Appeal - Nokia Technologies and another v Oneplus Technologies and others

Great Hall of the People Chongqing

Author flyerletian Licence  CCO 1.0  Soutce Wikimedia Commons

 

Jane Lambert

Court of Appeal (Lords Justices Peter Jackson, Arnold and Phillips) Nokia Technologies OY and another v Oneplus Technology (Shenzhen) Co Ltd and others [2022] EWCA Civ 947 (11 July 2022)

This was an appeal from the judgment of HH Judge Hacon sitting as a judge of the High Court in Nokia Technologies OY and another v Oneplus Technology (Shenzhen) Co., Ltd and others (Rev1) [2021] EWHC 2952 (Pat) (4 Nov 2021) which I discussed in FRAND - Nokia Technologies v Oneplus Technology on 25 April 2022.  Readers will recall that the learned judge refused an application to set aside service of patent infringement proceedings on defendants that had been incorporated in China and to stay the action against the defendants that had been incorporated here to abide the outcome of proceedings in China to determine the terms of a FRAND licence for the claimants' patent portfolio on the basis that China was the more appropriate forum or alternatively, to stay the whole action or at least the determination of the licence terms on case management grounds.  

It will also be recalled that the defendants had contended that the circumstances that had led to the Supreme Court's decision in  Unwired Planet International Ltd v Huawei Technologies (UK) Co Ltd, Conversant Wireless Licensing SÀRL v Huawei Technologies Co Ltd and Conversant Wireless Licensing SÀRL v ZTE Corporation [2020] UKSC 37 had changed. First, the Supreme People's Court of the People's Republic of China held in Guangdong OPPO Mobile Telecommunications Corp. Ltd v Sharp Corporation ((2020) Zui Gao Fa Zhi Min Xia Zhong No. 57).that the Chinese courts had jurisdiction to settle the global terms of a FRAND licence even in the absence of agreement between the parties as to the forum in which terms are to be determined. Secondly, Council Regulation (EU) No. 1215/2012 ("the Recast Brussels Regulation") which might have required the Conversant proceedings to take place in England under the Owusu principle no longer applies to the UK.

Judge Hacon rejected those contentions for the reasons I mentioned in my article on the case but he gave the defendants permission to appeal.  That appeal came on before Lords Justices Peter Jackson, Arnold and Phillips on 30 June 2022.  By their judgment which they handed down on 11 July 2022, their lordships dismissed the appeal (see Nokia Technologies OY and another v Oneplus Technology (Shenzhen) Co Ltd and others [2022] EWCA Civ 947 (11 July 2022)).

Lord Justice Arnold, who delivered the lead judgment, noted at para [6] that the claim in England and the proceedings in Chongqing were not the only proceedings between the parties. Nokia had issued proceedings for the infringement of 2 SEPs in Finland, 8 in Germany, 3 in India, 5 in Indonesia, 4 in the Netherland and 2 in Sweden. It had also issued proceedings for the infringement of patents that had not been declared essential to any standards in France (2 patents), Germany (six 6),  China (3), Spain (2), Russia (2) and England (1). OPPO had filed claims for infringement of their own SEPs by Nokia in Germany (8 patents) and China (8). As of 30 June 2022, only one judgment on the merits had been given, namely, a judgment of the Regional Court of Mannheim dated 21 June 2022 holding that European Patent (DE) No. 1 704 731 had been infringed by OPPO.  Further judgments were expected imminently in both Germany and Indonesia.

Between paras [8] and [17] Lord Justice Arnold gave the reasons for the proliferation of litigation:-

"[8] Standards exist so that different manufacturers can produce equipment which is interoperable. This has a number of advantages, of which the following are probably the most important. First, it enables different manufacturers to produce different components of a system. This spreads the investment required and enables specialisation. Secondly, it enables additional types of device to be connected to a system, producing network effects. Thirdly, it means that manufacturers of the same type of device can compete with each other on both quality and price. Fourthly, it gives users of devices that comply with the standard the confidence that they will work anywhere. Standards are central to the development of modern technology, and their advantages are now familiar to many people worldwide through the development of telecommunications standards from 2G to 5G. As this example shows, standards have enabled major technological advances to be rapidly developed and commercialised in recent years. This has required huge investments to be made in research and development.
[9] Standards are set by standards-development organisations (SDOs), also known as standards-setting organisations (SSOs), such as the European Telecommunications Standards Institute (ETSI). SDOs such as ETSI typically have an intellectual property rights (IPR) policy which requires companies participating in the development of a new standard to declare when technical proposals they contribute are covered by SEPs (or, more usually at that stage, applications for SEPs). A patent is said to be standard-essential if implementation of the standard would necessarily involve infringement of the patent in the absence of a licence. Once a proposal is declared to be covered by a SEP, the patentee is required to give an irrevocable undertaking to grant licences of the SEP on FRAND terms. If the patentee declines to give such an undertaking, the proposal is not incorporated into the standard and some other technology is used instead. In this way a balance is struck between the interests of patentees and of implementers. Patentees are ensured a fair reward for the use of their inventions, and implementers are guaranteed access to those inventions at a fair price. This balance is in the public interest, because it encourages patentees to permit their inventions to be incorporated into standards and it encourages implementers to implement those standards. Because standards are global in nature, and are implemented by businesses which trade globally, the obligation to licence SEPs on FRAND terms is also a global one.
[10] In order to make IPR policies involving the licensing of SEPs on FRAND terms fully succeed, there are two particular potential evils that must be avoided. Although terminology is not entirely consistent, these evils are generally known as "hold up" and "hold out" respectively. In simple terms, "hold up" occurs if a patentee is able to ensure that a SEP is incorporated into a standard and implemented by implementers in circumstances which enable the patentee to use the threat of an injunction to restrain infringement to extract licence terms, and in particular royalty rates, which exceed the reasonable market value of a licence of the patented invention (i.e. treating the SEP as akin to a "ransom strip" of land). "Hold out" occurs if an implementer is able to implement a technical solution covered by a SEP without paying the reasonable market value for a licence (or perhaps anything at all). It will be appreciated that the FRAND undertaking is designed to prevent hold up by giving the implementer a defence to a claim for infringement and hence to an injunction, while the patentee's ability to obtain an injunction to restrain infringement of an unlicensed SEP should prevent hold out.
[11] Avoidance of hold up and hold out depends upon the existence of a well-functioning dispute resolution system, because it is in the interests of patentees to maximise the royalty rates they can obtain for licensing their SEPs, while it is in the interests of implementers to minimise the royalty rates they pay. In the absence of a negotiated agreement between a patentee and an implementer as to the terms of a FRAND licence, which may be facilitated but cannot be guaranteed by mediation, a dispute resolution system is required to resolve disputes. As the Supreme Court noted in Unwired Planet at [90], the IPR policies of SDOs such as ETSI do not provide for any international tribunal to determine such disputes. It follows that, in the absence of an agreement to arbitrate, the only dispute resolution systems available to such parties are the national courts competent to adjudicate upon patent disputes.
[12] It is generally accepted, however, that patents are territorial. That is to say, they are proprietary legal rights created by the law of a nation state which confer a monopoly within the territory of that nation state, but not outside it. (The unitary EU patent, when it comes into existence, will confer a monopoly within the territory of the participating EU Member States, but that does not detract from the basic principle.) Thus an inventor wishing to patent their invention must apply for a patent in every state in which they wish to obtain a monopoly: in any state where they do not obtain a patent, the invention may be freely used by other parties. It follows that patentees typically own families of corresponding patents in many countries of the world, although the costs of patenting everywhere are generally prohibitive.
[13] The competence of the courts of one state to adjudicate upon a claim for infringement of a patent granted by another state is a complex and contested question, but it is generally accepted that, even if they have jurisdiction over the parties because of e.g. domicile, the courts of state A are not competent to adjudicate upon a claim for infringement of a patent granted by state B at least if the validity of that patent is in issue. This principle is enshrined, for example, in Articles 24(4) and 27 of the Brussels I Regulation. Since it is commonplace for a claim for patent infringement to be met with a defence and/or counterclaim that the patent is invalid, the practical reality is that, for the most part, the courts of the state where the patent was granted have exclusive jurisdiction over the enforcement of that patent. It follows that SEPs must be enforced territory by territory.
[14] This gives implementers who wish to (as the patentee would put it) hold out against taking a licence or (as the implementer would put it) resist exorbitant demands for a licence an important tactical weapon, which is to require the patentee to sue in every jurisdiction where the implementer exploits a patent family (or at least a significant number of such jurisdictions). This places a significant burden on patentees. Although it also places a similar burden on implementers, the result is a war of attrition which tends to favour implementers because it leads to delay in enforcement and hence the potential to starve patentees of income from licensing.
[15] Patentees have reacted to this problem by seeking determinations that FRAND terms are global, enabling the courts of one country to set the terms of a global FRAND licence which the implementer must either accept or face exclusion from that country's market by an injunction to restrain patent infringement. The courts of an increasing number of countries have held that they have jurisdiction to determine the terms of a global FRAND licence either with or, in some cases, even without the consent of both parties. If the courts of a single country determine the terms of a global FRAND licence, then that should (at least in theory) avoid the necessity for patent enforcement proceedings in multiple countries (whether it will actually have that result depends on whether the implementer is willing to forego exploitation of the patented inventions in that territory in order to avoid having to take a licence on those terms).
[16] But what is to happen if the courts of more than one country are seised with proceedings concerning the SEPs in question? If more than one country's courts proceed to determine the terms of a global FRAND licence, there is an obvious risk of inconsistent decisions (not to mention a huge waste of legal costs). The only way to avoid the risk of inconsistent decisions is to ensure that only one court determines the terms of the global FRAND licence. As a matter of principle, one might expect this to be the court first seised of the dispute, with its determination being binding on the parties (by way of res judicata) in any other proceedings. This has three potential consequences. The first is a rush by each party to the court to establish jurisdiction in a forum which is perceived to be favourable to that party's position. The second is an application by one party for an anti-suit injunction to restrain the other party from commencing or pursuing proceedings in a different jurisdiction to that considered favourable by the applicant party. The third is an application by the respondent party in the forum sought to be enjoined for an anti-anti-suit injunction restraining the first party from making or pursuing its application for the anti-suit injunction in the other forum. All of these consequences have manifested themselves in disputes between patentees and implementers in recent years.
[17] The only sure way to avoid these problems is to use a supranational dispute resolution procedure, and the only supranational procedure currently available is arbitration. If the parties do not agree to arbitration, however, the national courts must deal with the resulting jurisdictional disputes as best they can. Because there are no bespoke jurisdictional rules applicable to such disputes, still less any internationally agreed ones, national courts must apply their ordinary jurisdictional rules. In doing so national courts must have due regard to comity (that is, the need to respect the jurisdictions and judicial systems of other nations), but national courts cannot solve the problems inherent in the present system of resolving SEP/FRAND disputes."

In the action, Nokia Technologies OY and Nokia Solutions and Networks OY ("Nokia") seek:

"i) A declaration that each of the UK Patents is essential to various standards identified by Nokia.
ii) A declaration that each of the UK Patents is valid and has been infringed by OPPO. (To be precise, each of the Defendants is alleged either to have done infringing acts within the UK or to be jointly liable with one or more Defendants which have committed such acts.)
iii) A declaration that the terms and conditions of "the Nokia Offers" are FRAND. The Nokia Offers are defined in the Particulars of Claim as a written offer made on 29 November 2020 and an oral offer made on 11 June 2021, particulars of which are given in a Confidential Schedule.
iv) Save in so far as OPPO are entitled to and take a licence to the UK Patents on FRAND terms and Nokia remain required to grant one, an injunction to restrain OPPO from infringing the UK Patents and an order for delivery up.
v) An inquiry as to damages for infringement of the UK Patents alternatively an account of profits and an order for payment for all sums found due together with interest,"

The defendants (referred to collectively as "Oppo") challenged the jurisdiction of the courts.  In the event that their challenge to the jurisdiction failed, they contested the validity of each of the UK Patents, disputed essentiality and infringement, and counterclaimed for declarations (inter alia) that:

"(i) Nokia are unwilling licensors who have not complied with their obligations under the ETSI IPR Policy and that OPPO are entitled to enforce Nokia's undertakings to ETSI and (ii) OPPO are within the class of beneficiaries of clause 6.1 of the ETSI IPR Policy and are entitled to rely upon and enforce the undertakings given by Nokia to ETSI."

Readers are reminded that clause 6.1 of ETSI IPR Policy requires patentees who make a declaration of essentiality to give an irrevocable undertaking to grant irrevocable licences on FRAND terms and that this undertaking may be made subject to the condition that those who seek licences must agree to reciprocate.

Following his November judgement, Judge Hacon directed 3 5-day technical trials of validity, essentiality and infringement of the UK Patents in November 2022 (Trial A), April 2023 (Trial B) and June 2003 (Trial C) and a 10-15-day trial in October 2023 to determine FRAND issues (Trial D). Directions have also been given for a 5-day trial after February 2023 to determine whether Nokia can pursue its claim for an injunction having regard to OPPO's undertaking to take a global licence on the terms settled by the Chongqing court (Trial E).

In April 2022 Nokia sought permission to amend its particulars of claim to seek, in the alternative, a declaration that licensing terms that it has offered to Oppo are FRAND, a determination of the FRAND terms for licensing the UK patents and a declaration to that effect. Nokia also modified their claim to an injunction so as to claim, save in so far as OPPO undertake to an English court to take a licence to the UK patents on the terms determined by the court to be FRAND,

"(i) a declaration that OPPO do not fall within the class of beneficiaries of clause 6.1 of the ETSI IPR Policy and/or are not entitled to rely upon Nokia's FRAND obligation to avoid an injunction and (ii) a so-called "FRAND injunction" to restrain infringement of the UK Patents (meaning an injunction which has effect unless and until OPPO take a licence on the terms determined by the court to be FRAND)."

That application has yet to be heard and is resisted by Oppo.

Lord Justice Arnold described the proceedings in Chongqing as "a free-standing claim brought by the Third Defendant, its Shenzhen branch and a Chongqing affiliate against Nokia Corporation, the First Claimant and a Beijing affiliate ("Nokia Beijing") by which OPPO ask the Chongqing court to determine the rates and terms of a FRAND licence of Nokia's global portfolio."

The learned lord justice said that the court had asked the parties whether they were willing to agree to arbitration of the dispute. OPPO replied that they were opposed to arbitration because they considered that the appropriate way in which to resolve the dispute, failing a negotiated or mediated settlement, was through the national courts. Nokia was agreeable to arbitration of disputes over the terms of a FRAND licence (and his lordship noted that it was a matter of public record that Nokia had arbitrated at least 2 previous disputes), but that it was now too late to arbitrate this dispute given the passage of time since 1 July 2021 and the substantial investments made by the parties in litigation in the national courts.

The issue between the parties was which was the most appropriate forum for the resolution of their dispute.   Referring to para [71] of Lord Collins's judgment in Altimo Holdings and Investment Ltd v Kyrgyz Mobil Tel Ltd  [2011] 4 All ER 1027, [2011] UKPC 7, [2012] 1 All ER (Comm) 319, [2012] 1 WLR 1804, [2012] WLR 1804, [2011] 1 CLC 205 Lord Justice Arnold said that the burden lay upon Nokia to show that England is "clearly or distinctly the appropriate forum for the trial of the dispute".   Citing Spiliada Maritime Corp v Cansulex Ltd [1987] 1 AC 460, he said that in the case of the English defendants, the burden lay upon OPPO to show that another forum was more appropriate than England

Before Brexit, it had been held by the Court of Appeal in Conversant that it was not possible for an English court to decline jurisdiction on the grounds of forum non convenient under the Recast Brussels Regulation.  That was no longer the case if indeed the Court of Appeal had been right in their interpretation of the Regulation.  It was, therefore, appropriate to decide the most appropriate forum.

Lord Justice Arnold referred to para [66] of Lord Briggs's judgment in Lungowe v Vedanta Resources plc  [2019] 2 All ER (Comm) 559, [2019] 2 WLR 1051, [2019] WLR(D) 241, [2019] BLR 327, [2019] 2 Lloyd's Rep 399, [2019] 1 CLC 619, [2019] UKSC 20, [2019] 3 All ER 1013, [2019] BCC 520, [2019] Env LR 32, [2020] AC 1045:

"The best known fleshed-out description of the concept [of the appropriate forum] is to be found in Lord Goff of Chieveley's famous speech in the Spiliada case … That concept generally requires a summary examination of connecting factors between the case and one or more jurisdictions in which it could be litigated. Those include matters of practical convenience such as accessibility to courts for parties and witnesses and the availability of a common language so as to minimise the expense and potential for distortion involved in translation of evidence. Although they are important, they are not necessarily conclusive. Connecting factors also include matters such as the system of law which will be applied to decide the issues, the place where the wrongful act or omission occurred and the place where the harm occurred."

For this purpose, the starting point was the characterization of the dispute. In Conversant Mr Justice Henry Carr had characterized the case as a patent infringement claim and he had been upheld by the Court of Appeal and Supreme Court. Oppo had submitted that this case was a dispute over FRAND terms but Judge Hacon had rejected that contention. its first ground of appeal was that the judge had erred in his characterization of the dispute.  

Oppo did not dispute that this claim involves issues of validity, essentiality and infringement of the UK patents although OPPO contended that in all likelihood it would never be necessary to determine those issues. Nor did they dispute that those issues can only be tried in a UK court. Oppo contended, however, that those issues constituted no more than "the tail of an elephant the body of which is the dispute between the parties as to what terms for a global licence of Nokia's SEP portfolio are FRAND."  They submitted that there were a number of points of distinction between the present case and Conversant, and thus the judge had been wrong to conclude that the present case was indistinguishable from that one.

The reason why Oppo argued that it was unnecessary to determine validity, essentiality and infringement was that the dispute was not about whether Oppo will take a global licence but about the terms of that licence.  Oppos accepted that they needed a global licence for the portfolio taken as a whole and undertook to take one. Consequently, Nokia's ability to obtain compensation for the exploitation of its portfolio via a global licence did not depend on Nokia proving infringement of any specific valid SEP in any particular country.

Lord Justice Arnold agreed that Oppo's acknowledgement of their need for a global licence and their willingness to take one distinguished the present case from Conversant but it was not a relevant distinction.  Oppo were asked whether they would give up their right to challenge the validity and essentiality of the UK patents and whether they had infringed them and proceed straight to the determination of the FRAND terms but they refused to do so.  Oppo's undertaking to take a licence extended only to one that had been settled by the Chongqing court.   Moreover, Nokia could enforce their licence only if an injunction were in place.

It will be recalled that Judge Hacon had held that as a result of the decision in Guangdong OPPO Mobile Telecommunications Corp. Ltd v Sharp Corporation there was now an alternative forum in China.  Nokia had challenged that finding by a respondent's notice on several grounds none of which persuaded Lord Justice Arnold.   In his view, the judge had been correct to hold that, if the dispute was correctly characterized as one over the terms of a global FRAND licence of Nokia's SEP portfolio, the Chongqing court would have been an alternative forum.

As the Court had characterized the dispute as a claim for the infringement of UK SEPs there could be only one forum.  Had it been a dispute over FRAND rates it would have been necessary to consider the connecting factors between the dispute and each of the courts.   The Court of Appeal considered the competing claims between paras [53] and [65].  Lord Justice Arnold concluded at [66]:

"In summary, if the dispute is correctly characterised as a dispute over the terms of a global FRAND licence, there is no "natural" forum to determine it and none of the factors relied upon by the parties favours one forum over the other. In those circumstances one answer would be to resolve the dispute by application of the burden of proof, but as noted above neither side advocates that. That being so, it seems to me that the correct answer is that England is clearly an appropriate forum for the determination of the dispute since Nokia have UK SEPs which they wish to enforce in order to compel OPPO to take a licence upon FRAND terms, and Chongqing is at best no more appropriate a forum than England."

Finally, Lord Justice Arnold considered whether the English proceedings should be stayed on case management grounds to allow those in China to be resolved.   The Supreme Court had noted in Conversant that 

"A temporary stay may be ordered where there are parallel proceedings in another jurisdiction, raising similar or related issues between the same or related parties, where the earlier resolution of those issues in the foreign proceedings would better serve the interests of justice than by allowing the English proceedings to continue without a temporary stay: see Reichhold Norway ASA v Goldman Sachs International [2000] 1 WLR 173. But this would be justified only in rare or compelling circumstances: see per Lord Bingham CJ [2000] 1 WLR 173 at 185–186, and Klöckner Holdings GmbH v Klöckner Beteiligungs GmbH [2005] EWHC 1453 (Comm), [2005] All ER (D) 111 (Jul)."

The judge had considered the factors in favour and against granting a stay and had concluded:

"[126]. In my judgment none of the factors raised by the parties tips the balance of justice as between the parties in favour of a stay or no stay.
[127] That being so, I do not take the view that the circumstances of the present case are of the rare and compelling nature contemplated by the Court of Appeal in Reichhold Norway such that the balance of justice favours a stay of the FRAND issues before this court. No stay will be granted."

That had been an exercise of Judge Hacon's discretion with which an appeal court could interfere only if he had erred in law. failed to take some factor into account that he should have, took some factor into account which he should not have or was plainly wrong.  Oppo argued that the Chongqing court could deliver judgment far more quickly and at lower costs.   That argument did not impress the Court of Appeal. Lord Justice Arnold repeated his observation that if Oppos really wanted a quick result they could obtain one in England by dropping their validity, essentiality and non-infringement challenges.  Lord Justice Arnold concluded at [78]:

"The reality is that OPPO are not concerned to save time or legal costs, they just want the FRAND issues to be determined in the forum of their choice having commenced duplicative proceedings there after the commencement of the present claim. That is not a good reason for a case management stay."

There was therefore no error in the exercise of Judge Hacon's decision.

This appeal is an important one which I shall discuss in my talk at the Cambridge IP Law Summer School on 16 Aug 2022.  This will be my fourth lecture on FRAND since I was first invited to give that talk in 2019.   There have been a lot of changes to the topic since December when I last gave that talk.  Anyone wishing to discuss this case may call me on 020 7404 5252 during normal business hours or send me a message through my contact form.