Alcatel Lucent Sas v Amazon Digital UK Ltd

Hearing date: 16 January 2025

Approved Public Judgment

This judgment was handed down remotely at 10.30am on 28 January 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Introduction

This is an appeal by the Defendants/Part 20 Claimants (“Amazon”) against paragraph 5 of an order made by Zacaroli J (as he then was) on 10 September 2024 for the reasons given in the relevant part of his judgment dated 24 July 2024 [2024] EWHC 1921 (Pat). By that paragraph of his order the judge refused in part applications by Amazon for permission to amend their Defence and Counterclaim and their Part 20 Particulars of Counterclaim. The amendments which the judge refused plead claims for (i) a declaration that a willing licensor in the position of the Claimant (“Alcatel”) and the Part 20 Defendants (“Nokia Corp” and “Nokia Tech”) (collectively, “Nokia”) would agree to enter into, and would enter into, an interim licence of the Nokia Video Portfolio (as defined below), or at least part of it, pending the determination by the Patents Court of what terms for a final licence of the Nokia Video Portfolio are reasonable and non-discriminatory (“RAND”) and (ii) an order for specific performance requiring Nokia to enter into such a licence. I granted permission to appeal and expedited the appeal because the matter is of some urgency for reasons which will appear. At the conclusion of the argument the Court announced that the appeal would be allowed at least to the extent that Amazon would be granted permission to make the relevant amendments to their Particulars of Counterclaim subject to one adjustment explained below. This judgment sets out my reasons for reaching that conclusion and for concluding that the appeal should also be allowed in relation to the Defence and Counterclaim.

Amazon's core contention on the appeal is that the judge's decision can now be seen to be wrong in the light of this Court's subsequent decision in Panasonic Holdings Corp v Xiaomi Technology UK Ltd [2024] EWCA Civ 1143, in which the Court declared that a willing licensor in the position of Panasonic would agree to enter into, and would enter into, an interim licence of Panasonic's global standard-essential patent (“SEP”) portfolio pending the determination of fair, reasonable and non-discriminatory (“FRAND”) terms for a final licence to Xiaomi by the Patents Court. In order to minimise repetition, I shall assume that the reader is already familiar with that decision. It is pertinent to add that, after this Court gave its judgment in that case, the parties did agree to enter into an interim licence on the terms indicated by the Court. Thus the Court's declaration did serve a useful purpose.

This case concerns RAND obligations affecting patents declared essential to the International Telecommunication Union Telecommunication Standardization Sector (“ITU-T”) H.264/AVC and H.265/HEVC Recommendations (i.e. standards) rather than FRAND obligations affecting SEPs declared essential to European Telecommunications Standards Institute (“ETSI”) standards. It is not suggested that there is any material difference between RAND and FRAND as concepts, but as explained below RAND obligations are subject to Swiss law whereas FRAND obligations are subject to French law, and therefore the content of the obligations may not be identical. Nevertheless it is not disputed that there is a substantial degree of similarity between the content of a RAND obligation and that of a FRAND obligation.

The case also concerns patents which have not been declared to be essential to any standard (“non-essential patents” or “NEPs”).

Factual background

The parties

Alcatel and Nokia Tech are members of the Nokia Group, which is active in telecommunications, information technology and consumer electronics. Nokia Corp is the parent company of the Nokia Group. The Nokia Group participates (with other undertakings) in technological standard development and licenses its patents covering, inter alia, video standards.

Amazon are members of the Amazon Group, which is a leading provider of digital content, including its Prime Video, Freevee and Twitch streaming services, as well as a supplier of video decoding devices such as Kindle Fire Tablets, Fire TV Sticks and Fire TVs. Digital content provision involves, inter alia, the encoding of video data to allow for storage and transmission of video content, which content can be viewed by a consumer with equipment capable of decoding the relevant data.

The Nokia Video Portfolio

Nokia have publicly identified themselves as holding a “leading portfolio of [SEPs] and a broad scope of [N]EPs that cover every main area of the H.264/AVC and H.265/HEVC standards”, including “a number of fundamental implementation patents that enable key technologies in streaming/over the top (OTT) video platforms, Pay TV including cable, satellite and IPTV services, gaming, social media, AR/VR, and a number of cloud-based service offerings” (“the Nokia Video Portfolio”). The Nokia Video Portfolio includes: (i) video encoding and decoding patents declared essential to the ITU-T H.264/AVC and H.265/HEVC video coding Recommendations (“Codec SEPs”); and (ii) NEPs. The Nokia Video Portfolio is a global portfolio.

The declarations made by Nokia in relation to the Codec SEPs contain the following terms:

“The Patent Holder believes that it holds granted and/or pending applications for Patents the use of which would be required to implement [an ITU-T Recommendation] and hereby declares, in accordance with the Common Patent Policy for the ITU-T/ITUR/ISO/IEC, that …

The Patent Holder is prepared to grant a license to an unrestricted number of applicants on a worldwide, non-discriminatory basis and on reasonable terms and conditions to make, use and sell implementations of the [ITU-T Recommendation].”

The declarations are governed by Swiss law. Amazon contend that their effect is to impose on Nokia a contractual obligation to offer the beneficiaries of the declarations (i.e. implementers such as Amazon) a worldwide licence on RAND terms, and upon acceptance of that offer to enter into such a licence.

Amazon's position with respect to the Nokia Video Portfolio

Amazon wish to obtain a comprehensive licence in respect of the Nokia Video Portfolio so that their business can continue to operate without the threat of interruption by patent injunctions. Amazon accept that they require a licence covering at least the SEPs in the Nokia Video Portfolio, and have undertaken to the Patents Court to enter into a licence on the terms determined by the Patents Court to be RAND (subject to adjustment on any appeal). Amazon's case is that such a licence would include the option for Amazon to obtain rights under Nokia's relevant NEPs, and Amazon have undertaken to elect to take that option. Amazon allege that Nokia have (i) licensed competitors to Amazon in that way, (ii) previously licensed Amazon in that way and (iii) offered to license Amazon in that way in negotiations.

Negotiations

Negotiations between the parties have been ongoing for many years, but have not led to a conclusion in light of the parties' differences over the financial terms of any licence. Nokia say that they have made a number of offers which are consistent with their RAND obligations, of which four are said to remain open for acceptance. Of particular relevance is an offer of 30 May 2024 (“the 30 May Offer”) which covers both encoding and decoding claims of Nokia's Codec SEPs in respect of end user devices (but not streaming) in return for a lump sum payment. Nokia's position is that they are neither obliged, nor willing, to include their NEPs within a licence to Amazon. Amazon contend that, in adopting that position, Nokia are discriminating against Amazon compared to competitors of Amazon.

Worldwide litigation

On or around 31 October 2023 Nokia commenced what the judge described as a “worldwide campaign of litigation”, alleging infringement of both SEPs and NEPs within the Nokia Video Portfolio. This included the present proceedings issued by Alcatel against Amazon in the UK. As Nokia Tech's Head of Licensing stated in a blog post published on the Nokia Group website on the same day:

“…we have commenced legal action against Amazon for the unauthorized use of Nokia's video-related technologies in its streaming services and devices. Cases have been filed in the US, Germany, India, the UK, and the European Unified Patent Court. Amazon Prime Video and Amazon's streaming devices infringe a mix of Nokia's multimedia patents covering multiple technologies including video compression, content delivery, content recommendation and aspects related to hardware.”

Amazon allege that this campaign was commenced only six days after Nokia had made their first offer of a licence covering Amazon's video services.

Brazil. Nokia Tech sought and obtained a preliminary injunction in respect...