RAND - Alcatel v Amazon

Alcatel-Lucent SA's Head Office in Boulogne-Bilancourt

Author AnaBé  Licence CC BY-SA 3.0 Source Wikimedia Commons

Jane Lambert

Court of Appeal (Lords Justices Newey, Arnold and Snowden) Alcatel Lucent SAS v Amazon Digital UK Ltd and others [2025] EWCA Civ 43 (28 Jan 2025)

This was the second of three cases in which the Court of Appeal had to consider whether a willing licensor of a portfolio of patents declared essential to one or more standards ("standard-essential patents" or "SEPs") would grant an implementer of those standards who has undertaken to take a licence to that portfolio on the terms to be determined by the Patents Court to be fair, reasonable and non-discriminatory ("FRAND") an interim licence pending that determination.  The other cases were Panasonic Holdings Corporation v Xiaomi Technology UK Ltd and others [2024] EWCA Civ 1143 (3 Oct 2024) which I discussed in FRAND - Panasonic Holdings Corporation v Xiaomi Technology UK Ltd on 14 Oct 2024 and Lenovo Group Ltd and others v Telefonaktiebolaget LM Ericsson (PUBL) and another [2025] EWCA Civ 182 (28 Feb 2025) which I discussed in FRAND - Lenovo v Ericsson on 8 March 2025.   

Differences between Alcatel and Panasonic and Lenovo

The appeal in  Alcatel Lucent SAS v Amazon Digital UK Ltd and others [2025] EWCA Civ 43 (28 Jan 2025) was a little different from the other cases in several respects.  First, the relief sought by the implementor was permission to amend its statements of case.  Secondly, the terms of the promised licence were RAND (reasonable and non-discriminatory) rather than FRAND although the parties agreed that did not make any practical difference.  That was because the standards-setting organization was the International Telecommunication Union rather than the European Telecommunications Standards Institute ("ETSI").   Undertakings to the ITU by SEP holders were governed by Swiss law rather than French law.  Finally, this appeal concerned patents that had not been declared essential to a standard ("non-essential patents" or "NEPs") as well as SEPs.

The Parties

The claimant, Alcatel-Lucent SAS ("Alcatel"), is a member of the Nokia group of companies ("Nokia").  The first Part 20 defendant is the holding company of the Nokia group and the second Part 20 defendant is another of its subsidiaries. Nokia holds a portfolio of SEPs and NEPs that cover the ITU's H.264/AVC and H.265/HEVC standards relating to streaming/over the top video platforms, Pay TV including cable, satellite and IPTV services, gaming, social media, AR/VR, and several other technologies.

The defendants are members of the Amazon group of companies ("Amazon") which offers digital content through its Prime Video, Freevee and Twitch streaming services. It also supplies video decoding devices such as Kindle Fire Tablets, Fire TV Sticks and Fire TVs.

Nokia's Declaration

Nokia has made the following declaration:

"The Patent Holder believes that it holds granted and/or pending applications for Patents the use of which would be required to implement [an ITU-T Recommendation] and hereby declares, in accordance with the Common Patent Policy for the ITU-T/ITUR/ISO/IEC, that …
The Patent Holder is prepared to grant a license to an unrestricted number of applicants on a worldwide, non-discriminatory basis and on reasonable terms and conditions to make, use and sell implementations of the [ITU-T Recommendation]."

The declaration was governed by Swiss law.

Negotiations

Negotiations over the terms of a licence to implement the patents have continued for many years.  One of the stumbling blocks is whether the NEPs should be included in the licence,

Infringement Litigation

On 31 Oct 2023 Nokia commenced proceedings against Amazon for infringement of certain SEPs and NEPs in Brazil, England, Germany, India, the Unified Patent Court and the USA.  Amazon denied infringement and counterclaimed for revocation of the patents in suit.  It also counterclaimed for the enforcement of Nokia's declaration and challenged the validity and essentuality of the patents in separate Part 20 proceedings.  It also sought declarations that the NEPs would be included within any RAND licences.

Applications for Permission to Amend

On 12 July 2024, Amazon applied for permission to amend its defence and counterclaim and its Part 20 particulars of claim for (i) a declaration that a willing licensor in the position of the claimant and the Part 20 defendants would agree to enter into, and would enter into, an interim licence of the Nokia video portfolio or at least part of it, pending the determination by the Patents Court of RAND terms for a final licence and (ii) an order for specific performance of such an interim licence.

