Jurisdiction to hear Abuse of Dominant Position Claims relating to FRAND - Vestel Elektronik Sanayi Ve Ticaret A.Ş. and another v HEVC Advance LLC and another

Jane Lambert

Patents Court (HH Judge Hacon) Vestel Elektronik Sanayi VE Ticaret AS and another v HEVC Advance LLC and another [2019] EWHC 2766 (Ch) (21 Oct 2019)

This was an application for a declaration that the English Patents Court has no jurisdiction to entertain a claim by Vestel Elektronik Sanayi Ve Ticaret A.Ş and its British subsidiary, Vestel UK Ltd against HEVC Advance LLC, a Delaware company that manages a pool of standard-essential patents ("SEP"), or Koninklijke Phillips NV ("Phillips") one of the SEP owners for relief from an alleged abuse of a dominant position under art 102 of the Treaty on the Functioning of the European Union ("TFEU") and/or s.18 of the Competition Act 1998 by failing to offer licences under the SEP on fair, reasonable and non-discriminatory ("FRAND") terms.  The application came on before His Honour Judge Hacon sitting as a judge of the High Court on 2 and 3 Oct 2019.  Judgment was given on 21 Oct 2019 in favour of the defendants in Vestel Elektronik Sanayi VE Ticaret AS and another v HEVC Advance LLC and another [2019] EWHC 2766.

The Action
 Vestel Elektronik Sanayi Ve Ticaret A.Ş and its subsidiaries ("the Vestel Group") manufacture television sets many of which are distributed under the brands of other companies such as Toshiba, Hitachi, JVC, Telefunken, Bush and Panasonic. In 2013 a new video compression standard known as High Efficiency Video Coding ('HEVC') that allows significantly better data compression was issued. Several patents including Phillips's are essential for compliance with the standard and HEVC Advance issues licences under those SEPs.  Members of the Vestel Group applied to HEVC Advance and Phillips for the licences that they needed but were unable to obtain them on terms that they regarded as FRAND. The Vestel Group complained that the SEPs gave HEVC Advance and Phillips a dominant position in the market for the products covered by the patents and that they had abused that dominant position by failing to offer licences on FRAND terms. Vestel UK Ltd claimed declarations that the defendants had abused their dominant position and that the licence terms that they had offered were not FRAND,

Phillips's Application
Phillips applied for a declaration that the courts of the United Kingdon had no jurisdiction on the ground that art 4 (1) of  Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters requires persons domiciled in an EU member state to be sued in the courts of that state unless the claim falls within one of the other provisions of the regulation.  As Phillips was incorporated in the Netherlands the action should have been brought there,

The Vestel Group replied that art 7 (2) of the regulation provides that a person domiciled in a member state may be sued in another member state n matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur.  The question for the court was whether the alleged abuse of a dominant position took place in England and Wales.

The learned judge was not persuaded that Vestel UK Ltd would suffer any loss or damage at all.  It could not be forced to take a licence. If it was sued for patent infringement it could offer to take a FRAND licence which would be settled by the court on FRAND terms if the parties were unable to agree on terms through negotiation.  Even if Vestel UK Ltd could show damage in the UK it could not show that the event giving rise to the damage had occurred in this country,

HEVC Advance's Application
As HEVC Advance is domiciled outside the EU, Regulation 1215/2012 did not apply.  Instead, the claimant required the court's permission to serve its claim form on HEVC Advance in the USA,   CPR 6,37 (3) makes clear that the court will not give permission unless satisfied that England and Wales is the proper place in which to bring the claim.  Para 3.1 of Practice Direction 6B - Service out of the Jurisdiction sets out the grounds on which the court will grant permission. One of those grounds is subparagraph (9):

"A claim is made in tort where –
(a) damage was sustained, or will be sustained, within the jurisdiction; or
(b) damage which has been or will be sustained results from an act committed, or likely to be committed, within the jurisdiction."

The Vestel Group argued that a future loss to Vestel UK would be sustained within England arising from Advance's alleged abuse of its dominant position. The judge considered that the arguments against HEVC Advance were similar to those against Phillips under art 7 (2) of Regulation 1215/2012 and came to the same conclusion.

Another possible ground was subparagraph (11):

"The 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 Vestel Group contended that the SEP for the UK were "property within the jurisdiction."  The problem with that argument was that the claimants sought a global FRAND which meant that the action did not relate wholly or principally to property within the UK.

CPR 6 PDB 3.1(3) permits service out of the jurisdiction where:

"(3) A claim is made against a person ('the defendant') on whom the claim form has been or will be served (otherwise than in reliance on this paragraph) and –
(a) there is between the claimant and the defendant a real issue which it is reasonable for the court to try; and
(b) the claimant wishes to serve the claim form on another person who is a necessary or proper party to that claim."

That ground could assist only if a claim could be brought against Phillips.  As the judge had already decided that he had no jurisdiction under art 7 (2) any argument under that ground fell away.

Finally, paragraph 3.1(4A) allows service out of the jurisdiction where:

"A claim is made against the defendant in reliance on one or more of paragraphs (2), (6) to (16), (19) or (21) and a further claim is made against the same defendant which arises out of the same or closely connected facts."

Judge Hacon dealt with this argument shortly at paragraph [121] of his judgment:

"The short point is that I have not found that this court has jurisdiction, either under gateway 9 or 11. But if I had so found, I would have had difficulty in accepting Vestel's argument. It seems to me that a 'further claim' within the meaning of gateway 4A is a further cause of action, whether of the same type as the existing claim or of a different type. These proceedings consist of a claim for alleged abuse of a dominant position. A claim for settlement of FRAND terms is not a cause of action, at least not as presently constituted, so it can neither be a further ground for alleging an abuse of a dominant position, nor can it be a different cause of action."

His Honour added that if he had jurisdiction under subparagraphs (9) or (11) it would have been unnecessary to consider paragraph 3.1 (4A).

Addressing the question whether there was a reasonable prospect of success which he was required to consider by CPR 6.37 (3) the judge said that in the absence in the action of evidence of damage there was no prospect of success.

in the absence of any jurisdiction to hear the claims against Phillips and HEVC Advance it was unnecessary to consider forum non conveniens.  The doctrine provides a discretion not to hear a case where the court does have jurisdiction. It confers no jurisdiction where the court would otherwise have none.

Those interested in FRAND may be interested to learn that the Supreme Court has recently heard argument in ZTE Corporation and another v Conversant Wireless Licensing SARL, Huawei Technologies Co Ltd and another v Conversant Wireless Licensing SAR and Unwired Planet International Ltd and another v Huawei Technologies (UK) Co Ltd and another and recordings of counsels' arguments can be accessed through the Supreme Court's website.

Anyone wishing to discuss Vestel's case or FRAND generally may call me on 020 7404 5252 or send me a message through my contact form.