HTC Corporation (Appellant/Claimant and Counteraction Defendant) v Nokia Corporation (Respondent/Defendant and Counteraction Claimant)

This is an application by HTC Corporation ("HTC") for permission to appeal against the refusal by Arnold J of a general stay of the permanent injunction, which he made at the conclusion of the trial, in which he found that Nokia's European Patent (UK) No. 0 998 024 ("the Patent") was valid and infringed by components in some of HTC's products. The claims in the patent relate to chips for mobile phones. The judge gave permission to appeal against the injunction and the associated order for delivery up of infringing material, but stayed the injunction pending the appeal in respect of the HTC One phone, which he said, on the appellant's evidence, was its flagship model. The judge, however, refused any wider stay, rejecting HTC's claim that it should also be allowed to continue to sell the HTC One Mini and other products which utilise the infringing chips. As to that, the judge accepted that it would be difficult to quantify the damage which HTC will suffer if prevented from selling the HTC One Mini and other phones between now and the appeal, which is likely to be heard in either July or October next year. However, he ruled that HTC had been on notice of the infringement allegations from the date in May 2012 when some German infringement proceedings were commenced, in which time it could have made contingency plans including requesting its chip suppliers, Broadcom and Qualcomm, to design a chip for its phones which did not have the features of claim 1 of the Patent. The judge said that it was not until March 2013 that Qualcomm was asked to produce a workaround (which it refused to do) and not until 26th November 2013 that Qualcomm was persuaded to change its mind. The judge's conclusion, expressed in paragraph 85 of his judgment, was that:

"In my judgment, in the case of the One, the balance comes down in favour of granting a stay. The potential harm to HTC outweighs that to Nokia, the One has been on the market for some time and the impact of HTC's apparent lack of contingency planning is less significant. In the case of the One Mini, the balance comes down in favour of refusing a stay. In this case the potential harm is more evenly weighted, but importantly the phone was launched much more recently and HTC designed and launched it at a time when HTC knew it was facing a claim for infringement of the Patent and apparently without making any contingency plans."

HTC now seek permission to appeal against the refusal of a more extensive stay which would enable the One Mini and the other infringing phones to continue to be sold pending the hearing of the full appeal against the judge's order. Kitchin J adjourned the application to the full court with directions that the appeal should follow, if permission is granted, for the obvious reasons that the issue must be decided as a matter of expedition if the appeal is to be of any value to the appellant. I should emphasise that we are not today concerned with any issues of validity or infringement or with whether the judge was right to grant a permanent injunction, as opposed to some more limited form of relief for the infringements which he found proved. These are matters for the full appeal next year. We are only concerned with the much more limited question of whether Arnold J should have granted a general stay of the injunction pending the full appeal.

This is important because HTC's challenge to the judge's order relates both to the issue of validity and infringement and also to whether Nokia should have been refused a permanent injunction and been limited to its remedy in damages. HTC has permission to argue that even if the judge was right on the issues of validity and infringement, the grant of an injunction was disproportionate. On this latter point, the judge was taken to the familiar authorities such as Jaggard v Sawyer [1995] 1 WLR 269 on the circumstances in which the court may properly refuse a permanent injunction so as to prevent future breaches of the claimant's legal rights and instead award damages in lieu under what is now section 50 of the Senior Courts Act 1981. As a general rule, injunctive relief should be refused if the injury complained of is small, it can be estimated and adequately compensated for in money terms, and the grant of an injunction would, in the circumstances, be oppressive in the sense of disproportionate to the right sought to be protected. One advantage of an award of damages under section 50 is that it can be calculated on a basis which compensates the successful claimant for the profit which the defendant is likely to gain from being able to operate in breach of its legal rights. This is frequently based on what the court assesses would have been a reasonable fee for the parties to have negotiated for the grant of the necessary licence.

The judge also considered in his judgment the effect on this jurisprudence of Articles 3 and 12 of the Enforcement Directive (European Parliament and Council Directive 2004/48/EC of 29 ^th April 2004) with their own criteria of proportionality.

Mr. Burkill QC for HTC submits that judge's limited stay was contrary to established principles governing the stay of injunctive relief pending appeal, and that he failed to make an order which would enable the court to do justice between the parties, whatever the outcome of the main appeal may be. Moreover, since the judge accepted that the most serious and therefore potentially harmful source of competition to Nokia appears to be the HTC One phone but that this was still insufficient to justify the refusal of a stay in respect of that product, there can be no basis on which the judge could properly have refused a stay in respect of the other HTC phones which did not pose the same level of risk. In any event, the judge failed, in the relevant paragraphs of his judgment, to identify what facts he relied on in order to reach that conclusion. The proper course therefore for the judge was to preserve the status quo by granting a general stay pending the main appeal.

Both sides, I think, accept that the grant of a stay pending an appeal is an exercise of discretion by the court which is intended (as far as possible) to minimise the loss and inconvenience to the ultimately successful party. As the premise on which the court operates is that the eventual outcome remains uncertain until judgment on the appeal, the strength of the rival contentions on the merits is unlikely to be persuasive in deciding whether or not to grant the stay. The winning party at trial is entitled to rely on the fact that the judge has affirmed its position in the proceedings but the unsuccessful party can say that it has obtained permission to appeal (in this case from the judge himself) which, to use the language of CPR Part 52.7, indicates that the appeal must at least have a real prospect of success. There may be cases in which the court, whilst granting permission to appeal, recognises that the so far unsuccessful party will have an uphill struggle. But in most cases it will not be possible to predict the likely outcome with any certainty nor, in my view, appropriate to do so.

The effect of a stay is therefore to impose upon the successful party a temporary postponement of the relief he obtains from the trial judge until the correctness of the order is confirmed by the Court of Appeal. Consistently with the court's disinclination to debate the merits, the grant or not of the stay has to take into account the effect on the respective parties of such a postponement, weighed against the possibility that either may eventually turn out to be the winning party. Perfect justice is rarely obtainable and the uncertainty of the eventual outcome inevitably dictates that court may be able to do no more than to opt for the lesser of two evils. It is essentially about minimising risk. Where the potentially adverse consequences are relatively evenly balanced, the court can probably do no better than to maintain the status quo pending the outcome of the appeal.

The operation of these principles were discussed by Buckley LJ in Minnesota Mining & Manufacturing Co. v Johnson & Johnson (No.3) [1976] RPC 671, at page 676:

"It is not in dispute that where a plaintiff has at first instance established a right to a perpetual injunction, the court has a discretion to stay the operation of the injunction pending an appeal by the defendant against the judgment. On what principles ought such a discretion to be exercised. The object, where it can be fairly achieved, must surely be so to arrange matters that, when the appeal comes to be heard, the appellate court may be able to do justice between the parties, whatever the outcome of the appeal may be. Where an injunction is an appropriate form of remedy for a successful plaintiff, the plaintiff, if he succeeds at first instance in establishing his right to relief, is entitled to that remedy upon the basis of the trial judge's findings of fact and his application of...