Koninklijke Philips N.v (a company incorporated under the laws of the Netherlands) v 1. Asustek Computer Incorporation (a company incorporated under the laws of Taiwan) and Others
| Jurisdiction | England & Wales |
| Judge | Mr John Baldwin |
| Judgment Date | 21 April 2016 |
| Neutral Citation | [2016] EWHC 867 (Pat) |
| Court | Chancery Division (Patents Court) |
| Docket Number | Claim No HP-2015-000063 |
| Date | 21 April 2016 |
[2016] EWHC 867 (Pat)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr John Baldwin QC
(sitting as a deputy Judge of the Patents Court)
Claim No HP-2015-000063
Brian Nicholson and Adam Gamsa (instructed by Bristows LLP) for the Claimant
James Abrahams QC and Joe Delaney (instructed by Hogan Lovells International LLP) for the 4 th and 5 th Defendants
Hearing date: 8 th April 2016
Mr John Baldwin QC :
I am asked by the 4 th and 5 th Defendants (HTC) to order the trial of a preliminary issue in a patent infringement action concerning the technology used in mobile phones. The Claim Form and Particulars of Claim were served on 15 December 2015 and a Defence served on the 23 February 2016. On the same day as service of the Defence, this application was made and I was told that, if granted, the preliminary issue can be determined at a 2 day hearing in July.
The action concerns infringement of 3 patents and, simultaneously with service of proceedings last December, similar infringement proceedings were brought against HTC in Germany (Mannheim), the Netherlands, France and Delaware. The Claimant (Philips) claims that each of the three patents in suit is essential for the operation of mobile phones using 3G technology and, since HTC phones use this technology, infringement follows. HTC contests whether or not the patents are essential and presents a non-infringement defence.
The phones in issue, or similar ones, have been on the market for 10 years or so and, accordingly, there is no question of urgency as far as relief for Philips is concerned. It was not explained to me why proceedings had not been brought earlier in time and I assume that the reason is irrelevant.
In addition to the HTC parties, another set of Defendants is involved in the proceedings. These Defendants appear to be completely separate and the matter which is sought to be the subject of the preliminary issue does not concern them. These other Defendants, although not HTC (for reasons which I shall later explain), have challenged the validity of each of the patents in suit.
There are many issues of confidentiality surrounding the subject matter of these proceedings and for that reason I will only set out details in so far as they are necessary to make matters sufficiently clear for my decision to be understood.
It is common ground that the infringement proceedings will be complex and substantial and it may be the case that it is appropriate for them to be tried one patent at a time rather than all three together. A case management conference will be fixed in due course at which issues like this may be determined. All that needs to be recognised for present purposes is that the trial of the technical issues is anticipated to be time consuming and expensive.
The preliminary issue which is sought to be determined in July is whether, as a consequence of an agreement Philips reached with a third party (TP) some years ago, HTC has a defence to some or all of the claim. That defence would be by way of licence or similar and has been called the Licence Issue or Licence Defence for convenience. For the purposes of this application, Mr Nicholson, counsel for Philips, conceded that, as a matter of construction, the aforesaid agreement provides HTC with an arguable defence to the infringement claim.
A condition may be attached to the Licence Defence. It is that HTC may only rely on the agreement at its source if and so long as HTC does not challenge the validity of any of the patents which are the subject of the licence. It is for this reason that HTC has not raised validity in these proceedings.
Philips contests whether HTC's interpretation is the true effect of the agreement it has made with TP (it is to be construed in accordance with some foreign law) and asserts that, in any event, the agreement, or the relevant clause thereof, is void by reason of it being contrary to the anti-competitive provisions of the TFEU.
On 4 April 2016 HTC pleaded out in detail the case which it seeks to be determined by way of preliminary issue. This pleading purports to explain why the Licence Defence is a good one.
