As noted previously, last week the Patents Court of England and Wales dismissed Tesla’s request for a declaratory judgment of global FRAND terms relating to 5G telecommunications standard promulgated by ETSI. (The court retained jurisdiction to hear Tesla’s request for a declaration of invalidity and nonessentiality of three U.K. patents owner by InterDigital Patent Holdings Inc. (IDPH)). The defendants in the case are three InterDigital affiliated companies (one of them now dissolved), and also Avanci, LLC. All four defendants are or were incorporated in the State of Delaware. Avanci, the court notes, “has been authorized by each of the 65+ 5G Platform patentees . . . to grant a worldwide license of all the relevant 5G SEPs,” “at a fixed price of $32 per vehicle” (para. 11), and “maintains that its terms . . . are in fact FRAND, but that it is not itself legally obligated to offer a license on FRAND terms,” though the individual patentees are (para. 12). “The individual Patentees could all grant bilateral licences of their SEPs but few seem to do so to automotive makers” (para. 15).
Without going into greater detail than is necessary for present purposes, the question is whether the court has jurisdiction over the declaratory judgment action for determine the terms of a global 5G FRAND license, given that “only a few Patentees are UK resident and only an estimated 7% of the 5G SEPs covered by the Avanci Licence are domestic UK or UK designated patents. Further, the First Claimant, which is the principal Tesla company, InterDigital and Avanci are all US companies, whose business is based in the US. There is therefore no obvious connection between the licensing claim and the jurisdiction of this Court. Further, the validity or essentiality of the 3 UK patents in suit is largely irrelevant to the licensing claim, as InterDigital has not threatened to injunct Tesla, and Tesla has undertaken to accept a 5G Platform licence on whatever terms the Court determines to be FRAND” (para. 16). Tesla contends, nevertheless, “that not just a worldwide licence of the patents in suit and/or InterDigital’s 5G SEPs but a worldwide licence of all the SEPs on the 5G Platform is the only licence that would be FRAND” (para. 21); “that the only FRAND licence for the patents in suit would be a worldwide pool or platform licence that includes the 5G SEPs of the 65+ other Patentees as well as the 5G SEPs of InterDigital, and it seeks declarations and a determination of the terms of such a licence in proceedings brought against one patentee and the platform administrator” (para. 25).
Reviewing the existing case law, the court notes that “[i]t is impermissible in English law to bring a ‘free standing’ claim for declaratory relief in relation to a FRAND licence,” citing Vestel Elektronic Sanayi Ve Ticaret AS v. Access Advance LLC [2021] EWCA Civ 440; “[t]he fact that a declaration may serve some useful purpose is not sufficient, in the absence of a legal right” (para. 30). Summarizing some other cases, the court states that
33. In Nokia v Oppo Trial E, Meade J observed that the combined effect of Unwired Planet and Kigen was that an implementer can proactively seek to have global FRAND terms set in the UK. However, Kigen was not a case in which the Court had to consider jurisdiction in the sense of overseas defendants to such claims, and Nokia v Oppo Trial E was a patentee’s claim for an injunction. In Lenovo v InterDigital, which was an implementer’s claim, jurisdiction was not challenged in respect of the claimed licence of SEPs, nor was there a claim to a licence of any patents other than those owned by the defendant, InterDigital.
There follows some additional discussion of whether a pool administrator can be a party to such a claim, with citations to Mitsubishi Elec. Corp. v. Oneplus Tech. (Shenzhen) Co. [2021] EWHC 1541 (Pat.) and Vestel, at the conclusion of which the court states that “I see no reason why a claimant cannot assert a right to a FRAND licence of certain SEPs and also assert that, in commercial terms, a fair and reasonable licence is either a worldwide licence of the family of patents or even a licence of those and other SEPs in a pool. It means that the claimant will have to overcome the jurisdictional hurdle of showing not only that there is a good arguable case that such a licence would be a (or the) FRAND licence of the UK SEPs, but also that there is a good arguable case for the grant of declaratory relief relating to such a licence. However, that is a different question from the question whether the claimant has the better of the argument that gateway (11) is satisfied on the facts of a given case” (para. 45). (Gateway (11) is a provision of Practice Direction 6B of the Civil Procedure Rules, which states that service abroad may be permitted when “[t]he subject matter of the claim relates wholly or principally to property within the jurisdiction, provided that nothing under this paragraph shall render justiciable the title to or the right to possession of immovable property outside England and Wales.”) The court then cites the governing test for service out of the jurisdiction, as “restated by Lord Collins of Mapesbury JSC in Altimo Holdings and Investment Ltd v Kyrgyz Mobil Tel Ltd [2011] UKPC 7 . . . (1) a serious issue to be tried on the merits; (2) a good arguable case that one of the gateways for service out applies; (3) England and Wales is clearly and distinctly the appropriate forum for a trial; (4) in all the circumstances, it is appropriate to permit service of the proceedings out of the jurisdiction” (para. 46).
The court then rejects an argument that Tesla’s patent claims (the ones regarding revocation and nonessentiality of three InterDigital patents) are an abuse of process, and that InterDigital Holdings is an improper party to those claims. But the toughest question is whether there is a “good arguable case for declaratory relief” against Avanci, and against InterDigital in relation to the licensing claim. The court cites Rolls-Royce plc v. Unite the Union [2010] 1 WLR 318 for the proposition that declaratory relief requires, among other things, that “[t]here must, in general, be a real and present dispute between the parties before the court as to the existence or extent of a legal right between them. However, the claimant does not need to have a present cause of action against the defendant” (para. 89); and it concludes that “Tesla has a legitimate interest and . . . there is justification for seeking the declaratory relief that it seeks. If no such claim can be brought, the rate set by Avanci may not be capable of effective challenge in a FRAND determination” (para. 97). Nevertheless, “[w]hether it is fair and just to grant the declarations as sought in the absence of the owners of the 5G SEPs and Avanci is quite another matter” (para. 98). Ultimately, the court concludes that it is not, noting among other things that “the effect of suing IDH as representative of the Patentees is that the Patentees would be bound by the outcome of the claim and any declarations made” (para. 105), and “the practical difficulty of conducting a FRAND licensing trial without the relevant parties before it” (para. 109). There is much discussion of complex issues of U.K. procedural law here, but the bottom line is:
123. It may seem odd that a claim which Tesla has a legitimate interest in pursuing and which would in principle serve a proper purpose cannot be pursued here. The conclusion that it cannot has given me some concern. It would be very odd indeed if Tesla could not obtain a decision on its claim in any jurisdiction that is reasonably suitable. However, all Defendants agree to submit to the jurisdiction of the Delaware Court of Chancery. Neither that court nor this has yet embarked on a global rate-setting exercise for a pool or platform licence. There is no reason to believe that either court would decline to do so if the necessary parties were represented before it. The agreements between Avanci and the Patentees and the nature of the 5G Platform and the Avanci Licence appear to make this case suitable. I address this further under forum conveniens, below. I do not therefore feel compelled to reach a decision contrary to principle in order to provide a forum for the claim.
Further, although the issue of forum non conveniens is “unnecessary for [t]he court’s] decision” (para. 125), Mr. Justice Fancourt concludes that a U.S. court would be “an appropriate forum, in that it will entertain a claim for breach of contract and a claim for a declaration that the terms of the Avanci licence are not FRAND” (para. 134), even though it remains possible that the alternative forum (the Delaware Court of Chancery) will not set a global rate. “[T]he claim clearly has a closer connection with he US than with England and Wales” (para. 141).
For analysis, see Florian Mueller's write-up on ip fray.
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