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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Huawei Technologies Co, Ltd v Conversant Wireless Licensing S.A.R.L. [2019] EWCA Civ 38 (30 January 2019) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2019/38.html Cite as: [2019] EWCA Civ 38, [2019] RPC 6 |
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A3/2018/1278 |
ON APPEAL FROM HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY LIST (ChD)
PATENTS COURT
MR JUSTICE HENRY CARR
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE FLOYD
and
LORD JUSTICE FLAUX
____________________
HUAWEI TECHNOLOGIES CO., LTD(a company incorporated under the laws of the People's Republic of China) HUAWEI TECHNOLOGIES (UK) CO., LTDZTE CORPORATION (a company incorporated under the laws of the People's Republic of China) (4) ZTE (UK) LIMITED |
Appellants |
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| - and - |
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CONVERSANT WIRELESS LICENSING S.A.R.L.(Incorporated under the laws of Luxembourg) |
Respondent |
____________________
Michael Bloch QC (instructed by Bristows LLP) for the Third and Fourth Appellants
Adrian Speck QC, Colin West and Thomas Jones (instructed by EIP Legal) for the Respondent
Hearing dates: 3-5 December 2018
____________________
VERSION
OF JUDGMENT
Crown Copyright ©
Lord Justice Floyd:
Introduction
Huawei
and ZTE groups) dispute the jurisdiction of the English court to determine an action brought against them by the respondent ("
Conversant")
concerning UK patents owned by
Conversant.
I will refer to the first and second appellants as "
Huawei
China" and "
Huawei
UK" respectively, or together as "
Huawei",
and the third and fourth appellants as "ZTE China" and "ZTE UK" respectively, or together as "ZTE".
validity
and infringement of
Conversant's
UK patents in suit, also relates to the
validity
of
Conversant's
foreign patents, and the
validity
of foreign patents is not justiciable subject matter in the English court. Secondly, they say that the English court is not the natural or an appropriate forum for the claims against them. They contend that the Chinese court is the natural and appropriate forum, and that the English court ought to refuse service out of the jurisdiction on
Huawei
China and ZTE China and stay the proceedings against
Huawei
UK and ZTE UK on the ground of forum non conveniens.
Conversant
to be essential to certain telecommunications standards, such that it is not possible to sell equipment, such as a mobile phone compliant with those standards without infringing the patents. In other words, the patents are "standard essential patents" or "SEPs".
Conversant
accepts that, because its patents are claimed to be SEPs, it is under an obligation to offer to grant licences to implementers such as
Huawei
and ZTE on terms which are fair, reasonable and non-discriminatory ("FRAND"). Thus, although it seeks all the relief appropriate to an action for infringement of a UK patent, including an injunction and damages,
Conversant
anticipated that
Huawei
and ZTE would rely on
Conversant's
obligation to offer to grant such a licence, the terms of which, thus far, the parties had not been able to agree.
Conversant
seeks, in addition, declarations from the court that the offers which it has made in the course of the negotiations with the two sets of parties are FRAND and, in addition, as to the terms on which it must offer to licence its portfolio of patents.
v
Huawei
Technologies Co. Ltd and another [2018] EWCA Civ 2344 ("Unwired CA"). Unwired CA involved an appeal from a decision of Birss J in which he had decided on the terms of a global licence between the parties on terms he considered to be FRAND.
Huawei
and ZTE now accept that, in the light of Unwired CA, the justiciability limb of their jurisdiction challenge is no longer arguable at this level, although they reserve their position if the case goes further. We need, therefore, only deal with the jurisdiction challenge insofar as it is based on the forum non conveniens ground, a ground that was not argued by
Huawei
in Unwired Planet. If the appeal against the judge's decision on that ground fails, and the justiciability issue becomes determinative, the appellants ask us to refer certain questions of EU law to the CJEU.
Huawei
with Mr Henry Forbes-Smith; Mr Michael Bloch QC presented the case for ZTE; Mr Adrian Speck QC responded on behalf of
Conversant
with Mr Colin West and Mr Thomas Jones.
The facts
"3. It is generally accepted that the publication of such a standard supports innovation and growth by ensuring the interoperability of the digital technologies to which it relates. It leads to an increase in the range andvolume
of products which meet the standard and it allows consumers to switch more easily between the products of different manufacturers. Standards are set by standard setting organisations ("SSOs"). SSOs bring together industry participants to evaluate technologies for inclusion in a new standard, encourage those participants to contribute their most advanced technologies to that standard and promote the standard once it has been agreed. There are
various
SSOs around the world and each of them operates in much the same way. The SSO with which these proceedings are most concerned is the European Telecommunications Standards Institute ("ETSI").
4. As the European Commission has recognised, SEPs can be of greatvalue
to their holders. These holders can expect a substantial revenue stream from their SEPs as the standard for which they are essential is implemented in products sold to millions of consumers. This revenue stream is supported by the fact that alternative technologies which do not meet the standard may well disappear from the market. But the potential for anti-competitive behaviour is obvious. The owner of a SEP has the potential ability to "hold-up" users after the adoption and publication of the standard either by refusing to license the SEP or by extracting excessive royalty fees for its use, and in that way to prevent competitors from gaining effective access to the standard and the part of the telecommunications market to which it relates. ETSI and other SSOs therefore require the owners of SEPs to give an irrevocable undertaking in writing that they are prepared to grant licences of their SEPs on fair, reasonable and nondiscriminatory ("FRAND") terms. This undertaking is designed to ensure that any technology protected by a SEP which is incorporated into a standard is accessible to users of that standard on fair and reasonable terms and that its owner cannot impede the implementation of the standard by refusing to license it or by requesting unfair, unreasonable or discriminatory licence fees.
5. As we shall explain the negotiation of licences for SEPs on FRAND terms may be far from straightforward, however. The owner of a SEP may still use the threat of an injunction to try to secure the payment of excessive licence fees and so engage in hold-up activities.Conversely,
the infringer may refuse to engage constructively or behave unreasonably in the negotiation process and so avoid paying the licence fees to which the SEP owner is properly entitled, a process known as "hold-out"."
Conversant
is a Luxembourg company which owns a global portfolio of patents which, it claims, includes SEPs in over 40 countries. It is part of a Canadian group of companies and is managed from the United States. The portfolio was purchased from Nokia in 2011 for a sum which, at least on
Huawei's
case, was $20,000.
Conversant
does not itself manufacture or sell mobile phones: its business is concerned with licensing.
Conversant
maintains that the appellants are, and have for several years been, infringing its SEPs in many different jurisdictions. The portfolio is said by the respondents to be an "aging" one, by which they mean that the relevant patents are approaching the end of their terms.
Huawei
are part of a major telecommunications group based in China. China accounts for 56% of the
Huawei
group's worldwide sales on which damages or royalties are claimed by
Conversant.
Since China is the place of manufacture of the alleged infringements,
Conversant
can rely on its Chinese patents to claim royalties on a further share (some 19%) of global sales made in countries where
Conversant
has no patents. Therefore, if the Chinese patents are not infringed, or are invalid, then (according to the
Huawei
Defendants) some 75% of the worldwide royalty claim would fall away. By contrast, the United Kingdom accounts for only 1% of
Huawei's
worldwide sales on which royalties are claimed.
very
little business in the UK with only 0.07% of turnover being generated in the UK.
Conversant
has been in discussions, over several years, with
Huawei
China and ZTE China concerning the licensing of its portfolio of patents.
Conversant
claims to have made a number of offers for a global licence to
Huawei
China and ZTE China that are FRAND.
Conversant
alleges that no meaningful progress has been made with
Huawei
or ZTE, who continue to infringe, without taking a licence. The discussions have been on a global basis and have not focused, or indeed referred to, the UK as a market or to the UK patents in suit.
Conversant
has any
valid
SEP.
Huawei's
approach was summarised by their solicitor, Ms Dagg, at paragraphs 33 and 36 of her first witness statement:
"33.Huawei
intends to challenge
validity,
essentiality and infringement of the Chinese patents in particular, and of the other Asia-Pacific and other European patents as well, and also of the UK Patents. This would be done before signing any global portfolio licence and in defence to these English proceedings if they continue.
Huawei
intends to challenge the
validity
of the patents on the basis that (i) the patents are obvious over the prior art; (ii) the patents are not novel; (iii) the patents contain added matter; and / or (iv) there is a lack of priority. …
36. As I have said, there would be no reason to requireHuawei
to pay to license foreign patents which are not
valid
or not essential or not infringed under the law of the relevant country. Moreover,
Huawei
should not be required to enter into a licence covering countries in which
Conversant
has no patent protection. It would be wrong, and contrary to competition law to require
Huawei
to take a licence to invalid or non-essential or non-infringed patents in order to access UK SEPs."
Huawei
China and ZTE China have commenced proceedings in China against
Conversant,
seeking to establish invalidity and (in the case of
Huawei
China only) non-infringement of
Conversant's
Chinese patents. China has a bifurcated system for dealing with litigation about patents in which
validity
is determined in the Patent Re-examination Board ("PRB"), and infringement is determined in other intellectual property courts. The proceedings brought by
Huawei
China and ZTE China against
Conversant
in the PRB challenged the
validity
of all 11 Chinese patents in
Conversant's
Chinese portfolio. We were told that the majority of these proceedings have now been determined. Of the 11 patents, 7 have been held invalid and 3
valid.
A determination is awaited in relation to the 11th patent.
Huawei
China and ZTE China have also brought claims in the Chinese courts against
Conversant
for determinations of FRAND royalty terms in respect of the Chinese patents and (in the case of
Huawei
China only) declarations of non-infringement/non-essentiality. These proceedings are pending in Nanjing (
Huawei)
and Shenzhen (ZTE). We were not addressed on the comparative scope of the Chinese and UK patents, but were told by Mr Layton that there are no remaining Chinese patents in the same family as any of the UK patents in suit.
Conversant
have sued
Huawei
China and ZTE China in Germany for infringement of its German patents, damages for that infringement and for an injunction restraining that infringement on the basis that its global licence offers are FRAND.
Huawei
made the following offer recorded in a document which was before the judge:
"IfConversant
does not persist with this English litigation and instead proceeds in China for a global FRAND determination, the
Huawei
Defendants will agree to the Chinese court determining essentiality, infringement and FRAND terms for
Conversant's
whole portfolio, and will not in those Chinese proceedings challenge the
validity
of the non-Chinese patents in the portfolio.
This agreement is limited toConversant's
claims in this action and does not apply to any further claims, whether by
Conversant
or any other party. This agreement is restricted to proceedings in such Chinese courts.
It is not an agreement to refrain from challenging thevalidity
of any patents in these English proceedings."
Huawei
Note of Global Determination"
Huawei
proposed that a representative sample of
Conversant's
non-Chinese patents could be tested (for essentiality) and treated as proxies for all the non-Chinese patents.
"… It remains our clients' case that the FRAND licensing issues are most appropriately determined in China. We have invited your client to accept our clients' offer to ask the Shenzhen Intermediate People's Court (the "Shenzhen Court") to address the global FRAND dispute.
In order to facilitate the Chinese case proceeding without raising issues that may not be justiciable by the Shenzhen Court, we would propose (for the purpose of determining the current dispute as between your and our clients as to appropriate forum only) the following:
a. The parties will not ask the Shenzhen Court to rule on thevalidity
of any non-Chinese patents;
b. Our client will agree (provided your client also agrees) that the Chinese patents should stand as proxies for the non-Chinese members of the Relevant Families (as defined in the pleadings in these proceedings) (where applicable);
c. Both parties may refer to the contents of public records and public judicial outcomes (whether final or otherwise) for the truth of what they show or declare in relation to a particular patent (whether Chinese or otherwise); and
d. Both parties accept that thevalidity
of the remainder of your client's Relevant Families may be presumed to be average for the industry."
The UK proceedings and the position on service
Huawei
UK and ZTE UK could be, and were,
validly
served within the jurisdiction.
Conversant
made an attempt, which the judge rejected as invalid, to serve
Huawei
China and ZTE China by means of service on subsidiaries in the UK.
Conversant
also applied, in November 2017, for permission to serve out of the jurisdiction on
Huawei
China and ZTE China, and that application was before the judge at the hearing which resulted in his judgment under appeal. The judge held, first, that the claim fell within the jurisdictional gateway (2) in CPR 6 PDB 3.1(2) (claim made for an injunction ordering the defendant to do or refrain from doing an act within the jurisdiction). That was because, in an earlier judgment given in the course of the hearing of the applications, he had granted permission to
Conversant
to amend its pleadings on the basis that there was at least an arguable case for an injunction against
Huawei
China and ZTE China. The consequence of that was that the remainder of the claim fell within gateway (4A) because it arose out of the same or closely connected facts. Secondly the judge held that the claim fell within gateway 11 (subject matter of the claim relating wholly or principally to property within the jurisdiction). This was on the basis that the four patents sued upon in these proceedings, as European patents designating the UK, constituted property within the UK within the meaning of gateway 11, since they are UK intellectual property. There is no appeal from the judge's findings that the claim passed through those gateways.
Conversant
first identifies four UK patents ("the Patents") from amongst the portfolio acquired from Nokia in 2011. Thereafter it is explained that the Patents form part of a portfolio of patents which have been declared as essential ("the
Conversant
Portfolio"). At paragraph 13, it is alleged that
Conversant
is and at all material times has been prepared to grant licences under the
Conversant
Portfolio on FRAND terms in accordance with the said declarations and the ETSI IPR Policy. In the paragraphs which follow the pleading alleges that
Huawei
and ZTE have infringed the Patents in the manner described in the particulars of infringement; that thus far in the negotiations with
Huawei
and ZTE those entities have declined to take a license on the FRAND terms offered by
Conversant
and have not offered to take a license on terms that are FRAND; and that
Huawei
and ZTE are not willing licensees.
Conversant
has suffered loss and damage from the infringement which has occurred thus far and that the appellants threaten and intend to continue to infringe the Patents, whereby
Conversant
will suffer further loss and damage. Paragraph 25 then continues:
"25.Conversant
seeks that
Huawei
and ZTE enter into licences that are FRAND, and pay the royalties that would have been due under such a licence for their respective periods of unlicensed activity. Accordingly,
Conversant
seeks a declaration that it has made the Defendants, and each of them, offers in accordance with its FRAND obligations and on FRAND terms, or in the alternative, being as there is an extant, clearly defined and commercially real dispute between the parties as to what the FRAND terms for licencing the Patents are, a determination of the FRAND terms for the licensing of the Patents to
Huawei
and/or ZTE and a declaration that such terms are FRAND."
Huawei
and/or ZTE do not take a licence under the Patents on terms determined to be FRAND,
Conversant
will seek relief in respect of the acts of infringement complained of. In paragraph 27 it is pleaded that, insofar as
Huawei
and/or ZTE are not willing licensees or fail to take a licence to the Patents on terms determined to be FRAND,
Conversant
seeks a FRAND injunction (as defined by Birss J in Unwired Planet
v
Huawei
[2017] EWHC 304 at [20]). Such an injunction would cease to have effect if the Defendants enter into a licence on FRAND terms which covers the Patents.
"(1) A declaration that theHuawei
Offers and the ZTE Offers … were made in accordance with
Conversant's
FRAND obligations and were themselves FRAND, or in the alternative a determination of the FRAND terms for the licensing of the Patents to
Huawei
and/or ZTE and a declaration that such terms are FRAND.
(2) A declaration thatHuawei
and ZTE, and each of them, have failed to comply with their FRAND obligations.
(3) A declaration that the Patents and each of them is Essential.
(4) A declaration that the Patents and each of them have been or will be infringed by the Defendants' actual or intended unlicensed actions.
(4A) An injunction to restrain the Defendants and each of them, … from infringing the Patents and each of them, the said injunction to be lifted if and insofar as the Defendants or any of them enter into a licence for the Patents on terms held to be FRAND. …
(5) An inquiry as to damages for patent infringement (including damages in accordance with the IP (enforcement etc.) Regulations 2006) or at the Claimant's option an account of profits made by the Defendants and each of them by their unlicensed actions.
(6) An order that the Defendants pay the Claimant all sums found due together with interest pursuant to section 35A of the Senior Courts Act 1981 or pursuant to the Court's equitable jurisdiction for such period and at such rate as the Court thinks is fit.
(7) An order for appropriate measures for the dissemination and publication of the judgment to be taken at the expense of the Defendants and each of them.
(8) Further or other relief.
(9) Costs."
Conversant's
Statement of Case on FRAND recites the offers made and contains a positive averment that it was and remains FRAND to offer a global portfolio licence under the
Conversant
Portfolio, including the Patents. This is based, amongst other things, on what is said to be "general industry practice to licence portfolios of patents and to have such licences cover sales made in all jurisdictions of the world". It is also contended that the
Conversant
Portfolio is of sufficient geographical coverage that global portfolio licensing of it is FRAND. This pleading then sets out the method of computation of the appropriate royalty rate, broadly following the methodology used by Birss J in Unwired Planet. The pleading alleges that "[t]he
Conversant
China rates are 50% of the
Conversant
Benchmark Rates scaled by reference to the
Conversant
Portfolio coverage in China compared with the rest of the world ...".
The law on stays of proceedings against UK domiciled defendants
"Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State."
v
Jackson [2005] QB 801 the CJEU held that an English court could not apply the doctrine of forum non conveniens to decline jurisdiction over a claim against a person domiciled in a contracting state on the ground that the natural forum for the claims was the courts of a non-contracting state. At [46] the court stated that:
"… the Brussels Convention precludes a court of a contracting state from declining the jurisdiction conferred on it by Article 2 of that Convention on the ground that the court of a non-contracting state would be a more appropriate forum for the trial of the action, even if the jurisdiction of no other contracting state is in issue or the proceedings have no connecting factors to any other contracting state."
validity
of patents. In Owusu
v
Jackson the CJEU was asked, but declined to answer, a second question as to whether its conclusion in relation to the availability of the plea of forum non conveniens also applied in cases concerned with the subject matter of Article 24. The underlying issue is whether, for example, a person domiciled in a contracting state sued for infringement of a patent registered in a non-contracting state could rely on a plea of forum non-conveniens to challenge the jurisdiction of the state of his domicile.
"Where the dispute before the court concerns … thevalidity
of certain forms of intellectual property right … it is most improbable that an English court, seised with jurisdiction on the basis of [Article 4], is obliged to exercise it if the defendant applies for a stay on the ground that a non-Member or non-Convention state is the forum conveniens"
"It is submitted that the proper course for an English court is to use [Articles 24 and 25] to identify the classes of case in which a court may continue to apply its national law. It is inappropriate to go further and to insist on the articles being applied slavishly. So, for example, it would not be necessary to show that the proceedings had as their object rights in rem in, or a tenancy of, land in a non-Member State; it would suf?ce that the case was one which required a court to rule on a question of title to foreign land or on thevalidity
of a foreign patent."
v
Gilson Investments Ltd and others [2012] EWHC 721; [2012] 1 CLC 645 was concerned with the
validity
of the acts of an organ of a company whose seat was in Ukraine. The subject matter therefore fell within the subject matter of Art. 24(2) (then Art. 22(2)). Andrew Smith J concluded at [154] that, in cases such as these, and despite the mandatory terms of Article 4, it was a matter of discretion whether the court should or should not assume jurisdiction. I consider that conclusion to be correct for the reasons which Andrew Smith J gave.
The law on forum non conveniens
v.
Cansulex Ltd [1987] AC 460, the judge summarised the approach to forum non conveniens challenges at paragraphs 42 to 43 of his judgment in terms which neither side criticised:
"42. In service in cases, Lord Goff set out the law in six propositions at 476C – 478E. In summary:
i) The basic principle is that a stay will only be granted on the ground of forum non conveniens when the court is satisfied that there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action i.e. in which the case may be tried more suitably for the interests of all the parties and the ends of justice.
ii) In service in cases, the burden of proof rests on the defendant to persuade the court to exercise its discretion to grant a stay. However, each party will seek to establish the existence of factors which it relies upon, and in respect of any such matter the evidential burden will rest on the party who asserts its existence. If the court is satisfied that there is another available forum which is prima facie the appropriate forum, the burden will shift to the claimant to show that there are special circumstances by reason of which justice requires that the trial should nevertheless take place in this country.
iii) In service in cases, the defendant has the burden not just to show that England is not the natural or appropriate forum for the trial, but to establish that there is another available forum which is clearly or distinctly more appropriate than the English forum.
iv) Since the question is whether there exists some other forum that is clearly more appropriate for the trial of the action, the court will look first to see what factors there are which point in the direction of another forum. The natural forum is that with which the action has the most real and substantial connection. Connecting factors will include not only factors affecting convenience or expense (such as availability of witnesses), but also other factors such as the law governing the relevant transaction, and the places where the parties respectively reside or carry on business.
v)
If the court concludes at that stage that there is no other available forum which is clearly more appropriate for the trial of the action, it will ordinarily refuse a stay.
vi)
If, however the court concludes at that stage that there is some other available forum which prima facie is clearly more appropriate for the trial of the action, it will ordinarily grant a stay unless the circumstances by reason of which justice requires that the stay should nevertheless not be granted. In this enquiry, the court will consider all the circumstances of the case, including circumstances which go beyond those taken into account when considering connecting factors. One such factor can be the fact, if established objectively by cogent evidence, that the claimant will not obtain justice in the foreign jurisdiction, and the burden is on the claimant to prove this.
43. In service out cases, where the court exercises its discretionary power under CPR 6.37, the key principles identified in The Spiliada continue to apply. These were considered by the Supreme Court, in relation to CPR 6.37, inVTB
Capital plc
v
Nutritek International Corp and others [2013] UKSC 5; in particular in the judgment of Lord Mance at [12] – [18]. In summary:
i) The underlying aim in all cases of disputed forum is to identify the forum in which the case can suitably be tried for the interests of all parties and for the ends of justice.
ii) However, there is an important distinction in the starting point and onus of proof between cases where permission is required to serve proceedings out of the jurisdiction and situations where service is possible without permission. In the former case, the modern rules reflect Lord Goff's statement of general principle, in providing that permission is not to be given unless the court is "satisfied that England and Wales is the proper place in which to bring the claim": CPR 6.37 (3).
iii) The ultimate overarching principle is that stated in The Spiliada. If the court is not satisfied at the end of the day that England is clearly the most appropriate forum, then permission to serve out must be refused or set aside."
VTB
Capital plc
v
Nutritek International Corp and others [2013] UKSC 5, in particular from the speech of Lord Mance at [57], Lord Neuberger at [90]-[91] and Lord Clarke at [192].
"Harman J. plainly appreciated that the factual issues in dispute favoured trial in Argentina. … But in considering which was the more appropriate forum he seems to have put the factual issues to one side, and concentrated only on the fact that the remedies sought by Ladenimor by the petition were remedies made available by English statutes in respect of a company incorporated in England."
"With every respect to the judge, the answer is only "blindingly obvious" to him because of the premises which are built into the way he has posed his question. … in my judgment he has failed to keep in mind at this crucial stage in his judgment that this company is by Argentine law to be considered as a local, Argentinian company. I do not regard it as at all blindingly obvious that relief for the dishonest management of an Argentinian company in Argentina should be granted by a court other than the Argentinian court. That illustrates that the question formulated may by limiting the premises on which it is formulated dictate the answer. That is in my respectfulview
what the judge has done here, instead of concentrating on the question as put in Spiliada Maritime Corporation
v.
Cansulex Ltd. [1987] AC 460."
"Before applying The Spiliada … test, the judge posed the question: "What is this action?" That was avery
pertinent question. One cannot decide where a matter should be most appropriately and justly tried without being clear what is to be tried. But I do not think the question should be answered simply by reference to the relief claimed, since in an English action the relief claimed will almost inevitably be framed in English terms, particularly where it is statutory. An English pleader will not claim triple damages or dommage-intérêt, appropriate as such relief may be elsewhere. Thus when the judge answered the question by quoting part of the language of section 459 of the Companies Act 1985 he was unconsciously building in a bias towards the choice of an English forum".
The judgment of Henry Carr J
Huawei
UK and ZTE UK who had been properly served in the UK on the basis of their domicile. Having considered Article 4(1) of the Brussels I Recast Regulation, the decision of the Court of Justice in Owusu
v
Jackson [2005] QB 801, the impact of Article 24(4) of the Recast Regulation and the decision of Andrew Smith J in Ferrexpo, the judge concluded that
Huawei
UK and ZTE UK must necessarily be sued for infringement of the UK patents in the courts where they were domiciled and there was no room for the doctrine of forum non conveniens to apply. It followed from this that the cases would continue in this jurisdiction against the UK Defendants, whatever might be the position in respect of
Huawei
China and ZTE China.
Conversant,
Mr Jianzhong Shen for
Huawei
and Ms Mu Ying for ZTE. The judge concluded at [61]:
"In my judgment, the totality of the evidence establishes that the Chinese courts do not have jurisdiction to determine essentiality or infringement of non-Chinese patents, nor do they have jurisdiction to determine FRAND rates in respect of non-Chinese patents without agreement from both parties. The furthest that the Defendants' evidence goes is to suggest that, ifConversant
were to agree to the terms of the Defendants' offers, then the Chinese courts might or would accept jurisdiction. However, no reasons are advanced to support the conclusion that the Chinese courts would accept jurisdiction conferred by agreement to determine infringement of UK patents and to set a global FRAND rate. There was no evidence that this has ever been done before in China, and, with great respect to Mr Shen and Ms. Mu, I regard their somewhat tentative suggestions as speculative."
Conversant
did not in any event accept
Huawei
and ZTE's offers, and that their refusal to do so was reasonable.
Conversant
set different royalty rates for different territories, and it made no difference where the bulk of the sales occurred.
"These claims are concerned with infringement of UK patents, and the relief that should be granted if infringement is established. If one or more of the four patents in suit is held to bevalid
and infringed, then the court will consider what relief should be granted.
Conversant
says that it is willing to grant a licence on FRAND terms and (subject to some equivocation) the Defendants say that they are willing to take a licence on FRAND terms. There is a dispute between the parties as to whether a global licence would be FRAND."
Huawei
and ZTE as to why China was the appropriate forum. He concluded at [75] that England was clearly the natural and appropriate forum in which the claims should be tried.
The application to adduce further evidence of Chinese law
Huawei
and ZTE apply to adduce further evidence of Chinese law before this court. The admissibility of the further evidence is disputed by
Conversant,
but we allowed the parties to make their submissions on its admissibility, and on its effect if admitted, reserving our decision on admissibility to be given in the course of this judgment.
Huawei
and ZTE had filed notices of appeal to this court on 29 May 2018.
"For the purpose of appropriate adjudication of disputes concerning standard-essential patents (hereinafter referred to SEPs) in the field of communications, these guidelines are formulated in accordance with relevant provisions of the laws, administrative regulations, and judicial interpretations of the Supreme Court, and with reference to business practices, and judicial practices."
"For adjudication of disputes concerning SEPs, with regard to issues including, but not limited to, the interpretation of the FRAND principles, the determination of the scope and exercise of the rights of the relevant SEPs, and the definition of the nature of related actions, etc., the court shall in general, consider applying of the local laws of the place where the protection is claimed or the lex fori."
"Where the claimed territory scope of the related licensed SEPs on which judicial determination is requested by the patentee or the implementer of the SEP exceeds the territory scope of the court, and the other party does not explicitly raise an objection in the judicial proceedings or the objection raised is deemed unreasonable after examination, determination can be made on the royalty for such claimed territory scope."
"This provision confirms that the Guangdong Courts (including the Shenzhen Intermediate People's Court) will determine the FRAND royalty rate for a global licence in certain circumstances, even where one party does not agree. These circumstances would include the situation where the licensor -Conversant
in this case - seeks itself to rely on global offers and has brought proceedings in multiple jurisdictions, namely the UK and Germany. This provision also suggests that the Guangdong Courts will make findings relating to the essentiality and infringement of foreign patents in so far as necessary to determine a FRAND royalty rate for a licence covering territories outside of China."
Huawei
sets out the terms of clause 16 of the Guidelines. He says that the Chinese courts would exercise jurisdiction to determine essentiality, infringement and FRAND for a global portfolio in circumstances in which both parties consented to such a determination. He says further that he is of the opinion that clause 8 confirms that the Chinese courts will resolve a dispute over foreign FRAND obligations as appropriate, including under foreign law.
Conversant
disagrees with Ms Mu's propositions about how the Chinese courts would apply clause 16. He describes Ms Mu's conclusions about how the Guidelines would be applied as speculative. He says that clause 16 of the Guidelines certainly does not reflect the case law of the Chinese courts discussed in his previous statements and those of Ms Mu. He points out that the Chinese courts have never made a global FRAND determination and have only ever considered Chinese patents in a FRAND dispute. There was no case law concerning the circumstances in which it would be "unreasonable" for one party to object to the Chinese courts determining the scope of a licence for territories outside China. He also disagrees with Ms Mu when she says that the Guangdong Courts will make findings relating to the essentiality and infringement of foreign patents in so far as necessary to determine a FRAND royalty rate for a licence covering territories outside of China. He considers, again, that her conclusions on this point are speculative and he disagrees with them. He also points out that neither Ms Mu nor Mr Shen appears to conclude that paragraph 16 of the Guangdong Guidelines would permit a Chinese court to make a determination of the full terms of a FRAND licence. That is not something the Chinese courts have done to date, and he does not believe that the Guidelines will change this position. In any event the Guidelines were to be implemented for a trial period only.
viewed
as having major importance for the Chinese economy and which is evolving rapidly; and (c) clause 8 of the Guidelines lends support to the notion that the Chinese courts will make findings as to essentiality and infringement of foreign patents in so far as necessary to determine a FRAND royalty rate for a licence covering territories outside of China.
Conversant
takes further points about the status of the Guidelines, including points in relation to the manner in which they were made available and the impact of a recent decision which has the effect of "leapfrogging" cases concerning patents from first instance to the Supreme Court, thereby removing the intermediate tier of which the Guangdong High People's Court forms part. These points do not add materially to the debate which I have outlined above as to the substantive effect of the Guidelines, and I need say no more about them.
Huawei
v
Samsung handed down on 4 January 2018, in which "the Shenzhen court closely examined the proposed offers and counter-offers
Huawei
and Samsung each made during the negotiation of a global cross-licence". In the author's
view
the case indicated that a Chinese court "can preside over a global licensing dispute". Mr Layton said that this material was supplied to us in answer to questions posed by the court. However, we received no explanation of why this material was not placed before the judge, where it could have been dealt with in evidence by the Chinese law experts. There can be no doubt that
Huawei
was aware of it given that they were one of the parties, and the issue to which it relates was squarely before the judge.
The Appeal
Huawei
and ZTE presented common arguments in support of the appeal. Mr Bloch therefore adopted Mr Layton's submissions (subject to the exception) but emphasised certain points in his own way.
Submissions for
Huawei
Conversant
was able to obtain an uplift on the royalty rate set by the Chinese court in respect of sales which infringed non-Chinese patents. That was a
variation
in quantum only which did not prevent the Chinese court from doing substantial justice between the parties, or mean that China was not an available forum. It was irrelevant that the Chinese court would not be able to consider infringement or essentiality of foreign patents including the UK patents.
"… the claimant may seek to contend that the foreign court is not available to him on the ground that the claim which he makes in the English proceedings, or the remedy he seeks, would be unavailable to him in the foreign court, or that because of the foreign court's choice of law rules, he would lose in the foreign court. It is submitted that these matters are irrelevant to the issue of whether the foreign court is available, but that they may be taken into account under the second limb of the test in determining whether the claimant can show that it would be unjust to deprive him of a trial in England."
Conversant
did not wish to accept
Huawei's
offer.
Huawei
v
Samsung, saying that it indicated that a Chinese court can preside over a global licensing dispute.
Huawei's
fall back case was that permission should be restricted to the claims for declarations of essentiality and infringement of the UK patents, the FRAND injunction and the claims for damages and interest (i.e. paragraphs 3, 4, 4A, 5 and 6 of the prayer for relief set out in paragraph 22 above), but exclude the claims for declarations that the offers made by
Conversant
were made in accordance with
Conversant's
FRAND obligations, a determination of the FRAND terms for the licensing of the Patents to
Huawei
and a declaration that such terms are FRAND (i.e. paragraph 1) and the declaration that the respondents have failed to comply with their FRAND obligations (i.e. paragraph 2). The grant of permission should be on terms that there should be an immediate stay of the claims for an injunction and damages pending determination of global FRAND in China, with liberty to apply if for some reason that turned out not to be possible.
Conversant
patents would likely be industry-wide and affect the public. The appropriate forum for the determination of those rates for the Chinese patents was China. He relied on what Aldous J had said in Plastus Kreativ AB Minnesota Mining and Manufacturing [1995] RPC 438 at 447 lines 21 to 40:
"For myself I would not welcome the task of having to decide whether a person had infringed a foreign patent. Although patent actions appear on their face to be disputes between two parties, in reality they also concern the public. A finding of infringement is a finding that a monopoly granted by the state is to be enforced. The result is invariably that the public have to pay a higher price than if the monopoly did not exist. If that be the proper result, then that result should, I believe, come about from a decision of a court situated in the state where the public have to pay the higher prices. One only has to imagine a decision of this court that the German public should pay to a British company substantial sums of money to realise the difficulties that might arise. I believe that, if the local courts are responsible for enforcing and deciding questions ofvalidity
and infringement, the conclusions reached are likely to command the respect of the public. Also a conclusion that a patent is infringed or not infringed involves in this country a decision of
validity
as in this country no one can infringe an invalid patent. In the present case the plaintiffs admit the
validity
of the patent and therefore there is no dispute upon the matter. However, it will be implicit in the judgment of this court that there has been infringement, and that, between the parties, the patent is
valid.
Thus, I believe it is at least convenient that infringement, like
validity,
is decided in the state in which it arises."
Conversant
makes, because
Conversant
alleges that it has complied with its FRAND obligations under the ETSI licence. Language, personal connections and costs, all pointed towards China, on the hypothesis that the patents would be Chinese patents.
validity
of non-UK patents. Notwithstanding this, and basing himself on the passage from Dicey at paragraph 12-022 (cited in paragraph 28 above), he submitted that jurisdiction became discretionary where the subject matter was "closely allied" to subject matter which was within Article 24(4). That is what the editors of Dicey had meant by not resorting to a slavish application of Article 24(4) when applying it reflexively.
Huawei
China, then it did not become the appropriate place merely because Owusu required the court to accept jurisdiction against
Huawei
UK. To proceed in that way was to allow the
Huawei
UK tail to wag the
Huawei
China dog: see for example Pacific International Sports Clubs Limited
v
Soccer Marketing International Limited and others [2009] EWHC 1839 (Ch) at [112] a decision of Blackburne J; OJSC Oil Company Yugraneft (in liquidation)
v
Abramovich and others [2008] EWHC 2613 (Comm) at [490], a decision of Christopher Clarke J; and American Motorists Insurance Co (Amico)
v
Cellstar Corp and another [2003] EWCA Civ 206; [2003] 2 CLC 59 at [50], a decision of the Court of Appeal (Kennedy, Mance, Mantell LJJ).
Huawei
China to say that a global FRAND case will be pursued against
Huawei
UK in any event. As
Huawei
UK, itself, had no global sales, no global licence could be appropriate or FRAND in respect of
Huawei
UK. It was no more necessary to have
Huawei
UK in the FRAND trial than any other of
Huawei's
many subsidiaries around the world.
Submissions for ZTE
Conversant
should not go about it by seeking to enforce its UK patents. He drew attention to the contrast between this relatively small
volume
of sales and the comparatively heavy costs of litigation in the UK. It might not be an answer to that to say that ZTE had the option to withdraw from the UK market, because the devices made and sold elsewhere must be allowed to "roam" and will inevitably come into the UK. Withdrawal might not be a practical option.
value
of the licence.
Conversant
could avoid the need to show that England was the appropriate place to bring that freestanding claim by tacking on a claim for infringement of UK patents.
Huawei
v
Samsung showed that the court was prepared to tackle global FRAND.
Submissions for
Conversant
Huawei
UK and ZTE UK were "anchor" defendants and that the action would continue in England in any event.
Conversant's
patent rights. On the face of it,
Conversant
was entitled to choose which rights it wished to enforce. It recognised that its rights were subject to the undertaking to offer licences on FRAND terms, but it contended that it had done all that that undertaking required it to do, and that there was therefore no obstacle to it enforcing those rights. The overall dispute, which had as its object the enforcement of the underlying territorial rights, involved a number of issues in addition to the issues of infringement and essentiality, in particular whether the offers it had made were FRAND, and if not, what FRAND terms would be. This did not mean that the action was not properly characterised as an action to enforce the UK patents. The fact that by asking for declarations in its claim, rather than waiting for those matters to be raised by way of defence,
Conversant
had anticipated the appellants' reliance on the FRAND obligation, did not mean that the FRAND obligation should not be seen essentially as a defence to patent infringement. Indeed, failure readily to acknowledge the possibility of such a defence, by suing for infringement without reference to the FRAND obligations, could render
Conversant's
claim susceptible to competition law defences as well.
Conversant's
contention that it had complied with its obligations to ETSI. In the meantime
Huawei
and ZTE could continue their infringing activities, which
Conversant
contended infringed those patents. That conclusion, he suggested, did not strike the right balance between SEP owners and implementers, and promoted "hold out".
Conversant
accepted that they would not pursue those in the absence of a finding of
validity
and essentiality of a UK patent.
Conversant
being able to resort to an alternative forum to bring the claim. The claim it could bring in China would be for infringement of different, Chinese patents, which were not even in the same family as any of the UK patents in suit. The alleged infringements would be sales in China and not the United Kingdom. The claim would therefore have an entirely different factual underpinning from the claim it had chosen to bring in this country. There was no good reason why the appellants should be able to choose which of
Conversant's
patents
Conversant
was able to enforce against them.
validity
and perhaps infringement, but also relies upon the licence as a defence to the claim. The licence issue would also arise as an issue under potential claims for infringement of non-UK patents. The suggestion that, in those circumstances, a patentee could not enforce whichever patents he decides to on the grounds of forum non conveniens would, said Mr Speck, be hopeless.
Conversant
should sue for infringement of its Chinese patents and ask the Chinese court to determine the FRAND rate for the Chinese patents ignored the fact that a licence under the Chinese patents was not a licence under patents anywhere else. It was a fallacy to suggest that because manufacture took place in China, the licence determined by the Chinese court was the equivalent of the global licence which
Conversant
contended was FRAND. It would leave
Conversant
with the need to sue in other countries.
validity
of patents registered in a non-contracting state. The common law rule in British South Africa Co.
v
Cia de Moçambique [1893] AC 602 rendered such issues non-justiciable in any event. The claim in the present case, however, insofar as it was determining the terms of the FRAND licence, does not involve deciding on
validity
of foreign patents.
Conversant
to insist that all activities of a group are licensed at group level.
Conversant
would be prejudiced by any delay because the portfolio was an aging one, and the delay might take the case beyond the point at which
Conversant
could obtain an injunction.
Huawei
v
Samsung case in the Shenzhen intermediate court did not establish that the Chinese court would set a global FRAND rate. Instead the court was reviewing the conduct of the parties in the negotiations to determine which if any was at "obvious fault" both procedurally and substantially. In the result the court had concluded that Samsung was at obvious fault, both procedurally and substantially and it granted an injunction. The court nowhere set about determining the terms of a FRAND licence.
v
Marshall [1954] 1 WLR 1489 guidelines by analogy. He also submitted that the material had been available to the parties before the judge's order was sealed, and ought to have been brought to his attention rather than saved up for the appeal.
v
Baadarani and another [2013] UKSC 44; [2013] 1 WLR 2043 at [53].
Characterisation of the dispute
Conversant's
claim: one must look at the overall dispute between the parties. That may involve looking at how the claim is to be answered insofar as that is known: see the passages from
VTB
v
Nutritek identified in paragraph 32 above. That consideration alone does not assist the appellants, because the dispute characterised as a whole still involves, as Ms Dagg has explained, the questions of essentiality, infringement and
validity
of the UK patents. Although Ms Dagg does not speak on behalf of ZTE, it is quite unrealistic to suppose that, with the proceedings structured as they are, ZTE would not join in the attacks on
validity
as well, just as it has done in China.
Conversant
wishes to bring are to be analysed was considered in some depth in Unwired CA. The points which emerge from that judgment which are relevant to this appeal are the following:
i) At [52] the court pointed out that it was accepted that there was no such thing as a global portfolio right, and that the court in this country will only determine disputes concerning infringement and
validity
of UK patents or European patents designating the UK. Moreover, if a UK patent is found
valid
and infringed the relief by way of injunction and damages will relate only to acts of infringement of those patents within that territory.
ii) At [53] the court contrasted the territorial nature of patent rights with the position in relation to the FRAND undertaking given to ETSI. The undertaking, like the standard to which it relates, was of international effect, applying to all patents which belong to the same family irrespective of the territory in which they subsist. This was necessary in order to protect implementers whose equipment may be sold in a number of different jurisdictions and then used by members of the public who may travel with that equipment from one jurisdiction to another.
iii) However, just as it was necessary to protect implementers by giving them global protection in this way, it was necessary to protect SEP owners from the need to negotiate patent licences on a country by country basis, and the need to litigate on such a basis. As the court pointed out at [55],
Huawei's
witness had accepted that the costs of such litigation to the SEP owner would be impossibly high.
iv) Thus, the court pointed out at [56], in such circumstances it was possible, depending on the facts, that a global licence could be FRAND.
v)
Where a SEP owner brings proceedings for infringement against an implementer in one jurisdiction in respect of the SEPs which it owns there and makes good its case, two outcomes might follow. First, if the evidence establishes that a willing licensor and a willing licensee in the position of the parties would agree a FRAND licence in respect of that jurisdiction but the SEP owner refuses to offer it such a licence then no injunction should be granted. If on the other hand, the implementer refuses to enter into the FRAND licence for that jurisdiction then the SEP owner can properly seek an injunction to restrain further infringement there. Secondly, however, if the evidence establishes that a willing licensor and a willing licensee in the position of the parties would agree a global FRAND licence, that such a licence would conform to industry practice and that it would not be discriminatory but the SEP owner refuses to grant such a licence to the implementer then once again it should be denied an injunction. If on the other hand, the implementer were to refuse to enter into such a licence then the SEP owner should be entitled to an injunction in that jurisdiction to restrain infringement of the particular SEPs in issue in those proceedings: see [57] and [58].
vi)
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.
Conversant's
claim in the present case is closely analogous to the claim advanced in the Unwired Planet case. It is (i) that the UK patents are essential to the standard, (ii) that it has complied with its ETSI undertaking, in that the offers which it has made are FRAND, (iii) that
Huawei
and ZTE have not so complied without any reasonable ground for so doing, and (iv) that it is therefore entitled to enforce its UK SEPs and obtain the usual relief for infringement, including a FRAND injunction and damages.
Conversant
also seeks a determination as to the terms which are FRAND for the licensing of its portfolio.
Huawei's
and ZTE's answer is likely to be (i) that
Conversant's
patents are neither essential nor
valid,
and (ii) that
Conversant
has not complied with its FRAND undertaking and so is not entitled to an injunction even if it establishes that its UK patents are
valid
and essential. The content of
Conversant's
FRAND undertaking is thus an inseparable part of the dispute about whether
Conversant
is entitled to relief for infringement of
valid
UK patents.
Conversant's
portfolio, commits the error which the Court of Appeal identified in re Harrods Buenos Aires. In that case the dispute was about prejudice to the minority shareholders of a company registered in England. By focussing on the place of registration of the company and on the specific remedy of a buyout provided in English law, Harman J had prejudged the question of appropriate forum, particularly as, through the lens of Argentine law, the company was an Argentine company. If the case were to be tried in Argentina, the relief available would be different, but the underlying dispute would be the same. The facts relied on to establish prejudice would be the same, as would the shareholdings, and the company, about which the parties were fighting. It was possible to say that the appropriate forum for deciding that dispute was Argentina.
Conversant
to seek a remedy in China would be to compel them to advance a case based on different patents. The Chinese patents are not the UK patents
viewed
through the lens of Chinese law, but are different property rights applied for and registered in China. They are not even in the same families as the UK patents. They will have different claims. Different prior art will be relevant to their
validity.
The issue of essentiality of those patents will give rise to wholly different technical issues from the issues which would arise on the essentiality of the UK patents. The acts of infringement relied on will be acts in China, not acts in the UK. I find it impossible to
view
such a dispute as being the same dispute as that which would arise in the English court.
Conversant
which national patents they sue on, when that is plainly not the case. It is a way of characterising the dispute so as to make it suitable for determination in any jurisdiction where
Conversant
has a patent, no matter how different the scope of that patent may be to the scope of the UK patents in suit. Of the two ways in which the parties seek to characterise the dispute, it seems to me that the appellants' way is the one which offends against the warnings in Harrods Buenos Aires against building the answer into the way in which one formulates the question.
Forum non conveniens on the basis of the judge's characterisation of the claim
validity
of UK patents. A UK forum is clearly the most appropriate forum, indeed the only possible forum, for this dispute to be tried. The further evidence of Chinese law, if admitted, could not influence this outcome. Even taken at its highest it does not suggest that the Chinese court could inquire into the
validity
of UK patents.
very
surprising result if the patentee could not choose the country in which it chose to enforce a patent selected from the portfolio, but could be obliged to sue on the patent which subsisted in the country where the defendant's principal place of manufacture was located.
v
Kinahan (1895) 45 Ch D 78 where leave to serve English proceedings for infringement of a UK trade mark case on an Irish company in Ireland (Ireland then being part of the UK) was refused on forum non conveniens grounds, the preponderance of the business in question being conducted in Ireland. The UK trade mark was a right which extended territorially to both England and Ireland, and so the right in question would have been the same whether the action was brought in England or Ireland. That would not be the case if
Conversant
were obliged to sue on their different, Chinese rights.
Conversant
is seeking to enforce UK patents, governed by English law.
Conversant
were to sue on its Chinese patents in China, then the Chinese court would be scrutinising the
validity
and essentiality of the Chinese patents (the first of Mr Layton's big reasons). That in itself is not a reason for saying that the English court is not the appropriate forum for deciding the
validity
and essentiality of the UK patents. In any event, as the judge pointed out, it is likely that the results of the Chinese proceedings will be known before the English court determines the terms of the licence, so that those results can be factored in to the court's determination.
validity
and infringement of monopolies affecting the public in one jurisdiction should be taken by the courts of that jurisdiction. Aldous J's point applies with less force where one is concerned with the impact of an undertaking which has international effect, such as the FRAND licensing undertaking given to ETSI, and still less so when one takes the more modern, pragmatic approach advanced by Lord Sumption in Abela (cited at paragraph 94 above). It is a fact of life that the effect of decisions taken by the courts in one country can be felt elsewhere in the world. Moreover, at least within Europe, the courts have not held strictly to Aldous J's line: see Eli Lilly and Company
v
Actavis (UK) Limited and others [2017] UKSC 48 at [102] where the Supreme Court made findings of infringement of European patents having effect in France, Italy and Spain. Finally, although the English court would be deciding the royalty for China, it would be doing so without precluding the Chinese court from deciding on the
validity
and essentiality of the Chinese patents, and having that court's decision considered in the context of fixing the royalty, if any, for China.
Conversant
is entitled to relief for infringement of their UK SEPs. Whether one
views
consideration of these offers as a precondition for liability or relief, or part of the defence which the appellants will offer to the claim, it is not a claim which is capable of being treated separately for forum conveniens purposes. Whilst the claim for a declaration as to the terms of the FRAND licence might be regarded as a separate claim, it arises out of the same facts and is closely connected to the issues which arise for determination as part and parcel of the patent dispute, a conclusion which is supported by the unchallenged conclusions of the judge in relation to the jurisdictional gateways. In addition, although I would accept that this confirmation was in part tactically motivated, Mr Speck confirmed that
Conversant
does not seek that declaration if no UK patent is found to be
valid
and essential. Given the confirmation, the declaration is better regarded as a dependent claim. I would therefore reject the fallback positions as well.
Huawei
with an answer to the claim for infringement of the UK SEPs. The age of the
Conversant
Portfolio is also a factor which weighs against the grant of such a stay.
The position of the UK defendants
Huawei
and ZTE argue that it does present such an exception, because there is scope for the reflexive application of Article 24(4). They accept (at this level), however, that the present dispute does not require the court to decide on the
validity
of non-EU patents. That concession is rightly made given what was said in Unwired CA at [79] - [80].
v
Samsung Electronics Co Ltd [2018] EWCA (Civ) 220 at [128]-[132]. I do not accept Mr Layton's submission that in the present case to allow the UK companies to act as anchor defendants in this way would necessarily be to allow the tail to wag the dog. The UK companies have a real and substantial business in mobile communications in this country, notwithstanding that it is a small part of their global operations. It is not suggested that they are not worth suing in their own right. Moreover it may not be correct to say that the UK defendants do not need a global licence, for the reasons connected with roaming advanced by Mr Speck and recognised in Unwired CA at [53]. Finally, the Chinese defendants are not merely sued as joint tortfeasors with the UK defendants, but for direct infringement. The judge found that there was a properly arguable case of direct infringement in the UK by the Chinese defendants.
v
Soccer Marketing International Limited and others [2009] EWHC 1839 (Ch) the defendant (SMI) was the only company with any connection with this jurisdiction, due solely to the fact that it was incorporated here: it carried on business outside the jurisdiction of the English court. None of the events which gave rise to the claim had any connection with this jurisdiction: all occurred in Ukraine. The claims were governed by Ukrainian law. The only relevance of SMI to the claims was as the
vehicle
which held some shares. It had been dissolved, as a result of which it ceased altogether to exist but was restored to the register on the application of the claimant and specifically for the purpose of the proceedings. So far as is known it had no assets. In those circumstances it is not surprising that Blackburne J at [122], thought that allowing SMI to act as anchor defendant for claims against the other defendants was "to allow the tail to wag the dog". It is clear that the proceedings against the UK company had no substantial purpose in their own right.
v
Abramovich and others [2008] EWHC 2613 (Comm) the UK defendant also had minimal assets. The claim was about the conduct of Russians in Russia under Russian law. At [490], Christopher Clarke J said that it was obvious that the claim against the UK defendant was to provide the anchor on which to tether a claim against the Russian defendant. By implication it had no other substantial purpose.
v
Cellstar Corp and another [2003] EWCA Civ 206; [2003] 2 CLC 59 (a case decided before Owusu) the Court of Appeal (Kennedy, Mance, Mantell LJJ), said that even if the European Court ruled that Amico's proceedings must continue against the UK defendant in addition to parallel Texan proceedings, the problem should not be compounded by requiring the US defendant to come to this country to defend proceedings in addition to those which it was bringing in Texas. That is a
very
long way from the facts with which we are dealing.
v
Sony Europe Ltd and others [2017] EWHC 374 (Ch) 419 Marcus Smith J regarded the fact that the UK defendant was a substantial entity well worth suing in his own right as a decisive factor, albeit in an otherwise finely balanced case.
Conversant
seek relief for infringement of its UK SEPs. It follows that the judge was right that the case would have to continue against
Huawei
UK and ZTE UK in any event, and he cannot be criticised for relying on that fact in his forum non conveniens assessment.
The further evidence of Chinese law
view
which I have taken as to the correct characterisation of the dispute. Had I considered otherwise, I would not have been persuaded that the evidence should be excluded on the first Ladd
v
Marshall criterion. It is accepted that the Guidelines could not have been available for the trial. It is true that an application could have been made to the judge to reconsider his judgment in the light of the Guidelines before his order was sealed, but it is clear that the parties' litigation solicitors did not have the document in time. On the narrow facts of this case it would be harsh to exclude the material on the basis that it could have been placed before the judge after his judgment had been handed down.
v
Marshall criterion, as it could not have an influence on the outcome of the case. However, the evidence, at least on its face, goes further, and suggests that a party can be compelled to accept that jurisdiction if it refuses unreasonably to agree to it and suggests that the court would regard
Conversant's
objections to its exercise of this jurisdiction as unreasonable. It also suggests that the Chinese court might accept the invitation to decide questions of essentiality and infringement of foreign (i.e. non-Chinese) patents. That evidence, if accepted at face
value,
could influence the outcome, at least on one
view
of the case. I would accordingly have admitted the further evidence, so that it, and
Conversant's
answer to it, could be considered in the round.
view
that the refusal to agree was unreasonable. Ms Mu's further suggestion that the Chinese court would accept the invitation to decide essentiality and infringement of non-Chinese patents is also not something which is clearly stated in the Guidelines and Ms Mu does not provide any basis for her statement that this will be so. Mr Yang regards all this as speculative, and I agree. Ms Mu is
very
frank in accepting that this is an evolving jurisprudence in China. The Guidelines have been recently introduced and are, on the evidence, for a trial period.
Huawei's
counsel how its contentions in this case as to the state of Chinese law related to
Huawei's
case in Unwired CA which contended that the English court was out of step with other courts, including the courts in China, in being prepared to determine a global FRAND rate. We were subsequently provided with a copy of a letter sent by
Huawei's
counsel in the Unwired case in connection with its petition for leave to appeal to the Supreme Court. The letter refers to paragraph 16 of the Guidelines and continues:
"The Guidelines provide guidance on how Chinese courts determine disputes related to SEPs, but they have not been construed or applied in any case in China to date.Huawei
understands them to indicate that a global royalty-setting exercise may proceed with the consent of the parties (which has never been in dispute in these proceedings). There is no decided case in which the Chinese courts have gone further, as the English courts did in these proceedings, by conducting a global royalty-setting exercise without the consent of the parties and then imposing the result thereof as a condition of avoiding a territorial injunction. Whether they might do so in the future remains unknown to
Huawei
and the Chinese courts may well be influenced by the approach of the courts in other jurisdictions, which further underlines the importance of this case."
Huawei
v
Samsung decision of the Shenzhen court. It does not, as it seems to me, show anything other than analysis of the negotiations between the parties against a criterion of obvious procedural or substantive default. I have no doubt, given the issues as they were before the judge and on this appeal, that both
Huawei's
and ZTE's experts would have commented on it if it went any further. It does not support the proposition that the Chinese court had demonstrated that it was prepared to settle the terms of a global licence.
Reference to the CJEU on justiciability
Huawei, who were a party in Unwired CA, did not at any time suggest during the course of Unwired CA that a reference to the CJEU was necessary for the court to reach its decision in that case, which it is now accepted precludes any justiciability argument at this level. Thirdly, despite Mr Layton's extensive draft questions, I am not persuaded that there is any lack of clarity in the relevant EU law.
Conclusion
Lord Justice Flaux:
Lord Justice Patten: