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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Vestel Elektronik Sanayi Ve Ticaret A.S. & Anor v Access Advance LLC & Anor [2021] EWCA Civ 440 (26 March 2021) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2021/440.html Cite as: [2021] 4 WLR 60, [2021] EWCA Civ 440, [2021] WLR(D) 178 |
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ON APPEAL FROM THE HIGH COURT, BUSINESS AND PROPERTY COURTS OF
ENGLAND AND WALES, PATENTS COURT
His Honour Judge Hacon sitting as a judge of the High Court
HP-2019-000008
Strand, London, WC2A 2LL |
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B e f o r e :
LADY JUSTICE ELISABETH LAING
and
LORD JUSTICE BIRSS
____________________
(1) VESTEL ELEKTRONIK SANAYI VE TICARET A.S.(2) VESTEL UK LIMITED |
Appellants |
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| - and - |
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| (1) ACCESS ADVANCE LLC (formerly HEVC ADVANCE LLC) (2) KONINKLIJKE PHILIPS N.V. |
Respondents |
____________________
James Segan QC (instructed by Powell Gilbert LLP) for the First Respondent
Meredith Pickford QC and Andrew Scott (instructed by Bristows LLP) for the Second Respondent
Hearing dates: 2nd, 3rd March 2021
____________________
Crown Copyright ©
Lord Justice Birss:
Background and context
Vestel
group is based in Turkey and makes televisions. The second appellant,
Vestel
UK, sells these televisions in the UK. The UK is the group's largest market in the EU and one of its largest markets worldwide.
Vestel's
televisions are sold under various brands including Toshiba, Hitachi, Telefunken and Panasonic. It is convenient to use the term
Vestel
to apply to the two claimants. Nothing now turns on the difference between the two.
Vestel's
televisions use that technology. The standard is promulgated by the International Telecommunication Union (ITU), a UN agency based in Geneva. A large number of patents have been declared as essential to the standard. I will use the term SEPs (Standards Essential Patents) to refer to them without getting into the distinction between patents only declared by their owner to be essential as opposed to patents which have been found actually to be essential. We have not been taken to the relevant rules of the ITU, but we were told that the relevant rules require that patentees who declared SEPs to this standard must commit to licensing them on terms which are FRAND, i.e. Fair, Reasonable and Non-Discriminatory.
Vestel
need a licence from the HEVC Advance pool or from Philips directly. Access Advance offers a licence called the Patent Portfolio Licence Agreement (PPL).
Vestel
contend that the terms of the PPL are not FRAND. One major reason is that
Vestel
say the royalty due ($1.33 per unit) is too high.
Vestel
point out that the MPEG LA royalty is 20 cents per unit. Whether that is an appropriate comparable rate is not an issue we have to decide. One argument is that the MPEG LA rate is not a good comparable because, it is alleged, the patentees in that pool are also implementers and so have an interest in a lower rate.
Vestel
agree that such licences should be worldwide and contend that that is FRAND.
Vestel
for abuse of dominance under Article 102 Treaty on the Functioning of the European Union (TFEU) and section 18 of the Competition Act 1998. It was brought against Access Advance and Philips. Philips is said to be joined both in its own right and in a representative capacity representing all the other patent holders in the HEVC Advance pool. The representative capacity issue is not before us.
Vestel's
case on the relevant market; the alleged dominant position of both Philips as a holder of SEPs and of Access Advance as administrator of the patent pool; and the alleged abuses. A number of alleged abuses were relied on. The main ones were the failure to offer a licence on FRAND terms and the demanding of royalty rates which were excessive.
Vestel
sought was for the court to grant declarations. Essentially the declarations were that the respondents had abused their dominant position, that the PPL was not FRAND whereas
Vestel's
counter-offer was, and that if neither set of terms were FRAND then the court should declare what licence terms would be.
Vestel)
which is seeking a FRAND declaration. There is no claim for patent infringement. Nor have
Vestel
used the machinery available to them under the Patents Act 1977 to bring a claim for a declaration of non-infringement or revocation of any SEPs before the court.
Vestel
candidly agree they do need a licence, although it is fair to note that they have not admitted any particular patent is valid or infringed/essential.
Vestel's
case was legally coherent in that the claimants were bringing it as a claim in tort against the defendants for abuse of dominance and then seeking the FRAND declarations as part of the remedy. The dominance comes from the patents and the abuse was the failure to offer a licence which was FRAND. However since the defendants were overseas companies, the court's jurisdiction had to be established.
Vestel
relied on Article 7 (2) (place where the harmful event occurred) as a justification for bringing a claim in this jurisdiction rather than suing Philips in its country of domicile (the Netherlands) under Article 4.
