IRELAND 2016:IV INTERNATIONAL LICENSING AND INTELLECTUAL VENTURES II LLC
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THE HIGH COURT

2016 No. 5102P

 

 

 

 

Between

 

VODAFONE GmbH

Plaintiff

- and -

IV INTERNATIONAL LICENSING AND INTELLECTUAL VENTURES II LLC

Defendants

 

JUDGMENT of Mr Justice Max Barrett delivered on 14th June, 2016.

    • TABLE OF CONTENTS (Square-bracketed numbers are paragraph numbers) Part 1: Introduction [1] Part 2: The Parties [2] I. The Plaintiff.[2] II. The Defendants[3]. Part 3: Patent Law and Competition Law Intertwined [5] I. Standard Essential Patents[5] II. The Decision in Huawei.[8] Part 4: A Summary History of Certain Dealings and Proceedings [14] Part 5: Alleged Abusive Conduct [15] I. The Detail of the Alleged Abusive Conduct[15] II. The Essence of the Case Made.[16] Part 6: Reliefs to be Sought [17] Part 7: Ex Parte Orders Now Sought [18] Part 8: Order 11, Rule 1. [19] I. General.[19] II. Some Principles of Relevance. A. Overview. [23] B. Some Common Principles. [26] C. Appropriateness of Ireland as a Forum. [30] D. Some Factors of Relevance to Court’s Considerations. [33] E. Some Procedural Matters. [34] F. Action Founded on Tort Committed in Ireland. (O.11, r.1(f)). [37] G. Necessary or Proper Party. (O.11, r.1(h)). [42] Part 9: Application of Above-Identified Principles [48] Part 10: Conclusion [72]


  • Part 1: Introduction

    1. Last Thursday, Vodafone GmbH made an ex parte application for leave to serve notice on a party outside the jurisdiction of intended proceedings concerning the licensing of certain European patents. It is not every day that such an ex parte application would merit a written judgment. However, there are a number of features to the within application, not least certain patent and competition law dimensions presenting that make the application something of a first in the Irish courts and hence an ex parte application in respect of which it may be worthwhile for the court to commit to writing the background facts, the critical issues arising, and its reasons for deciding as it did.

     

    Part 2: The Parties

    I. The Plaintiff.

    2. Vodafone GmbH is a company domiciled in Germany. A member of the well-known Vodafone group of companies, it is engaged in the provision of communications services (including digital subscriber line or ‘DSL’ services) in Germany.

     

    II. The Defendants.

    3. The defendants are purchasers and/or owners and/or licensors of intellectual property rights. The Intellectual Venture group of companies (the ‘IV Group’) is what is known as a non-practising entity (NPE). It is apparently well-known for its significant patent portfolio acquisitions and its vigorous exploitation of such rights as those patents confer. IV International Licensing (‘IV International’) is a private limited company incorporated in Ireland, having a registered office and a place of business here in Dublin. Intellectual Ventures LLC (‘IV LLC’) is a limited liability company domiciled in the US state of Delaware.

    4. To this time, the allegedly complex structure of the IV Group has apparently had the result that it has not been possible for Vodafone GmbH to ascertain the nature of the precise relationship between IV International and IV LLC. However, it appears to Vodafone GmbH, from certain representations that have been made to it in the course of the negotiations and proceedings described hereafter, that IV International and IV LLC are combining and acting together with regard to the licensing of the patents that are the subject of the within proceedings, in a tortious manner that is alleged to be (and alleged alsoto be intended to be) harmful to the economic interests of Vodafone GmbH and also an abuse of a dominant position.

     

    Part 3: Patent Law and Competition Law Intertwined

    I. Standard Essential Patents

    5. The intended proceedings concern the licensing of 16 European patents (the ‘relevant patents’) whose current registered proprietor, at least as regards the German national designations, is IV LLC. It appears that IV LLC has delegated its rights to licence the relevant patents to IV International. (As it happens, the original application for the relevant patents was by a company called Aware Inc. and, doubtless, one of the relevant issues that will fall to be resolved in the proceedings - indeed Vodafone GmbH has expressly reserved its rights in this regard - is whether and how the defendants have valid title to the relevant patents).The relevant patents relate to DSL technology, a type of broadband technology that connects a user to a high speed/bandwidth internet connection across a telephone network. DSL services operate in accordance with standards (so-called ‘xDSL standards’) set by the International Telecommunications Union (commonly known as the ‘ITU’).

