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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> TQ Delta, LLC v Zyxel Communications UK Ltd & Anor [2019] EWCA Civ 1277 (18 July 2019) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2019/1277.html Cite as: [2019] EWCA Civ 1277, [2020] FSR 10 |
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY LIST
PATENTS COURT
Mr Justice Birss
Strand, London, WC2A 2LL |
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B e f o r e :
and
LORD JUSTICE FLOYD
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TQ DELTA, LLC |
Claimant/ Respondent |
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- and - |
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(1) ZYXEL COMMUNICATIONS UK LIMITED (2) ZYXEL COMMUNICATIONS A/S |
Defendants/Appellants |
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Nicholas Saunders QC and James St Ville (instructed by Gowling WLG (UK) LLP) for the Respondent
Hearing date: 11 July 2019
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Crown Copyright ©
Lord Justice Floyd:
"[ZyXEL] hereby and irrevocably waive any and all rights they might have to seek to enforce [TQD's] RAND obligations to licence [TQD's] UK-designated DSL SEPs in the United Kingdom"
"that [ZyXEL] are not willing licensees to [TQD's] portfolio of patents essential to the Recommendations and/or that [TQD] is not obliged to offer a licence to such patents on RAND and/or any other terms to them".
SEPs and RAND licences
i) A UK-designated SEP has limited claims and limited territorial scope, so that the relief granted for infringement will be limited to an injunction to restrain infringement of the patent in question only in this jurisdiction, and to corresponding damages for infringement. There is no such thing as an international portfolio right.
ii) The FRAND undertaking was designed to allow implementers access to the standards without being held up by dominant patents, by injunctions and excessive licensing fees. To be of use the licence must be wide enough to allow the implementer to market its products which meet the standard.
iii) On the other hand, SEP owners were entitled to appropriate reward for the use of their invention. So implementers must engage constructively with patent owners, and, where necessary, agree to submit to the outcome of an appropriate FRAND determination and thus limit hold-out.
iv) Depending on the facts, a global licence may be FRAND, and a purely national licence may not be FRAND, because it may be wholly impractical to negotiate licences on a country-by-country basis. What is FRAND in any individual case depends on what a willing licensor and willing licensee would agree in those circumstances.
v) In the case where a purely national licence is FRAND, the SEP owner who wins on validity and infringement may be granted an injunction if the implementer refuses to take a licence on those national terms.
vi) The same regime applies in the case where a global licence is FRAND. In that case the SEP owner may be granted an injunction if the implementer does not agree to take a licence on those, global terms.
vii) The court explained the rationale in the following way:
"Were the position otherwise then the SEP owner seeking to recover the FRAND licence monies for all of the SEPs in the same family from an uncooperative implementer who is acting unreasonably would be required to bring proceedings in every jurisdiction in which those rights subsist, which might be prohibitively expensive for it to do. This result would not involve any alteration of the territorially limited characteristics of any SEP; nor would it involve any jurisdictional expansionism. To the contrary, it would amount to a recognition by the court (i) that the SEP owner has complied with its undertaking to ETSI to offer a licence on FRAND terms; (ii) that the implementer has refused or declined to accept that offer without any reasonable ground for so doing; and (iii) that in these circumstances the SEP owner is entitled to the usual relief available for patent infringement including an injunction to restrain further infringement of the particular SEPs in issue in the proceedings."
"The judge having found in UP's favour on this issue, it became a matter for Huawei whether to accept the licence. In these circumstances there was nothing unnecessary or disproportionate about the approach taken by the judge. Huawei stood before the court without a licence, but it had the option of taking one."
The judgment of Birss J
i) It was not possible to waive the RAND obligation as ZyXEL had purported to do if, as TQD contends, the RAND licence and obligation operate on a worldwide basis (paragraph 40).
ii) A RAND licence is an "undertaking to undertaking" licence (i.e. a licence between groups of companies and not individual corporate entities) (paragraph 41).
iii) Holders of SEPs have a legitimate interest in having the scope and terms of a RAND licence determined (paragraph 42).
"49. In any event however just because a party asserts that there is no dispute does not mean that no dispute exists. It is manifest that as between the group of which the individual defendants are members and TQ Delta that there is a real and lively dispute as to RAND terms. That dispute has not gone away, and it is a real commercial dispute.
50. The real point, and the only point, is whether it is right that the waiver means that there is no dispute between the individual defendant entities and the claimant. The point is that although the dispute exists generally, it is not between the claimant and the individual defendants. In my judgment, the answer is really simply this. If the defendants are right about the effect of their waiver, then they may well be correct about that absence of a dispute, but that does depend on the issues of the kind I have mentioned already. If the defendants are wrong about the effect of the waiver, then there plainly is a real commercial dispute, as much with the defendants as with the other members of the group. I also bear in mind that in this case it is the group which makes the decisions about this litigation.
51. This approach applies as much to the determination of RAND terms as it does to the question of whether it is right to characterise the defendants as willing licensees. …
59. So for all those reasons, I will not stop the non-technical trial from going ahead as planned. The reason why not is the same reason that I will allow the amendments. It is because there is a real commercial dispute in the background to these proceedings and, critically, it is properly arguable that despite the waiver, a real commercial dispute exists involving these defendants and this territory."
Subsequent development
The appeal
1. The judge's conclusion that there was "a real and lively dispute" between TQD and members of the ZyXEL group was not available to him on the evidence.
2. The judge was wrong in law to hold that there was sufficient uncertainty about the scope and effect of the waiver given by ZyXEL to make it arguable that the court might, at the trial, find that there was a real commercial dispute between the parties which might justify the grant of declaratory relief. The concerns which he expressed about the scope and effect of the waiver were wrong in principle, irrelevant and/or illusory.
3. The judge should have held that the scope and effect of the waiver were clear, and that the waiver rendered the dispute between the parties about RAND licences redundant and/or non-justiciable by the court.
4. The judge acted irrationally by failing to give the parties an opportunity to address the court further on the concerns which he had identified, for example by adjourning the hearing or asking for written submissions. These could have resolved the issues at far less expense than committing the parties to a costly hearing at which there was a very real prospect that it would be rendered entirely irrelevant by the undertaking.
Discussion
Lord Justice Lewison: