Adaptive Spectrum and Signal Alignment Inc. v British Telecommunications Plc
| Jurisdiction | England & Wales |
| Judge | Lord Justice Birss,Lord Justice Nugee,Lord Justice Arnold |
| Judgment Date | 26 April 2023 |
| Neutral Citation | [2023] EWCA Civ 451 |
| Docket Number | Case No: CA-2022-01728 and CA-2022-001759 |
| Court | Court of Appeal (Civil Division) |
[2023] EWCA Civ 451
Lord Justice Arnold
Lord Justice Nugee
and
Lord Justice Birss
Case No: CA-2022-01728 and CA-2022-001759
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY LIST
MRS JUSTICE FALK [2022] EWHC 1707 (Ch)
HP-2020-000039
Royal Courts of Justice
Strand, London, WC2A 2LL
James Segan KC, Luka Krsljanin (instructed by Kirkland and Ellis International LLP) for the Appellant
Nicholas Saunders KC, Gideon Shirazi (instructed by Bird & Bird LLP) for the Respondent
Hearing dates: 29 March 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on [date] by circulation to the parties or their representatives by e-mail and by release to the National Archives.
This appeal concerns the construction of a contract between Adaptive Spectrum and Signal Alignment Inc (ASSIA) and British Telecommunications Plc (BT) to settle a number of international patent disputes concerning home broadband internet connection technology. Amongst other things the settlement terms involve each side granting a patent licence to the other. The issue is about the scope of the licence granted by ASSIA to BT and whether a service offered by BT called VULA is licensed or not. ASSIA contends that VULA is not licensed within the relevant terms whereas BT contends that it is. At trial Falk J decided ( [2022] EWHC 1707 (Ch)) that VULA was within the scope of the licence. ASSIA appeals with the permission of this court.
As I will explain below, I conclude that VULA is licensed under the patent licence and so the appeal should be dismissed.
Background
ASSIA holds a number of patents in the field of digital subscriber line (DSL) technology, which enables copper wires originally used for voice telephony to deliver broadband internet access. ASSIA offers licences of its DSL technology to a number of communication service providers (“Service Providers”) such as Sky and Talk Talk.
BT owns most of the copper telephone wires in the UK and sells access to them to Service Providers, along with other, more extensive services. The Service Providers, in turn, supply services to their own customers (or “end users”). The end users' premises may be connected to local exchanges either entirely via copper wires or only partially, in which case the copper line covers the distance between the premises and the relevant street cabinet, with the remaining distance being covered by optical fibre. A modem is required at each end of the copper line. In this judgment I will refer to the modem at the end users' premises as a Customer Modem. The Customer Modem can be provided either in the same box as the router which controls the home wifi network or separately from it. If provided in the same box, the Customer Modem is typically provided by the Service Provider with whom the customer contracts; if provided separately, it is not invariably so. The modem at the exchange or street cabinet end is part of a piece of equipment known as the Digital Subscriber Line Access Multiplexer (DSLAM).
In the papers for the case the parties used the abbreviations CP (for communications providers) and CPE (for customer premises equipment). I found those two abbreviation confusing and have used Service Providers and Customer Modem instead. They mean the same things respectively.
Performance of the DSL line is monitored using “Dynamic” line management technology, which improves efficiency on the copper line. Before May 2022, part of ASSIA's business was to provide line management technology to Service Providers. That technology is covered by ASSIA's patents. BT has its own line management controllers, known as Rate Adaptive Monitoring Boxes (RAMBos).
One kind of service offered by BT is called a Metallic Path Facility. Here BT provides the Service Provider with access to the relevant copper wire, and space in the exchange/street cabinet for the Service Provider to put equipment. The Service Provider installs its own DSLAM in the cabinet and provides a Customer Modem at the end user's premises. The Service Provider is responsible for any line management technology. It could, for example, buy in that technology from ASSIA.
VULA is a variant of this approach. VULA stands for Virtual Unbundled Local Access, but nothing turns on these terms. As the judge found (at [66]), VULA is a data connection. It includes (1) the fibre connection between the exchange and the street cabinet; (2) the DSLAM; and (3) the copper wires between the cabinet and the end user's premises. One thing BT does not provide with VULA is the Customer Modem. That would usually come from the Service Provider. Also part of the VULA service is an Ethernet layer connection to the end user's premises.
Thus using VULA a Service Provider will be able to offer an end user an internet connection at their home. However VULA alone is not enough. An internet access service has many more components, which the Service Provider would need to provide too. Although without the data connection such as the one provided by VULA it would be impossible for the end user to access the internet, considerably more is also required.
The section of line covered by VULA is under BT's sole control. Therefore the Service Provider has no control of the relevant DSLAM and no ability to apply its own line management technology. BT both owns and operates the relevant DSLAMs, using its RAMBos to monitor performance of the DSL line. As a consequence, in this set up ASSIA has no opportunity to sell its line management technology to the Service Provider.
Service Providers have increasingly opted for VULA. This has reduced the extent to which they have been responsible for providing any line management themselves and has, in turn, reduced the take up of line management technology from ASSIA (see judgment [27]–[31]).
There was litigation in multiple jurisdictions between ASSIA and BT relating to infringement of ASSIA's patents by BT and vice versa, including in this jurisdiction. In 2015, they started settlement discussions and ultimately entered into two agreements on 27 July 2015, namely a “Licence Agreement” and a “Settlement Agreement”, both of which are expressly governed by English law. The two documents cross-refer to one another and in effect amount to a single contract. They contain cross-licences for one party to the other in respect of each party's relevant patents within a certain, party specific, field of use. The parties also agreed to discontinue all the various proceedings. One of the proceedings expressly mentioned (at recital I to the Settlement Agreement) and which was in fact discontinued, was a claim in this jurisdiction issued by BT in March 2015 for a declaration that VULA did not infringe the relevant ASSIA patent.
The relevant licence in this case is from ASSIA to BT. It is clause 3. By clause 3.1 ASSIA grants BT and its group a “… Non-Exclusive perpetual and irrevocable, royalty free and fully paid up licence to the ASSIA Patents to practice and undertake any of and all of the rights granted a patent owner under Patents Act 1977…with respect to the BT Field of Use in the Territory.” The capitalised expressions are defined in the contract but nothing turns on the details of those definitions. The Territory is worldwide.
By clause 3.2 BT is not entitled to sub-license anyone under the licence apart from other BT group companies and related parties. This clause does not give BT the right to sub-license independent Service Providers like Sky or Talk Talk.
The clause on which attention falls in this case is clause 10.1 of the Licence Agreement, as follows:
“ 10. CLARIFICATION REGARDING PATENT LAUNDERING
10.1 The Parties understand and acknowledge that the licenses and covenants not to sue granted hereunder are intended to cover only the products or services or networks of the two Parties to this Agreement, and are not intended to cover manufacturing activities that either Party may undertake on behalf of third parties (patent laundering activities). Similarly, the licenses granted under this Agreement are not intended to cover products or services provided by the Parties to the extent that such products or services are provided on behalf of a third party and then to the extent that such products or services are provided using materials provided by or on behalf of the third party. For the avoidance of doubt, this section does not apply to those products or services that fall within the ASSIA Field of Use or the BT Field of Use that are modified, supplemented, or customized for customers in the normal course of business of ASSIA or BT or any of their Group and sold or distributed under a trademark or brand of ASSIA or BT or any of their Group.
10.2 The Parties agree that a purchase of a product or service from a supplier and resale of such product or service in substantially the same form back to the same supplier is not licensed or immune from suit under this Agreement.”
[ emphasis added]
The debate concerns the second sentence of clause 10.1, which I have italicised.
Legal principles
The law on contractual interpretation was definitively established by the trio of Supreme Court cases on the subject, namely Rainy Sky SA v Kookmin Bank [2011] UKSC 50; [2011] 1 WLR 2900, Arnold v Britton and others [2015] UKSC 36; [2015] AC 1619 and Wood v Capita Insurance Services Ltd [2017] UKSC 24; [2017] AC 1173.
There is no need to review these authorities or any others at any length. The guiding principle is that the task of the court is a unitary exercise involving an iterative process to ascertain the objective meaning of the language used by the...
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