Hearing before Mr Justice Zacaroli

The application was heard by Mr Justice Zacaroli (as he then was) on 2, 3, 4, 5 and 19 July 2024.  His lordship delivered judgment on 24 July 2024 (see Alcatel Lucent SAS v Amazon Digital UK Ltd and others [2024] EWHC 1921 (Pat) (24 July 2024)).

Mr Justice Zacaroli's Judgment

The judge refused Amazon's application on substantive and case management grounds.   The substantive grounds were as follows:

"[79] In my judgment, there is no sufficiently arguable case that the premise (i.e. the Swiss law principles identified) leads to the conclusion that Nokia is obliged to enter into an Interim Licence.
[80] The two principles of Swiss law identified in this part of the pleading are that the RAND Commitment obliges Nokia (1) to enter into negotiations in good faith for a RAND licence and (2) to refrain from seeking to enjoin Amazon in the meantime. A third principle of Swiss law also said to be relevant is that the intended third party beneficiary, C, of a contract between A and B can enforce that contract.
[81] Assuming that the RAND Commitment gives rise to an enforceable obligation to enter into negotiations for a RAND licence in good faith, I do not see how that leads to the conclusion that Nokia – in addition to entering into good faith negotiations to enter into a licence on RAND terms, which is to have retrospective as well as prospective effect – must agree to enter into a licence at an early stage (whether that is, or is not, characterised as a second licence), covering at least part of the same period that will be covered by the final licence, pending resolution of the terms of the final licence."

He set out his case management objections in para [90]:

"Irrespective of the lack of merit in the claim, I would have been inclined to refuse – on case management grounds – to give directions for the resolution of the terms of an Interim Licence. On Amazon's argument, the Interim Licence would have to be on RAND terms: the RAND Commitment could not conceivably oblige Nokia to enter into even an interim licence on terms which were not RAND, even if Amazon wanted that on an interim basis. I do not see how the complexities (including on the crucial issue of scope) which arise in determining a final RAND licence can be avoided in determining the Interim Licence. The notion that the latter exercise could be undertaken in a few days is wholly unrealistic. It would be a waste of the parties' and the court's resources to hold two RAND trials."

Grounds of Appeal

Amazon appealed on the grounds that: 

• the judge had been wrong to hold that its claim to an interim licence had no real prospect of success; and that 
• if and insofar as he had refused Amazon permission to amend on case management grounds, he had been wrong to do so.

Respondent's Notice

Nokia sought to uphold Mr Justice Zacaroli's decision on 5 additional or alternative grounds.

Permission to Appeal

Mr Justice Zacaroli refused permission to appeal.   Amazon applied to the Court of Appeal.  Lord Justice Arnold granted permission to appeal and expedited its hearing because of the Court of Appeal's judgment in Panasonic.

Amazon's Revised Offer

On 4 Nov 2024 Amazon filed a statement of case on the terms of the licence that it believed to be RAND.

On 12 Dec 2024, Amazon offered to take an interim licence that mirrored the terms of a final licence that Nokia had previously offered and agreed to pay whatever interim licence fee the Court considered appropriate. 

The Appeal

The appeal came before Lords Justice Newey, Arnold and Snowden on 16 Jan 2025.  At the end of the hearing, the Court indicated that it would allow the appeal and deliver its reasons later.   Those reasons were handed down on 28 Jan 2025.  The lead judgment was delivered by Lord Justice Arnold.  The other two Lords Justices delivered short concurring judgments.

Whether Amazon's Appeal Was Procedurally Inappropriate

The first issue that the Court of Appeal had to decide was whether it was still appropriate to consider Amazon's appeal in view of that group's revised offer.  Nokia argued that Amazon should have made a fresh application for permission to amend its defence and counterclaim and Part 20 particulars of claim. Lord Justice Arnold replied that the problem with that course of action was that Mr Justice Zacaroli's decision that there was no real prospect of success would have barred a fresh application unless and until that decision was challenged on appeal.  Amazon's offer of 12 Dec 2024 related to the terms of a possible interim licence but made no difference to the arguments on which Amazon relied.  Lord Justice Arnold noted at para [37] of his judgment that counsel for Nokia spent more time in his oral submissions arguing that the appeal was procedurally inapposite than he did engaging with the merits of the appeal.  His lordship wondered whether that might betoken that he was on weak ground so far as the merits were concerned.

Whether Amazon's Claim Had a Real Prospect of Success

Lord Justice Arnold's starting point at para [35] of his judgment was that an amendment to a statement of case should be permitted unless it raises a claim or defence which has no real prospect of success.  Referring to paras [48] and [49] of Lord Justice Males's judgment in CNM Estates (Tolworth Tower) Ltd v Carvill-Biggs [2023] EWCA Civ 480, [2023] 1 WLR 4335 and paras [69] to [77] of Sir Geoffrey Vos MR and Lord Justice Newey's in the same case, Lord Justice Arnold added that that was the same test as on an application for summary judgment.  In applying that test, the court must take into account the fact that this is a rapidly developing area of law. As Lord Briggs had said in Lungowe v Vedanta Resources plc [2019] UKSC 20, [2020] AC 1045, the facts should be found first before attempting to decide how far the law goes.

Foreign law is a question of fact and in the absence of expert evidence on Swiss law, his lordship had to assume that for the purposes of the appeal, Amazon's allegations on Swiss law were correct.  Amazon argued that Swiss law went further than French law in that it enabled RAND obligations to be specifically enforced.  

At para [48] of his judgment, Lord Justice Arnold said that the relevant principles of English law were set out in Panasonic.  The High Court had a general jurisdiction to grant a declaration regardless of whether or not any other relief was claimed. The key criterion for the grant of such relief was whether the declaration would serve a useful purpose as Lord Woolf MR had noted in para [41] of his judgment in Messier-Dowty Ltd v Sabena Ltd [2000] 1 WLR 2040.  As noted in paras [21] and [23] of Panasonic, FRAND is both a process and a result.  A SEP holder is required to behave consistently with its obligation to grant a licence on FRAND terms, and an implementer is required to behave consistently with its need to take a licence on FRAND terms. There should be no holding up by SEP holders or holding out by implementors. Because FRAND terms are those that would be agreed by a hypothetical willing licensor and a hypothetical willing licensee, the willingness of the actual SEP holder to grant a licence, or the actual implementer to take a licence, on those terms are irrelevant to the determination of what terms are FRAND.  An implementer is entitled to a licence on FRAND terms as of right, and hence the only role for an injunction to restrain infringement of the SEP is to enforce the SEP holder's entitlement to the financial remedy obtainable through a licence on such terms. A range of terms may be FRAND, and if so the SEP holder complies with its FRAND obligation by offering the FRAND terms most favourable to itself.

Nokia contended that Panasonic would be distinguished for the following reasons which Lord Justice Arnold listed in para [62]:

"i) Unlike Panasonic, Nokia did not commence proceedings in the Patents Court seeking the determination of (F)RAND terms. Indeed, Nokia did not commence proceedings in this jurisdiction to enforce any SEPs at all.
ii) Unlike Panasonic, Nokia have not undertaken to the Patents Court to enter into a licence of their SEPs on the terms determined by the Patents Court to be (F)RAND.
iii) Unlike Panasonic, Nokia seek to enforce NEPs against Amazon."

Lord Justice Arnold rejected those contentions. In his judgment, Amazon had a real prospect of successfully arguing that none of those factual differences was material, and thus Panasonic was legally indistinguishable.

Nokia contended by its respondent's notice that: 

• it had acted entirely consistently with its RAND obligations and not acted contrary to good faith,
• a declaration would serve no useful purpose and 
• a declaration would be contrary to comity. 

The short answer to each of those contentions was that unless Panasonic was distinguishable, Amazon had at least an arguable case to the contrary. 

Case Management

Lord Justice Arnold noted that Mr Justice Zacaroli had not said that he would have refused Amazon permission to amend its pleadings had he found that its claim to an interim licence had a real prospect of success and it was unlikely that he would have done so. As he put it at [75] Amazon's application for an interim licence would not require the court to determine most of the issues which would arise at the RAND trial. It would simply require the court to determine whether Amazon was entitled to an interim licence and if so, on what terms. As could be seen from Panasonic, the question of what terms are (F)RAND for an interim licence is quite different to the question of what terms are (F)RAND for a final licence, and determining such terms is a much more limited task. That is because the interim licence is only designed to hold the ring pending determination of the terms of the final licence,  Payments made pursuant to it would be adjusted to the extent necessary in consequence of the determination of the terms of the final licence.

Comment

The most important part of this judgment is Lord Justice Arnold's review of Panasonic between paras [48] and [53]. He also reminded us that amendments will normally be allowed so long as they do not raise a claim or defence that has no real prospect of success, that foreign law is a question of fact and that applications for interim licences on RAND or FRAND terms are considerably less complex than claims for final ones.

Anyone wishing to discuss this article may call me on +44 (0)20 7404 5252 during normal business hours or send me a message through my contact page at any time.