As yet there is no pleading by Philips of its competition answer to the Licence Defence and so it is not possible to assess its credibility. However, there is evidence that the matter will be very complicated and will take 5 to 6 weeks of trial time, sometime in 2017, to determine, assuming that the case gets off the ground. Both HTC and Philips accepted this to be a fair summary of the position.
Neither is there a detailed pleading in answer to HTC's contentions with respect to the Licence Defence, although there is a draft preliminary answer. It does not raise any technical issues.
It is anticipated that the Mannheim court will reach a conclusion on the infringement issue in September 2016. Inquiries have been made as to the procedure in Mannheim and the evidence is that the court, in considering whether to grant any injunction against HTC, may take into account any conclusions this court may express on the Licence Defence, if those conclusions are made known before the end of October 2016 and even if there is, lurking in the background, a competition argument to the effect that the source of the licence is a void agreement.
HTC has not challenged validity of the Philips' patents in Germany, the reason being the same as in these proceedings – HTC is concerned that the effect of such a challenge will be to deny to it the opportunity to rely on the Licence Defence.
The relevant matters for the court to consider on applications for a preliminary issue were set out recently by Birss J in Wagner International AG v Earlex [2011] EWHC 3897 (Pat), adopting the approach of Neuberger J in Steele v Steele [2001] unreported. The criteria are:
(a) whether the determination of the preliminary issue will dispose of the whole case or at least one aspect of the case;
(b) whether the determination of the preliminary issue will significantly cut down the cost and the time involved in pre-trial preparation and in connection with the trial itself;
(c) if the preliminary issue is an issue of law, the amount of effort involved in identifying the relevant facts for the purposes of the preliminary issue;
(d) if the preliminary issue is an issue of law whether it can be determined on agreed facts. If there are substantial disputes of fact it is unlikely to be safe to determine the legal issue until the facts are found;
(e) whether the determination of the preliminary issue will unreasonably fetter either the parties or the court in achieving a just result;
(f) the risk that an order will increase the costs or delay the trial and the prospects that such an order may assist in settling the dispute;
(g) the more likely it is that the issue will have to be determined by the court, the more appropriate it is to have it determined as a preliminary issue;
(h) the risk that the determination may lose its effect by subsequent amendments and statements of case; and
(i) whether it is just and right to order the determination of the preliminary issue.
Mr Abrahams QC, who presented the argument for HTC, submitted that whether there should be a preliminary issue or not was reasonably straightforward. He pointed out that the matter was a simple one of construction of the relevant agreement and that, if HTC is right, the expensive and technically difficult patent infringement case will fall away. He went on to point out that if HTC is wrong then the restrictions on HTC challenging validity of the patents in suit will fall away – and the sooner that he is able to plead an invalidity case the better in terms of efficient resolution of the dispute as a whole. Furthermore he contended that, if HTC is wrong on construction, then the whole of the competition case will fall away since it is only there to establish that the relevant clauses which are the source of the Licence Defence are void.
Mr Abrahams submitted that there were 4 key reasons why, given the guidance in Wagner, a preliminary issue was appropriate.
The first was that the Licence Issue was a discrete issue separate from any of the technical issues and would dispose of at least a good part of the case. He drew my attention to the relevant agreement in the context of the state of the pleadings to date 1 and contended that Philips made really only 2 points about the relevant agreement, neither of which raised any technical matters which might be difficult to resolve at a hearing in July.
The first contentious point was that the relevant agreement was under some foreign law (precisely which is currently confidential and that is why I do not mention it). However, Mr Nicholson, who appeared for Philips, was unable to satisfy me that this created any real difficulty. This court is well used to determining issues of foreign law in relation to construction of contracts and if it be the case that the foreign law is different from English law (and HTC does not contend that it is) then this should present no real difficulty and Mr Nicholson was unable to identify any.
The second contentious point was whether the relevant agreement covered the patents in suit. Mr Abrahams presented the argument as to why they clearly were covered and I can assume there is a contrary argument. What is evident, however,...
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