    6. There are, it seems, alternative ways of providing broadband services when, e.g., cable or fibre has been laid and connected to a customer’s premises. However, when the only connection available is a conventional telephone line, the xDSL standards offer the primary, if not the sole,means of providing broadband services to customers. This exclusiveness or near-exclusiveness has the result that patent proprietors whose patents fall to be infringed by implementation of the xDSL standards enjoy obvious and - it would not be an exaggeration to say - great market power. Why so? Because a patent proprietor can restrict those to whom it grants licences and may impose unfavourable terms on parties wishing to implement the xDSL standards. Patents which fall necessarily to be breached by implementation of the xDSL standards are known as ‘Standard Essential Patents’ or ‘SEPs’. It is, the court understands, asserted by both IV LLC and IV International that the patents that are the subject of the intended proceedings are SEPs.

    7. As a result of the considerable market power that SEP-holders enjoy, the ITU, as a standard-setting organisation (or ‘SSO’ to the initiated) has, in common with other SSOs, developed policies with regard to intellectual property rights that require SEP proprietors to license them on fair, reasonable and non-discriminatory (FRAND) terms to anybody who wishes to implement the relevant standard(s). Though this may seem, to some extent, a contravention of the very exclusivity of the rights that patents are intended to confer on patent proprietors, in fact FRANDs are meant to achieve a balance between conferring a fair reward on a patent proprietor and encouraging adoption of the relevant standard. It is the licensing of the relevant patents on FRAND terms that is at the heart of the claims made in the within proceedings.

     

    II. The Decision in Huawei.

    8. In recent years, the European Commission and the national courts of the European Union have been concerned to ensure that the natural dominance that an SEP proprietor enjoys is not abused. Thus, for example, in its settlement with Samsung and its decision in relation to Motorola, the European Commission has made clear that the usual right of a patentee to exclude infringers from a market (by means of injunction) would not necessarily apply in respect of SEPs. This approach was confirmed by the Court of Justice of the European Union in Huawei Technologies Co Ltd v. ZTE Corp and another [2015] Bus LR 1261. It is worth turning briefly to consider the facts and decision in that case.

    9. So far as appears relevant to the within proceedings, the facts in Huawei were as follows. Huawei is a multinational company active in the telecommunications sector,and also an SEP proprietor. Huawei, as SEP proprietor, had been discussing the possibility of concluding a licence on FRAND terms with ZTE; however, in the absence of agreement between the two, Huawei came to court claiming that ZTE was in breach of its patent and sought an injunction, the rendering of accounts, the recall of products, and damages. ZTE for its part maintained that the action brought by Huawei was an abuse of a dominant position contrary to article 102 of the Treaty on the Functioning of the European Union (TFEU). It will be recalled that article 102 provides, inter alia, as follows:

    • “An abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between member states. Such abuse may, in particular, consist in: (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) limiting production, markets or technical development to the prejudice of consumers…”.

      10. The Landgericht Düsseldorf, which was hearing the Huawei proceedings in Germany,referred five questions to the CJEU. The thrust of its various questions was broadly twofold, being whether:

      (1) an SEP proprietor’s action seeking injunctive relief and the recall of products against an alleged infringer which had requested the conclusion of a licensing agreement was an abuse of the SEP proprietor’s dominant position within the meaning of article 102 of the TFEU;

      (2) article 102 prohibited a SEP proprietor which, as in Huawei, had given an undertaking to grant its SEP on FRAND terms, from bringing an action for infringement against an alleged infringer seeking the rendering of accounts or an award of damages in relation to past use of the SEP.

      11. At the risk of over-simplifying a comprehensive judgment, the most critical conclusions of the CJEU, so far as appear relevant to the within proceedings, are stated as follows, at para.71 of the Court’s judgment:

    • “It follows from all the foregoing considerations that the answer to questions (1) to (4) and to question (5) in so far as that question concerns legal proceedings brought with a view to obtaining the recall of products, is that article 102FEU must be interpreted as meaning that the proprietor of an SEP, which has given an irrevocable undertaking to a standardisation body to grant a licence to third parties on FRAND terms, does not abuse its dominant position, within the meaning of article 102FEU, by bringing an action for infringement seeking an injunction prohibiting the infringement of its patent or seeking the recall of products for the manufacture of which that patent has been used, as long as - prior to bringing that action, the proprietor has, first, alerted the alleged infringer of the infringement complained about by designating that patent and specifying the way in which it has been infringed and, secondly, after the alleged infringer has expressed its willingness to conclude a licensing agreement on FRAND terms, presented to that infringer a specific, written offer for a licence on such terms, specifying, in particular, the royalty and the way in which it is to be calculated, and - where the alleged infringer continues to use the patent in question, the alleged infringer has not diligently responded to that offer, in accordance with recognised commercial practices in the field and in good faith, this being a matter which must be established on the basis of objective factors and which implies, in particular, that there are no delaying tactics.”

      12. The foregoing has the effect, inter alia, that prior to bringing an action for infringement seeking an injunction, an SEP proprietor must (1) alert the alleged infringer of the infringement complained about by (i) designating the patent, and (ii) specifying the way in which it has been infringed, and (2) after the alleged infringer has expressed a willingness to conclude a licensing agreement on FRAND terms, present to that alleged infringer a specific, written offer for a licence on terms, specifying, in particular, the royalty and the way in which it is to be calculated.

      13. Vodafone alleges in the within proceedings that IV International and IV LLC have failed to comply with the obligations with which SEP proprietors must comply when seeking to license SEPs. More particularly, it is alleged, inter alia, that IV International and IV LLC have failed (i) to provide a licence offer on FRAND terms, (ii) to specify adequately or at all how each of the relevant patents are said to be infringed.

       

      Part 4: Summary History of Certain Dealings and Proceedings

      14. The court seeks to identify, in the summary chronology that follows, thenot un-complex history of dealings and proceedings that arise in the within proceedings:

    • 2001-2012: Aware Inc. makes various declarations to the ITU stating that it is prepared to license, on a worldwide, non-discriminatory basis and on reasonable terms and conditions, persons seeking to use its patents, as embodied in the xDSL standards, if such willingness is reciprocal. No specific individual patents are named in any of Aware Inc.’s declarations and it is not therefore possible to determine which of the relevant patents is the subject of any particular declaration. However, the defendants have proceeded on the basis that relevant declarations remain operative. 2012: A company in the IV Group (Intellectual Ventures Management LLC) approaches Vodafone Group Services Limited about Vodafone’s taking a licence in respect of various patent portfolios. No agreement is ultimately reached. 30.ix.15: IV LLC commences seven sets of patent proceedings in Germany against Vodafone GmbH. January 2016: IV LLC commences four further sets of proceedings in Germany against Vodafone GmbH. [The court is advised that none of these eleven sets of proceedings involves or is related to issues of FRAND licensing; thus they do notinvolve or relate to the same subject-matter or cause of action as the within proceedings.] 25.3.16: IV International writes to Vodafone and Vodafone Group Services Limited setting out an offer to licence the relevant patents on the terms of a draft patent licence agreement that was enclosed with the letter. IV International’s offer included an option to take only a licence of the German designations of the patents. The court understands that Vodafone GmbH is willing to take a licence of the relevant patents on FRAND terms in Germany; and the wider Vodafone group is willing to discuss the terms of a broader licence to cover other relevant jurisdictions. 9.6.16: Vodafone makes a counter-offer on FRAND terms and remains willing to enter into a licence on such terms. Concerned, however, by how matters have proceeded to this time, Vodafone has also come to commence these proceedings seeking, inter alia, a declaration that the offer made by the defendants is not on FRAND terms [The court notes that IV International (domiciled in Ireland) is the party that has made the licence offer, and thus is a correct defendant to the within proceedings. IV LLC, being the registered proprietor for the German designations and the party seeking damages of Vodafone GmbH in the German proceedings appears to have a financial interest in the relevant patents and is therefore a necessary and relevant party to the claim. Moreover it is claimed that the two defendants are (a) acting together in relation to the control and licensing of the patents, and (b) are under common control and/or are combining and acting together with regard to the licensing of the relevant patents.]


  • Part 5: Alleged Abusive Conduct

    I. The Detail of the Alleged Abusive Conduct

    15. It is claimed that:

    • - the defendants have asserted outside these proceedings that the relevant patents are essential to th