Mitsubishi Electric Corporation v Archos SA
| Jurisdiction | England & Wales |
| Judge | Sir Alastair Norris |
| Judgment Date | 09 October 2020 |
| Neutral Citation | [2020] EWHC 2641 (Pat) |
| Date | 09 October 2020 |
| Docket Number | Case No: HP-2019-001 |
| Court | Chancery Division (Patents Court) |
[2020] EWHC 2641 (Pat)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY LIST (Ch)
PATENTS COURT
Royal Courts of Justice
The Rolls Building
Fetter Lane
London EC4A
Sir Alastair Norris
Case No: HP-2019-001
Sarah Abram and Michael Conway (instructed by Bird & Bird LLP) for the Claimant
Daniel Piccinin (instructed by Taylor Wessing LLP) for the Fifth, Sixth and Eighth Defendants
Colin West QC (instructed by Kirkland & Ellis International LLP) for the Ninth to Twelfth Defendants
Nicholas Saunders QC (instructed by Eversheds Sutherlands LLP) for two counterparty companies (“X” and “Y”) (intervening)
Hearing date: 22 September 2020
APPROVED JUDGMENT
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic.
This litigation concerns standard essential patents (“SEPs”) in the mobile telecommunications field. Because a true valid SEP is essential to compliance with the agreed standards in the field, the producer of a product complying with the standard (“an implementer”) must either infringe the patent or become a licensed user of it. Proprietors of declared SEPs must undertake with the organisation that sets the standard to grant licences to implementers on terms that are fair, reasonable and non-discriminatory (“FRAND”). The object of this undertaking is to secure a proper reward for the innovation embodied in the patent whilst avoiding the possibility of the SEP owner holding implementers to ransom, and at the same time preventing unscrupulous implementers from exerting economic pressure on the owners of SEPs by dragging out negotiations.
In simple terms the First Claimant (“Mitsubishi”) is the proprietor of two of the three SEPs with which the case is concerned; the Second Claimant (“Sisvel”) is the proprietor of the third and it administers all three. The SEPs relate to the 3G and 4G standards in mobile telecommunications. They are not the only SEPs that an implementer would need to make a 3G or 4G compliant mobile device. The three particular SEPs with which this litigation is concerned (“the Relevant SEPs”) form of part of a portfolio containing other such SEPs in different ultimate ownerships (“the MCP Pool”). The MCP Pool contains about 1000 patents, grouped in about 150 patent families and in 10 different ownerships.
The Defendants are implementers who do not have licences to use the Relevant SEPs. The Fifth, Sixth and Eighth Defendants are one such related group of implementers (“the Oppo Defendants”). The Ninth to Twelfth Defendants are another such group (“the Xiaomi Defendants”). As well as being implementers they are themselves the owners of SEPs (some of which they have purchased by assignment) and potential licensors of those SEPs.
The Claimants say that the Defendants are infringers against whom they are entitled to injunctive relief to prevent infringement of the Relevant SEPs but to whom they are willing to grant FRAND licences to the MCP Pool. They ask for royalty rates on a “per unit” basis, with differing rates for 3G, 4G and multimode devices. The Claimants have already granted 23 such licences; and they say that from those 23 licences it can be demonstrated that the MCP Pool licence which is available to the Defendants is offered to them on FRAND terms. They further say that it would be relevant to that issue to know upon what terms the Oppo Defendants and the Xiaomi Defendants have themselves taken licences of other SEPs.
The Defendants
i) Challenge the jurisdiction of the Court (save for the Fourth and Seventh Defendants);
ii) Deny that they are infringing implementers;
iii) Dispute that the terms offered to them are FRAND;
iv) Assert that the nature of the counterparties to the existing 23 SEP licence agreements (who are said to be below “mid-size” operators) means that their terms do not demonstrate what would be FRAND terms for counterparties such as the Defendants (Xiaomi claiming to be the fourth-largest smart phone manufacturer in the world);
v) Intend to argue that the Claimants are implementing a strategy of securing agreements with “minor players” in order to establish an unrealistic “headline royalty” to be used as a baseline for negotiations with major players;
vi) Argue that licences to portfolios other than the MCP Pool may be relevant in principle and might shed more light on the value of the MCP Pool than the 23 licences relied on by the Claimants;
vii) Argue that it is not fair, reasonable and non-discriminatory to require the Defendants to take a licence of the entire MCP Pool rather than of the Relevant SEPs (or the relevant individual portfolios of the Claimants) alone.
Issue (i) will be disposed of either by agreement in the light of the judgment of the Supreme Court in Unwired Planet [2020] UKSC 37 or at a separate hearing: and until it is disposed of the statements of case are treated as served in draft. Issue (ii) will be determined at two technical trials in December 2020 and March 2021. Issues (iii) to (vii) will be disposed of at a “FRAND” trial provisionally listed for October 2021. The “FRAND” trial has generated separate statements of case. The statements of truth on the pleadings concerning the “FRAND” issues of both the Oppo Defendants and the Xiaomi Defendants have been signed by their respective solicitors, with their authority.
In the draft statements of case issues (iii) to (vii) are pleaded in fairly non-specific terms. The Claimants requested that they be pleaded more fully, in particular whether the Oppo Defendants and the Xiaomi Defendants intended to advance positive cases as to what would be FRAND terms (especially as to payment for a licence by way of royalty).
Royalty payments under FRAND agreements are assessed using various methodologies. They are summarised in the judgment of the Supreme Court in Unwired at paras [42] and [43]. That advanced by the Claimants (and challenged by the Oppo Defendants and the Xiaomi Defendants) utilises comparable licences. SEP licences will take many forms. They may involve a premium payment, or a fixed periodic fee, or a fixed or weighted royalty payment per product sold; they may have been granted at below their true market rate in order to secure some collateral advantage (e.g. the “first mover” advantage in a new market); they may involve the grant of a cross-licence; they may be global or have excepted territories or be restricted to particular territories, or reflect the competition policies of licenced territories; or they may relate to a whole portfolio or to elements within a portfolio (including elements which are not real SEPs). So they have to be deconstructed (or “unpacked”) by experts, generally not with the object of valuing individual patents (or the importance of individual inventions) but with a view to valuing the licensor's portfolio relative to the industry as a whole and to other licensors by utilising “portfolio strength metrics”. The process is not the same as that employed (for example) in assessing the rent payable under a renewed commercial lease by reference to comparables. Individual licences are the raw material for sophisticated expert analysis and although many may be disclosed as part of the litigation process ultimately few will require detailed consideration at or before trial.
The response of the Oppo Defendants and the Xiaomi Defendants to the Claimants' request for specificity in pleading any positive case was to say that this was not possible until disclosure had been given of all relevant licences and assignments (in addition to those provided under initial disclosure).
At a case management hearing before Mann J on 22 July 2020 the following regime was established (in part by agreement and in part by determination):-
i) The Defendants were ordered to file (by 16 October 2020) amended FRAND statements of case particularising any positive case they intended to advance;
ii) If the Defendants intended to advance a positive case based on comparable agreements they must (i) identify and disclose any licences upon which they relied on their side and (ii) give full and detailed particulars of any reliance placed on any documents disclosed to them by the Claimants;
iii) The Claimants were ordered to provide disclosure and inspection (by no later than 10 August 2020) of “copies of licences where the rights licenced include any of the patents in the MCP Pool (other than on the terms of the MCP Pool Licence)…” and “copies of agreements… entered into by the Claimants or either of them or any of their affiliates…under or pursuant to which patents or patent applications comprised in the MCP Pool or rights or interests therein were assigned…” (emphasis supplied);
iv) The Claimants could apply to such disclosure a confidentiality designation and the Defendants could challenge that at a hearing.
The available confidentiality designations were established by a Confidentiality Order also made by Mann J on 22 July 2020. They were:-
i) “Attorney's Eyes Only (or “AEO”) which could be seen by only the lawyers and experts in the AEO...
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