Vestel
needed permission to serve out based on one of the gateways in CPR PD 6B para 3.1. The primary grounds relied on were gateway 9 (claims in tort, damage within the jurisdiction) and gateway 11 (claim relates wholly or principally to property within the jurisdiction). Also relevant were gateway 3 (necessary and proper party) and gateway 4A (same facts) but neither of those could succeed without
Vestel
establishing some jurisdiction by another route first.
Vestel
had filed disclosed any credible basis on which to conclude that
Vestel
UK had suffered or would suffer any direct damage arising from the alleged abuse of dominance, assuming the abuse was proved at trial. He therefore rejected the claim based on Article 7(2) of Brussels 1 Recast.
Vestel
failed at step (i) on all of the gateways relied on. The judge also held that the abuse of dominance claim failed at step (ii) on the basis that
Vestel
had failed to show they would suffer any damage. Step (iii) (referred to below as forum non conveniens) did not need to be considered.
Vestel
faced before the judge on gateway 9 was closely related to the problem with Article 7(2), i.e. an inability to establish significant direct damage in the jurisdiction. One kind of damage
Vestel
sought to rely on was financial harm caused by having to put money aside to cater for the uncertainty about what the royalties due might be when the rate was finally settled. This failed on the facts.
Vestel
contended was FRAND was a licence of SEPs in every jurisdiction all over the world, and since the UK SEPs within it represented less than 5% of the patents (the precise number was disputed and may be lower), the claim did not relate wholly or principally (my emphasis) to property within the jurisdiction and so the gateway was not satisfied.
Vestel
sought to amend the Particulars of Claim to add a new alternative plea (paragraph 93A) for two further declarations. They were drafted so as to emphasise that the licence on offer, and the terms sought to be settled as FRAND by the court, were the terms of a licence to the UK patents. The judge held (paragraph 115) that this did not make any difference. He therefore held that gateway 11 was not satisfied and refused to allow the amendment to the Particulars of Claim since it did not help.
Vestel
sought permission to appeal on six grounds. Ground 1 related to gateway 11 and paragraph 93A of the Particulars of Claim. Ground 4 related to gateway 4A and ground 5 related to forum non conveniens. Ground 6 related to the refusal to allow the amendment in paragraph 93A of the Particulars of Claim. The judge gave permission on all these grounds because the law on jurisdiction as it applies to FRAND is a developing area of law.
Vestel
at the permission stage. By ground 3
Vestel
contended that gateway 9 could be satisfied on the basis that the relevant tort was the tort of patent infringement and in effect the claim is for a negative declaration relating to it. The judge refused permission on that ground because it was not pleaded or argued.
Vestel
sought permission on grounds 2 and 3 from the Court of Appeal. By an order dated 27th February 2020 Floyd LJ gave permission on both grounds.
Vestel,
in July 2020 patentees holding SEPs in the HEVC Advance pool (including Philips) started patent infringement proceedings against
Vestel
in Germany. Amongst other things they contended that the PPL terms are FRAND and so the requirements of Huawei v ZTE (Case C-170/13) EU:C:2015:477 are satisfied.
Vestel
applied to expedite the appeal in the light of the German proceedings. Floyd LJ refused expedition noting that the German courts would analyse the pool licensing offer to determine whether it is FRAND and would no doubt be astute to give effect to the principles relating to abuse of dominant position.
Vestel
made a radical change to its case on this appeal. The claim based on abuse of dominance (and so also ground 2 of the appeal) was dropped altogether. Draft amended versions of the Claim Form, Particulars of Claim and Grounds of Appeal were produced. Save in one minor respect the draft amendments consist entirely of deletions. The claim for abuse of dominance is certainly deleted. However
Vestel's
assertion to be entitled to certain declarations remains although the declarations now sought are reduced to three. The sole remaining declaration from those sought in the original proceedings was the claim for a declaration that
Vestel's
counter-offer was FRAND. The two other declarations sought were those which
Vestel
had tried to add by the amendment to insert paragraph 93A. I will come back to the question of the legal basis on which the relief is now sought.
Vestel
permission to delete matter consequential on their dropping of ground 2 of the appeal but took care to adjourn to the hearing of the appeal the application to amend insofar as the claimants were seeking to raise any new point, explaining that the court could not at that stage determine whether or not the amendments should be permitted in advance of the hearing. Predictably enough when the matter came before us, the parties were far apart on the effect of the amendments.
Vestel
argued that the amendments were mere deletions and had all been permitted (save for the minor point involving some additional wording), while the respondents argued that the amendments gave rise to an entirely new case not advanced below, had not been permitted by Arnold LJ and should be refused now. The respondents also argued that this change of case was turning the appellate court into a court of first instance, and in addition referred to the authorities on changes of case in jurisdiction disputes (citing NML v Argentina [2011] UKSC 31 and Alliance Bank JSC v Aquanta [2012] EWCA Civ 1588).
Vestel
say that that argument has always been in the case. However it is not that simple. It is true that after the claims had been served but before the matter came before HHJ Hacon, in a response dated 1st July 2019 to a Request for Further Information from Access Advance,
Vestel
confirmed at paragraph 21 that in the alternative to its case based on abuse of dominance,
Vestel
relied on the court's inherent jurisdiction as an alternative legal basis on which the declarations were sought. However as against Philips the position was different. In the corresponding response to Philips' Request for Further Information (response dated 12th June 2019)
Vestel
confirmed that the only legal basis on which the declarations were sought as against Philips was in connection with the cause of action for abuse of dominance. In other words
Vestel
there eschewed as against Philips any reliance on an inherent declaratory jurisdiction.
Vestel
to base their case in this court on the court's inherent jurisdiction to grant declarations in appropriate circumstances. As with the patent infringement point, the arguments arise from the same facts and evidence already in the case and to some extent the issue was already in the proceedings.
Vestel
that it has a legally enforceable right to a FRAND licence. When the claim began
Vestel
claimed such a legally enforceable right, on the basis that for either respondent to refuse to offer a licence on FRAND terms was a tort actionable by
Vestel,
i.e. an abuse of dominant position. That claim has been dropped and no attempt is made in the consequential amendments to introduce a new claim to a right to a FRAND licence. The argument based on the tort of patent infringement is the other way round and will be addressed below. The argument based on the inherent jurisdiction is not founded on a claim to a legal right to a FRAND licence.
Appeal ground 3 – claim in tort
Vestel
that they can satisfy gateway 9 in relation to Access Advance and Brussels 1 Recast Article 7(2) in relation to Philips on the basis that all the claims for declarations can be characterised as claims for a negative declaration in a claim based on tort, the tort being patent infringement. For Philips the relevant patents are its UK patents which have been declared as essential to the standard, in other words Philips' UK SEPs. In relation to Access Advance, the patents are all the UK SEPs in the portfolio administered by HEVC Advance Pool at least at the date the claim began. The Particulars of Claim annexes a list of all these patents.
Article 4
1. Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State.
…
Article 7
A person domiciled in a Member State may be sued in another Member State:
…
(2) in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur;
Vestel
contends that a claim for a declaration of non-liability for the tort of infringing any of Philips' UK SEPs would fall within Article 7(2). I agree. However the question then becomes whether that is the right way to characterise the claims for FRAND declarations in this case. I believe it is not, for the following reasons.
"14 It appears from this brief review of the IPR Policy in its context that the following conclusions may be reached.
First, the contractual modifications to the general law of patents are designed to achieve a fair balance between the interests of SEP owners and implementers, by giving implementers access to the technology protected by SEPs and by giving the SEP owners fair rewards through the licence for the use of their monopoly rights.
Secondly, the SEP owner's undertaking, which the implementer can enforce, to grant a licence to an implementer on FRAND terms is a contractual derogation from a SEP owner's right under the general law to obtain an injunction to prevent infringement of its patent. […]"
"58 In addressing the submissions set out above, we recognise, as is undisputed, (a) that questions as to the validity and infringement of a national patent are within the exclusive jurisdiction of the courts of the state which has granted the patent and (b) that in the absence of the IPR Policy an English court could not determine a FRAND licence of a portfolio of patents which included foreign patents. It is the contractual arrangement which ETSI has created in its IPR Policy which gives the court jurisdiction to determine a FRAND licence and which lies at the heart of these appeals. We therefore address first the fourth of Huawei's submissions concerning the interpretation of the IPR Policy."
"90 […] The English courts have jurisdiction to rule upon whether the UK patents in suit are valid and have been infringed, and also have jurisdiction to rule on the contractual defence relied upon by the implementers based upon the true meaning and effect of the irrevocable undertaking the SEP owners have given pursuant to the ETSI regime. […]"
Vestel,
after dropping the abuse of dominance plea. They are in this form:
i) A declaration that the terms of the Access Advance draft PPL insofar as they relate to any patents in the HEVC Advance patent pool which designate the United Kingdom are not FRAND;
ii) A declaration that the terms of the Claimants' counter-offer of 18 January 2019 are FRAND;
iii) Alternatively, a declaration as to the terms which are FRAND for the patents within the HEVC Advance patent pool which designate the United Kingdom (alternatively, such patents within that pool as are owned by the Second Defendant).
Vestel
has a right to any such licence. That might not matter if the Particulars of Claim did plead a case that
Vestel
has a legal right to such a licence, but they do not. In argument counsel for
Vestel
suggested that such a right arose because for Philips to refuse would be an abuse of dominant position but that argument was rightly dropped after the respondents pointed out that such a claim had been abandoned already. It was not open to
Vestel
to advance such a case.
Vestel
also referred in a general way to the ITU rules which require Philips to undertake to offer FRAND licences on SEPs declared to the standard. However no case that there is any such right enforceable by
Vestel
is pleaded in the Particulars of Claim either. The omission from either the terms of the declaration or the Particulars of Claim is not an accident of drafting. Perhaps it was thought there would be jurisdictional difficulties if such a case was advanced but we do not know and it is not fruitful to speculate.
Vestel
did actually have a licence from Philips, on whatever terms, then any subsequent act such as the sale of a standards compliant television would not infringe the relevant UK patents. However that fact does not turn the declarations which are sought into declarations of non-liability in tort. They are not.
Vestel's
position is like that of a trespasser with no right to enter the property claiming that if they had permission then it would not be a trespass.
Claims in tort
(9) A claim is made in tort where –
(a) damage was sustained, or will be sustained, within the jurisdiction; or
(b) damage which has been or will be sustained results from an act committed, or likely to be committed, within the jurisdiction.
Vestel
contend that they satisfy this gateway by bringing a claim for a declaration of non-liability for the tort of patent infringement. In FujiFilm v Abbvie [2016] EWHC 2204 (Pat) Arnold J (as he then was) held at paragraphs 102 to 106 that a claim for a negative declaration that no tort has been, or will be, committed falls within gateway 9. The judge reached that conclusion both on the basis that gateway 9 should be interpreted consistently with Article 7(2) and in the light of Folien Fischer but also that, even in its own terms the reasoning in Folien Fischer is persuasive and supports that interpretation of gateway 9 irrespective of its relationship with Article 7(2). I agree with that conclusion for the same reasons as Arnold J.
Vestel's
claim was a claim for a declaration of non-liability for the tort of infringing any of the UK SEPs in the portfolio administered by Access Advance, then that would be capable of satisfying the gateway. However, for the same reasons already explained above, it is not.
Vestel's
case was not within those provisions. If this had been the only issue, I would have decided the Article 7(2) and gateway 9 issues in
Vestel's
favour. In other words, if
Vestel
had had a claim to a right not to be the subject of an injunction for patent infringement, I would have held that this satisfied Article 7(2) and/or gateway 9 even if the vindication of that right did not absolve
Vestel
of all tort liability, such as for damages. However this conclusion does not alter the outcome of ground 3.
Appeal ground 1 – gateway 11
Claims about property within the jurisdiction
(11) The subject matter of the claim relates wholly or principally to property within the jurisdiction, provided that nothing under this paragraph shall render justiciable the title to or the right to possession of immovable property outside England and Wales.
Vestel's
claim without the proposed amendment to introduce paragraph 93A of the Particulars of Claim the judge held:
"113.Vestel
was clear that its claim related to all the patents in the pool. Advance's point was that the subject matter of the claim therefore related neither wholly nor principally to property within the jurisdiction. I agree. In my view an action which relates to property in the form of SEPs is not principally concerned with 2.43% or 4.9% of that property, whichever may be the correct number. Gateway 11 is not satisfied."
Vestel's
case put in the form it was, I can see the force in the judge's reasoning.
Vestel
were simply adding paragraph 93A and leaving the rest of its pleaded case of abuse of dominance intact. The judge held (paragraph 115) that paragraph 93A did not change anything and so reasoned that his conclusion on gateway 11 did not change either. It is not necessary for us to examine that conclusion because, again,
Vestel's
case before us is now quite different.
Vestel
now put the case they wish to advance in the following way. The sole claim is for declaration or declarations of what the FRAND terms would be for a licence under the UK SEPs which are in the HEVC Advance pool. That claim can be brought under the court's inherent jurisdiction because it would serve a useful purpose (Rolls Royce v Unite the Union [2009] EWCA Civ 387). It serves a useful purpose because it establishes the licence which
Vestel
would need to avoid infringing those patents in the UK by carrying out its activity here, such as selling standard-compliant televisions. The subject matter of the claim is UK property – i.e. the UK patents. That is because it is a claim about what terms are available for a licence in respect of that property. Therefore the subject matter of the claim relates wholly or principally to property within the jurisdiction and so the case falls within gateway 11. The fact that the licences of the UK patents which would be FRAND would also license patents from other countries, cannot alter the fact that what
Vestel
is entitled to and is seeking is a licence under the UK patents. This paragraph is not a quote from
Vestel's
skeleton argument but it fairly reflects how
Vestel
put their case.
