FRAND principle (Prayer for Relief, §1);
ii) sought an injunction restraining Conversant from "unfair, unreasonable, discriminatory overpricing and other acts which are in violation of the FRAND principle" (Prayer for Relief, §2). This included bringing the English proceedings; Conversant's conduct in licensing negotiations; and, it would appear, reliance on any licence settled by this Court;
iii) alleged that by bringing the English Proceedings and requesting the English court to make a global FRAND determination, Conversant had undermined ZTE's right to obtain a verdict from the
Chinese
courts, affected international comity and
challenged
the judicial sovereignty of the
Chinese
courts (Section V, heading and third paragraph);
iv) alleged that by bringing the English Proceedings and requesting the English court to make a global FRAND determination, Conversant had violated its FRAND obligations (Section V, heading and final paragraph; and last paragraph of Section II).
v) sought a finding of "liability" in respect of Conversant's acts, including the acts of bringing the English Proceedings and requesting the English court to make a global FRAND determination; Conversant's conduct in licensing negotiations; and, it would appear, reliance on any licence settled by the English court (Section VII).
China,
and created a risk of findings which could be used by ZTE
China
to reverse the result, or interfere with the efficacy, of the English proceedings, or to interfere with any licence resulting from the English proceedings.
Conversant's application
challenging
the Targeted Claims. In my view, this was sensible since the Shenzhen Proceedings were not served until July
2018.
Once they were served, and the
Chinese
court set a tight timetable, this application was brought.
China's
stance was that any amendments required to the Shenzhen Complaint could be dealt with after the Jurisdiction Appeal had been determined. It did not accept that any of the Targeted Claims were wrongful, but offered an assurance, which did not appear to be legally binding, that it would not seek an injunction in
China
to restrain the English proceedings. In its evidence in answer to this application, served on 1 August
2018,
ZTE
China
offered the same limited assurance and continued to contend that the Targeted Claims were legitimate. It also alleged that Conversant had delayed unjustifiably and pointed to delays in the
Chinese
proceedings if it was required to amend and re-serve the Shenzhen Complaint.
China
offered a much more extensive package of binding undertakings and agreements to resolve the application. After a brief initial consideration, Conversant made clear that it did not consider that the offer went far enough and further drafting was required. The parties then engaged in further discussion and an Order was made by consent on 17 August
2018.
China
has made significant
changes
which have removed or neutralised the principal aspects of the Targeted Claims which were
challenged
by this application. In particular, ZTE
China
has agreed to amend the Complaint by removing prayer 2 and most of prayer 1; to remove all claims for liability which might involve claims as to damages or other financial relief; to remove or heavily amend most of the factual allegations to which Conversant objected; not to bring any further claims akin to those deleted by amendment for liability or any financial relief; and not to rely on any alleged res judicata arising out of the Shenzhen Proceedings other than in relation to the FRAND rate and FRAND licence terms for
Chinese
Patents.
China
that it has begun the process of amending the Shenzhen Complaint. Conversant has provided the necessary authority to its
Chinese
lawyers to accept service of the amended Shenzhen Complaint. Conversant contends that the overall result of the Order is that it has succeeded on this application.
Discussion
"…where litigation had been settled save as to costs there was no convention that there should be no order as to costs … the court's overriding object was to do justice between the parties without incurring unnecessary court time and additional cost; that where it was obvious which party would have won had the substantive issues been fought to a conclusion it would be appropriate to award costs to that party; that where that was not obvious, the extent to which the court would be prepared to look into the previously unresolved substantive issues in order to determine the issue of costs would depend on the circumstances of the case, including the amount of costs at stake and the conduct of the parties; that in the absence of a good reason to make a specific order the court would make no order as to costs …"
China
to amend its Complaint in the Shenzhen Proceedings to remove those parts of the Targeted Claims which have now been deleted, failing which I would have granted an anti-suit injunction, in accordance with the principles set out in the judgments of Lord Goff in Aerospatiale v Lee Kui Jak [1987] AC 871 at 892 – 897 and Airbus v Patel [1999] 1 AC 119 at 133 - 140 as summarised by Toulson LJ in Deutsche Bank AG v Highland Crusade Offshore Partners LP [2010] 1 WLR 1023 at [50]. I consider that those aspects of the Targeted Claims which have now been agreed to be deleted or amended were vexatious, in that they sought to obstruct, or could have had the effect of obstructing, pending proceedings before the English court; or of undermining or frustrating the performance of a judgment given by the English court. It was not necessary for ZTE
China
to advance these Targeted Claims in the Shenzhen Proceedings, since Mr Bloch QC explained that ZTE
China
wishes to make the amendments that it has now agreed to as it considers that they represent an improvement to the Shenzhen Complaint.
China
resists an order for costs. First, Mr Bloch submitted that costs should be reserved pending the determination of the Jurisdiction Appeal. It was suggested that the court cannot determine the extent to which ZTE's conduct was vexatious without regard to whether the court's seizure of jurisdiction was appropriate. It was argued that in granting permission, I recognised that the appeal had a realistic prospect of success and therefore that it might not have been appropriate to exercise jurisdiction.
2018,
precipitated this application. The Shenzhen court set a tight timetable, with a possible trial date in January 2019. It was apparent that the hearing of the application could not be delayed, and the parties agreed that it was sufficiently urgent to be heard as vacation business. Since the application was fully argued, and I have been able to reach a conclusion as to its merits, it is appropriate to deal with the costs at this stage.
China
argued that enforcement of the costs order should be stayed pending judgment on the Jurisdiction Appeal and provision should be made for reconsideration should the appeal be successful (in whole or in part). There is some force in this point. I express no view at this stage upon whether the result of the appeal would cause me to vary the costs order, but I can see that each side might have further arguments to advance. If Conversant is willing to undertake to repay the costs awarded to it in the event that the court considers that it is appropriate to do so, following the result of the Jurisdiction Appeal, then there is no need for a stay of enforcement, and I shall give the parties permission to apply following judgment on the appeal. If the undertaking is not offered, then I shall stay enforcement of the costs order pending judgment on the appeal.
2018
and was quickly resolved by Conversant's evidence in response (Moss 8). After Conversant agreed to accept service of the amended Shenzhen Complaint, ZTE
China
did not make an adequate offer and continued to contest the application. Similarly, Conversant's undertaking concerning the German proceedings was offered two days before the hearing, but nonetheless ZTE
China
continued to contest the application.
China
points out that the application was dismissed as against ZTE UK, which was not a party to the
Chinese
Proceedings, and did not participate in those proceedings. I agree that this merits some discount, but as Mr Bloch fairly acknowledged, the extent to which the overall costs were increased by the joinder in the application of ZTE UK is likely to have been modest. No evidence was directed to the position of ZTE UK, and the argument concerning it was brief. I shall deduct 5% from Conversant's costs.
Quantum
China of 65% of 95% of Conversant's costs, to be paid within 28 days, which, by my calculation, amounts to £175,370.