Vestel's
claim cannot be brought under the inherent jurisdiction in this way at all, because no legal right is involved. They also contend that
Vestel
cannot fall within the gateway for the same reasons
Vestel's
claim below did not fall within the gateway, i.e. because the licences in issue license patents worldwide and the UK patents only make up 5% or less of that property.
Vestel
now put their case is that to answer the first limb (the gateway issue) involves examining with some care the claim
Vestel
are actually making, which is an issue which more naturally falls into the second limb. The gateway presupposes that the claimant has a claim of some sort, whose subject matter can be considered and found to be property wholly or principally within the jurisdiction.
Vestel
have identified no legal right to the declarations sought. The most they have is a legal proceeding which asks the court to exercise its inherent jurisdiction to grant these declarations.
Vestel
did claim to have a legally enforceable right against a patentee or a licensing agent of a patentee, whereby
Vestel
were entitled to be offered a FRAND licence under the UK SEPs in the HEVC Advance pool, then the subject matter of that particular claim would be the UK SEPs. The question that claim would be concerned with is the licence terms which are available to license those UK rights. The fact that the only licence of the UK patents which is FRAND would also involve licensing foreign patents does not alter the subject matter of the claim. The fact that UK patents in the FRAND licence were only 5% or less of the patents licensed by it would make no difference. I would hold that such a claim was one which related wholly or principally to property within the jurisdiction and therefore fell within gateway 11. If I am differing from the judge below in this respect it may be because in the court below
Vestel
never clearly narrowed its claim to the extent it now does.
Vestel's
"claim" here is for the court to exercise the inherent jurisdiction to make a FRAND declaration despite the absence of an assertion of a right to such a licence.
Vestel
contend that this would nevertheless be a proper exercise of the court's jurisdiction based essentially on something I said in Pfizer v Hoffmann La Roche [2019] EWHC 1520 (Pat). I can see that if what
Vestel
seeks would be a proper exercise of the court's jurisdiction then it might be a "claim" within gateway 11 but I do not agree with
Vestel's
reasoning, as I shall explain.
Vestel's
argument based on Pfizer is that the conclusion shows that useful purpose is the only criterion which has to be satisfied in order for the court's declaratory jurisdiction to be engaged and that the absence of a putative legal right does not preclude it. The submission is based on paragraphs 64(i) and paragraph 86. The relevant passages are:
64 […] In summary counsel for Roche submitted that:
(i) The court has no jurisdiction to grant declarations where there was no dispute about UK legal rights or disputes of facts that were relevant to UK legal rights.
[…]
86 Taking stock, in my judgment the position is the following. Roche's first submission (set out at [64(i)] above) is wrong because it purports to place a limit on the court's power to grant a declaration even when it would serve a useful purpose. That is not right because the only relevant limitation is concerned with useful purpose. I would characterise Henry Carr J in FujiFilm as a case illustrating why the first point is wrong. The fact that analytically, by the time the question came to be decided, it was true that there was no longer a dispute before the court about the existence or scope of AbbVie's UK legal rights, did not mean the declaration would serve no useful purpose.
Vestel's
argument. However that would be to misread the case as a whole and take what was said out of context. There was never any doubt in Pfizer about the nature of the question the court would have been considering, if the court had decided to go ahead. It would have had a clear legal basis and legal context. It would have been whether the claimant's product would have the benefit of a complete defence to a legal claim. That was a claim for patent infringement based on patents in the relevant patent family, if they existed. The defence was one known as a Gillette defence.
Vestel's
argument on this topic, is not an example of the court holding that the declaratory jurisdiction can be engaged on the sole basis that it would serve a useful purpose and in the absence of any putative legal claim at all or any legal standard against which to judge the matter.
Vestel
refers to the ITU rules it does not contend in these proceedings that they have legal force.
Grounds 4 and 5
Vestel
would first need to succeed on one of grounds 1 or 3.
Ground 6 – Amendment
Vestel
would succeed on this ground but it does not help them in the end.
Conclusion
Vestel needs to win to lead to success on this appeal. I would therefore dismiss the appeal.
Lady Justice Elisabeth Laing:
Lord Justice Nugee: