England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION, PATENTS COURT
MR. JUSTICE LAWRENCE COLLINS

		Royal Courts of Justice Strand, London, WC2A 2LL
		20th December 2002

Vice-Chancellor :

Introduction
1. The Claimant ("Intel") designs and makes microprocessors or central processing units ("CPUs") for use in personal computers ("PCs") under the well known brand names such as Pentium and Celeron. It also makes chipsets for use in PCs. The first defendant ("Via") also makes CPUs and chipsets for use in PCs. Intel and Via are competitors in the world wide market for such components though it is Intel which, by a wide margin, enjoys the dominant position in that market.
2. On 27th September 2001 Intel instituted two actions in the Patents Court ("the Chipset Action" and "the CPU Action") alleging that Via was infringing five of Intel's patents by various acts in relation to Via's CPUs or chipsets. On 12th December 2001 Via served its defence and counterclaim in each action. It denied the validity of each of the patents relied on and denied that it had infringed any valid claim in any of them. In addition it raised defences under Articles 81 and 82 of the EC Treaty and the corresponding provisions of Competition Act 1998. So far as they remain material they are that, in the Chipset Action,

(a) Bringing these proceedings is an abuse by Intel of the exercise of intellectual property rights and/or Intel is estopped or otherwise precluded from obtaining the relief sought in these proceedings;

(b) The refusal of Intel to grant a licence to Via either at all or on lawful or reasonable terms is an abuse of a dominant position and Intel is not entitled to the relief sought;

and, in the CPU Action,

(c) The refusal of Intel to grant a licence to Via either at all or on lawful or reasonable terms is an abuse of a dominant position and Intel is not entitled to the relief sought;

(d) Intel's refusal to licence Via in respect of the patents in suit is abusive because it forms part of a plan to withdraw from the market certain products for which there is a continuing demand, and to force consumers and users to adopt a new and more expensive technology.

3. On 21st December 2001 Jacob J ordered that the actions should be tried in three stages, namely the Chipset Action Patent Issues, the CPU Action Patent Issues and the Competition Issues in both the Chipset Action and the CPU Action. They were fixed to be heard in December 2002, February 2003 and, subject to Intel's application for, amongst other relief, summary judgment in respect of the Competition Issues, May 2003 respectively.
4. Intel's applications for summary judgement under CPR Rules 3.4(2) and 24.2 were heard by Lawrence Collins J in April 2002. By his order made on 14th June 2002 Lawrence Collins J awarded Intel summary judgment on each of the competition issues. He gave Via permission to appeal in the Chipset Action in relation to part of issue (a) but refused permission to appeal in relation to all other competition issues in the Chipset Action and all competition issues in the CPU Action. By its appellant's notice issued on 28th June 2002 Via appeals from the order of Lawrence Collins J to the extent that he gave it permission and seeks permission to appeal on all but one of those for which permission was refused. We heard full argument from both Intel and Via on all such issues whether or not permission to appeal had been granted.
The Facts
5. The CPU is the component of a PC which executes the arithmetical or logical functions that make up a computer programme. The Chipset is a group of microchips which determine which data, from which source and in which order the CPU is to process. Random Access Memory ("RAM") is the main memory storage device for the data required to be processed. A bus is an electronic pathway by means of which the various components of a PC communicate with one another. The bus between the CPU and the Chipset is called the host bus. The CPU, Chipset, RAM and host bus, together with many other components, are fixed to the motherboard. One of the attachments by which CPUs are fixed to the motherboard is called "Socket 370".
6. In about 1981 IBM introduced its PC on an open architecture basis, that is to say publishing its specification and encouraging other manufacturers to make similar PCs. The CPU in the IBM PC, called the 8086, was made by Intel, a Delaware Corporation. Successive generations of the CPU, 186, 286, 386 and so on are described collectively as x86 CPUs. The x86 CPUs have been made and sold by Intel to IBM and other makers of PCs under the names such as Celeron and Pentium. The operating software used by the IBM PC was made by Microsoft. It too has gone through a number of subsequent generations, such as Windows 3.x, Windows 95 and Windows 98. It is important that subsequent generations of CPU and operating software should be compatible with earlier generations and each other. Thus all of them must be able to respond to what is called "the x86 instruction set".
7. It is the basic complaint of Via that in recent years the open architecture of the early PCs has been transformed by Intel into a proprietary system. Via suggests that this has been done by patenting the standard conventions relating to how a PC operates whereby components and software made by one producer are compatible with those of others. The effect, so it is suggested, is that a manufacturer such as Intel can prevent a rival from making its own components compatible with those of Intel thereby limiting the production of independent technology. This, it is contended, is what Intel seeks to do in the Chipset Action and the CPU Action because the patents in suit relate not to the overall design of a CPU or Chipset but to specific features of them which interact with other components. Thus, the two patents in suit in the Chipset Action relate to the protocols which enable the CPU to communicate with the Chipset in a way each will understand. The three patents in suit in the CPU Action relate to the conventions or protocols which enable the CPU to interact with the operating software, almost invariably a version of Windows.
8. As I have indicated, Intel was incorporated in the State of Delaware, USA. It is the largest designer and maker of x86 CPUs in the world, accounting for about 80% of sales for each year between 1996 and 2000 (both inclusive). It also makes Chipsets for use with its x86 CPUs. For the years 1996 to 1998 (both inclusive) its Chipsets accounted for about 100% of the market. Between 1998 and 2000, its share of the world-wide market in Chipsets declined to about 75%. Of the remaining 25% about 19% was picked up by Via.
9. Via is a company incorporated in Taiwan. It was established in 1992 and has about 600 employees. It designs and makes components for PCs. On 24th November 1998 it entered into a Chipset Licensing Agreement with Intel ("the CLA") regulating the terms on which it could use the patents of Intel in the design and manufacture of its own chipsets for use with the Celeron and Pentium II CPUs made by Intel. One of the terms on which it got the licence from Intel was that it should grant to Intel a licence in relation to its own patents. In 1999 Via acquired the business of Cyrix Technologies. It then started or expanded its production of CPUs.
10. In June 1999 Intel purported to terminate the CLA. It contended that Via had broken its terms in using the licensed technology. Intel instituted proceedings against Via in the US, Singapore and England. These proceedings were settled in June 2000. Via entered into a revised CLA ("the Revised CLA") with Intel extending the licence granted by the CLA to cover new products. A number of issues were referred to an arbitrator. The award was given in February 2001. The arbitrator concluded that Via had not broken the CLA but, in purporting to terminate it without sufficient cause, Intel had. As the result of the arbitration, the licence was made reciprocal in its scope, each party being permitted to make chipsets using the other's licensed technology.
11. On 12th September 2000 Via complained to the EC Commission that Intel was refusing to license its patents to Via so as to enable the latter, in particular, to make chipsets compatible with Intel's forthcoming Pentium 4 CPUs. Such CPUs were launched on the market in December 2000. At the end of 2000 and the beginning of 2001 Intel entered into a number of licences with third parties for the manufacture and sale of chipsets compatible with its Pentium 4.
12. On 10th January 2001 Intel produced to Via the form of a further revised CLA ("the draft CLA") it was prepared to grant to Via. The draft CLA contains two provisions to which Via objects. By the first ("the Market Division term") Via is limited in the application of the licensed technology to chipsets compatible with Pentium 4 CPUs. In other words if Intel produce an improved version of the Pentium 4 CPU Via cannot use the licensed technology to make a chipset compatible with that improved CPU. By the second ("the Asymmetric Licence") Via is obliged to grant to Intel a licence for the unrestricted use of all its patents and technology relating to both its chipsets and its CPUs but receives in return a licence from Intel related only to its chipsets and then only for use in connection with chipsets compatible with Pentium 4 CPUs.
13. These proceedings were instituted on 27th September 2001. Subsequently, on 14th January 2002, Via withdrew its complaint to the EC Commission. On 3rd May 2002 the EC Commission closed its investigation into the matters of which Via had complained.
The Chipset Action
14. Intel relies on UK Patent No. 2 287 162B and European Patent (UK) No. 694 849 B1. As their titles indicate they relate to a method and apparatus for the transmission of information by means of a type of bus called a wired-or bus, and to a method for performing bus transactions in a computer system. They are alleged to have been infringed by the disposal, use and supply of Via's Apollo P4X226 chipsets on and after 10th September 2001. Via served its defence and counterclaim on 12th December 2001. In paragraphs 64-79 and its particulars of objection it denied that the patents in suit were valid or if valid were infringed and counterclaimed for orders for revocation and associated relief.
15. The defences with which we are concerned are set out in paragraphs 1-51. Their nature is apparent from paragraphs 1 to 3 which are in the following terms:

"1. Paragraphs 1 and 2 of the Particulars of Claim are admitted.

A. Bringing these proceedings is an abuse by the Claimant of the exercise of intellectual property rights and/or the Claimant is estopped or otherwise precluded from obtaining the relief sought in these proceedings

2. The bringing of these proceedings by the Claimant is unlawful and/or the Claimant is estopped or otherwise precluded from obtaining the relief sought in these proceedings because:

(a) the Claimant is prepared to grant a licence to the First Defendant in respect of the patents in suit only on terms that would create an infringement of article 81(1) EC and/or section 2(1) of the Competition Act 1998 ("the Chapter 1 prohibition") and

(b) these proceedings form part of an attempt by the Claimant to compel the First Defendant to enter into a licence agreement that would infringe article 81(1) EC and/or the Chapter 1 prohibition.

The Defendants further refer to and rely on sections D and E below.

B. The refusal to grant a patent licence to the First Defendant either at all or on lawful and/or reasonable terms is an abuse of a dominant position contrary to article 82 EC and/or section 18 of the Competition Act 1998 and the Claimant is not entitled to the relief sought by it in these proceedings or any of it.

3. As a result of exceptional circumstances, the Claimant's refusal to grant a licence to the First Defendant in respect of the patents in suit either at all or on lawful and/or reasonable terms is an abuse by it of a dominant position contrary to article 82 EC and/or section 18(1) of the Competition Act 1998 ("the Chapter 11 prohibition"). The Defendants further refer to and rely on sections D and F below."

16. Paragraphs 5 to 36 contain allegations relating to PCs and the background to which I have briefly referred. Particular reference should be made to a number of specific allegations. Thus:

a) Paragraphs 9 to 11 allege that x86 CPUs are not technically interchangeable with other CPUs so that they comprise a separate economic product for a world-wide market in which Intel has a dominant position.

b) Paragraphs 13 to 25 deal with chipsets, their importance to the quick and efficient working of a PC and the need for compatibility with the CPU. It is alleged that the previous open architecture of the x86 CPUs was changed when in 1996 Intel introduced its Pentium Pro model using new sockets and altering the host bus. Since that time, it is alleged, Intel has asserted that any independent chipset manufacturer must get a licence from Intel authorising the making of chipsets compatible with its x86 CPUs. It avers that there is a separate product market in chipsets for use with Intel's x86 CPUs which is world wide. It asserts Intel has a dominant position in that market which "is crucially buttressed by its control over the award of patent licences to third parties" (paragraph 25).

c) Paragraphs 26 to 30 deal with the introduction of the Pentium 4 in November 2000. Via alleges that Intel asserts that Via must have a licence if it is to make chipsets compatible with the Pentium 4.

d) Paragraphs 31 to 34 deal with the Asymmetric Licence and paragraphs 35 and 36 refer to the Market Division term. With regard to the latter it is averred in paragraph 35 that the effect of the Market Division term would be that Via would be prevented from supplying chipsets for use with a "Pentium 4A" regardless of how arbitrary or trivial the modification over the Pentium 4 might be and irrespective of whether any modification to Via's chipset would be required.

17. Section E, comprising paragraphs 37 to 41, is described as

"Competition law defence 1: bringing these proceedings is an unlawful attempt by [Intel] to compel [Via] to enter into an agreement contrary to Article 81(1) EC and/or the Chapter I prohibition."

Paragraphs 37 to 39 contain detailed allegations of how acceptance of the Asymmetric Licence would distort competition within the common market and the United Kingdom in both x86 CPUs and chipsets compatible therewith. In paragraphs 40 and 41 Via alleges how acceptance of the Market Division term would distort competition in the Common Market and the United Kingdom.

18. Section F, comprising paragraphs 42 to 51 contains the allegations relevant to what is described as

"Competition law defence 2: the refusal to grant a patent licence at all or on lawful or reasonable terms is an abuse of a dominant position contrary to Article 82 EC and/or s.18 Competition Act 1998."

It is re-iterated that Intel has a dominant position in the world-wide market in both x86 CPUs and x86 Intel-compatible chipsets. Via asserts (para 44) that the patents in suit constitute industry standards for the chipset market so that "it is impossible for other undertakings to enter or compete at all with [Intel] on that market unless they can make use of the technology in question". Paragraph 45 sets out in some detail how the refusal to grant a licence on lawful or reasonable terms and bringing infringement proceedings constitutes an abuse of Intel's dominant position by (a) preventing the emergence of new types of x86 compatible chipsets, (b) partitioning the market in x86 compatible chipsets by relegating licensees to trailing edge technology and (c) thereby prejudicing consumers and users by preventing Via and others from the development of new improved products and/or lower prices from those supplied by Intel.

19. Paragraph 46 contains a number of further allegations of abuse by Intel of its dominant position by abandoning the open architecture of the earlier x86 CPUs and refusing to license Via or others except on terms which perpetuate its dominant position thereby partitioning the market in x86 compatible chipsets and inhibiting further developments. Paragraph 47 alleges the consequential prejudice to consumers and users. Paragraph 48 recognises that, in the absence of "exceptional circumstances", the owner of an intellectual property right, including one in a dominant position, is entitled to refuse to licence others. Via contends that the facts and matters alleged in paragraphs 44 to 47 amount to exceptional circumstances for the purposes of that principle.
The CPU Action
20. In the CPU Action Intel relies on three UK patents nos 2 230 118, 2 261 753 and 2 326 494. They relate to an invention for controlling memory misalignment; to "selective re-initialisation of processor state" relating to switching between operational modes of the CPU; and to an invention relating to the MMX technology which is an addition to the x86 instruction set to enable the CPU to deal with graphics and multi-media applications. In their particulars of infringement Intel allege the infringement of these three patents by Via's CPUs which it introduced to the market in early 2001.
21. In paragraphs 27 to 38 of its defence and its particulars of objection Via contends that the patents in suit are invalid and, insofar as valid, not infringed. In paragraph 2 it claims that

"[Intel's] enforcement of its intellectual property rights in these proceedings and/or its refusal to grant a licence to [Via] in respect of the patents in suit on lawful and/or reasonable terms is an abuse by it of a dominant position contrary to Article 82 EC and/or s.18(1) Competition Act 1998."

In paragraphs 3 to 11 Via refers to the PC industry and the market for Windows compatible CPUs in substantially the same terms as in the Chipset Action.

22. Paragraphs 12 to 20 support what is described as

"Competition law defence 1: [Intel's] refusal to licence [Via] in respect of the patents in suit is abusive because it forms part of a plan to withdraw from the market certain products for which there is a continuing market demand, and to force customers and users instead to adopt a new and more expensive technology which many consumers neither want nor need."

23. This complaint relates to a device called the "Socket 370" whereby a CPU is attached to the motherboard so as to make contact with the built-in wires and data bus. Socket 370 was designed and has the effect of facilitating the upgrade or replacement of the x86 CPU for which there is a significant demand. Via alleges that Intel's Pentium 4, launched in November 2000, does not use a Socket 370 with the consequence that the motherboard and other components designed for use with it are incompatible with and more expensive than those designed for use with Socket 370. Via alleges that Intel intends to establish the Pentium 4 as the mainstream x86 CPU and to phase out its Socket 370 range altogether in 2002. In paragraph 19 Via alleges that Intel has refused to grant it a licence under the patents in suit on any or any lawful or reasonable terms for the purpose of eliminating Socket 370 CPUs so that consumers will be unable easily or inexpensively to upgrade their CPUs. Via alleges that the market for x86 CPUs is world wide and is thereby abused by Intel.
24. Paragraphs 21 to 25 support what is described as

"Competition law defence 2: [Intel's] refusal to licence its patent rights in these proceedings is abusive because those rights relate to technology constituting an industry standard and competitors cannot otherwise access the x86 processor market and because the exercise of those rights unjustifiably prevents the marketing by [Via] of a unique product."

25. Via alleges the importance of x86 CPUs being compatible with the latest version of Windows operating systems. Via asserts (para 22) that each of the patents in suit relate to industry standards with the consequence (para 23) that "it is impossible for competitors [of Intel] to access the market for x86 [CPUs] at all without making use of the relevant inventions.". In addition Via relies on a new format, an enhanced ball grid array ("EBGA"), incorporated in its CPU of which complaint is made. Via asserts that EBGA is a unique and valuable product which it will be unable to market without a licence from Intel.
26. Via contends (para 25) that the facts and matters referred to in paragraphs 21 to 24 constitute "exceptional circumstances" for the purposes of the principle to which I have already referred in paragraph 19 above. It claims that Intel's refusal to grant a licence to use the patents in suit on lawful and reasonable terms both eliminates competition in respect of a substantial part of the product market and prevents the emergence of a valuable new product. It contends that such conduct has no justification and constitutes an abuse by Intel of its dominant position on the x86 CPU market whereby trade in the relevant places may be affected.
The judgment of Lawrence Collins J
27. In its application Intel sought an order under CPR 3.4(2) striking out these defences as being an abuse of the process of the court. As the judge had already concluded that Intel was entitled to summary judgment in respect of them he did not decide this part of the application. But he indicated (paragraph 187) that had it arisen he would have heard argument on whether to direct a preliminary issue. There is no cross-appeal on this point with the consequence that the compromise of the 1999 proceedings and the complaint of Via to the EC Commission made in September 2000 have no direct relevance to anything we have to decide.
28. In paragraphs 1 to 87 of his judgment the judge set out the background. In paragraph 94 he set out the principal issues before him. They were, so far as still relevant before us, the following:

a) The circumstances in which the bringing of proceedings for patent infringement may be barred and in particular whether they may be barred if their object is to compel the defendant to enter into a licence agreement on terms which may infringe Article 81 and/or s.2(1) Competition Act 1998;

b) Whether the terms of the draft CLA arguably infringe Article 81 and/or s.2(1) by requiring Via to enter into

(i) the Asymmetric Licence, and/or

(ii) the Market Division term.

c) The circumstances in which the refusal of a licence may amount to an abuse of a dominant position under Article 82.

29. I will set out in greater detail later the reasoning of the judge in relation to many of the issues which were argued before us. But at this stage it is convenient to summarise the judge's conclusions alone. They were:

a) The decision of this court in British Leyland v TI Silencers [1981] CMLR 75 probably went no further than holding that infringement proceedings may not be brought by the owner of an intellectual property right if he is abusing that right in order to enforce unrelated terms on a trader who "desperately" needs a licence in order to trade. The case for Via did not fall within that principle because

(i) its evidence on the economic effect of not being able to make Pentium 4 chipsets fell short of establishing that "it desperately needs a licence to allow it to trade",

(ii) Via does not suggest that Intel is putting pressure on it to agree such terms.

No final decision on the rationale and scope of British Leyland was needed unless the Asymmetical Licence and the Market Division term were arguably contrary to Article 81(1). [para 115]

(b) The Asymmetric Licence point failed because Via's pleading is formulaic and so devoid of specificity that it fails to give rise to a triable issue. [para 130]

(c) The Market Division term was a limit on Via's ability to make certain products, not on the persons to whom they might be sold. Accordingly Via had no real prospect of establishing that it was restrictive of competition under Article 81(1) or s.2(1) Competition Act. [para 142]

(d) The refusal by an owner of an intellectual property right to grant a licence can only amount to an abuse of a dominant position in "exceptional circumstances". There is nothing in the decisions of the European Court of Justice or of the Commission to suggest that it is seriously arguable that the owner of a patent, which will eliminate competition, may not refuse a licence merely on the ground that the applicant needs it in order to make use of the invention. [para 173]

(e) Via had not made factual allegations in the Chipset Action which could amount to exceptional circumstances within the existing jurisprudence of the European Court of Justice [paras 177 and 178] because

(i) there are other competitors of Intel in the market,

(ii) it had not claimed that it was prevented from introducing a new product or variation of an existing product.

(f) Via had not pleaded facts in the CPU Action which could amount to exceptional circumstances because it only alleges that Socket 370 will be phased out in the future and does not plead that Intel is refusing or will refuse to supply a demand. [para 184]

The Issues
30. As I have indicated Lawrence Collins J gave Via permission to appeal only in respect of the issue whether the Market Division term gave rise to a defence based on the decision of this court in British Leyland. But that was not the issue primarily argued before us. The issues before us and the order in which they were argued were:

(1) Whether and if so when the owner of an intellectual property right, who is in a dominant position for the purposes of Article 82, is under an obligation not to exercise that right so as to exclude others from the market or a substantial part of the market.

(2) Whether the owner of an intellectual property right, whether or not he is in a dominant position, may lawfully exercise his right to license it on terms (ie the Asymmetric Licence and Market Division term) which are either wider than necessary to define the extent his exclusive right has been surrendered or are distortive of competition.

(3) Whether it is a defence to an action for infringement of a patent that its enforcement would enable the owner of the patent to act in breach of Articles 81 or 82.

31. I will deal with the issues in that order. But, first, it is necessary to set out the terms of Articles 81 and 82 and to draw attention to certain principles applicable to all the issues. Articles 81 and 82 (formerly 85 and 86) are in the following terms

"81.1. The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which:

(a) directly or indirectly fix purchase or selling prices or any other trading conditions;

(b) limit or control production, markets, technical development, or investment;

(c) share markets or sources of supply;

(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;

(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void."

"82. Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common 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;

(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;

(d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts."

32. There are principles of general application to which I should refer. First, in paragraph 90 of his judgment Lawrence Collins J referred to the fact that what he described as Euro-defences are not in some special category but do demand careful scrutiny so as to avoid defences without merit going to what is likely to be a long and expensive trial. He also noted that cases involving Articles 81 and 82 often raise questions of mixed law and fact which are not suitable for summary determination. I would endorse both those propositions, but I would add two notes of caution. First, until the patent issues raised in the Chipset Action and the CPU Action have been determined the extent of the exclusivity conferred by the patents in suit on Intel and of the inhibition imposed on Via as a consequence is unknown. Both will depend on which claims in which patents are valid. Second, where it can be seen that the jurisprudence of the European Court of Justice is in the course of development it is dangerous to assume that it is beyond argument with real prospect of success that the existing case law will not be extended or modified so as to encompass the defence being advanced.
33. The first of those notes of caution prompted an exchange between the members of the court and counsel for Intel which led to an application by the latter for the appeal and applications to be adjourned until after the conclusion of the trial of the patent issues. After hearing argument from both sides we indicated that we rejected the application and would give our reasons in our judgments on the appeal and applications in due course.
34. The reason I considered that the application should be rejected is, basically, that it came too late. The order for separate trials was made by Jacob J on 21st December 2001 in the knowledge that Intel was seeking summary judgment on the Euro-defences. If it were thought that the trial of the patent issues should precede that of the Euro-defences then the point should have been taken then or, at the latest, when the applications for summary judgment came before Lawrence Collins J on 11th and 12th April 2002. Though the point may have been made before Jacob J it was not pursued. It was not made at all to Lawrence Collins J. It is too late now.
35. The other principles of general application to which I would refer at this stage are the tests to be satisfied if summary judgment is to be given under CPR Rule 24.2. They are that Via has no real prospect of succeeding on the Euro-defence and there is no other compelling reason why that Euro-defence should be disposed of at a trial. A real prospect is to be contrasted with one which is fanciful, Swain v Hillman [2001] 1 AER 91. A Euro-defence which is likely at some stage to be the subject matter of a reference is likely also to be one which for that reason should only be disposed of at a trial. In most cases it is not necessary or appropriate to refer the point to the European Court before all the relevant facts have been ascertained by the national court.
Abuse of a dominant position
36. It is well recognised that there is a tension between the European Community rules of competition contained in Articles 81 and 82 and the intellectual property rights conferred by national systems of law which, by Article 295, must not be prejudiced by the Treaty. Thus in relation to the former in ITT Promedia NV v European Commission [1998] ECR II 2941, 2987 para 139 the Court of Justice stated

"It follows from the nature of the obligations imposed by Article 86 of the Treaty that, in specific circumstances, undertakings in a dominant position may be deprived of the right to adopt a course of conduct or take measures which are not in themselves abuses and which would even be unobjectionable if adopted or taken by non-dominant undertakings (see, to that effect, Case 322/81 Michelin v Commission [1983] ECR 3461, paragraph 57). Thus, the conclusion of a contract or the acquisition of a right may amount to abuse for the purposes of Article 86 of the Treaty if that contract is concluded or that right is acquired by an undertaking in a dominant position (see, to that effect, Case T-51/89 Tetra Pak v Commission [1990] ECR 11-309, paragraph 23)."

By contrast, in Volvo v Veng [1988] ECR 6211, 6235 para 8 the Court of Justice stated in relation to the right of the owner of an intellectual property right

"It must also be emphasised that the right of the proprietor of a protected design to prevent third parties from manufacturing and selling or importing, without its consent, products incorporating the design constitutes the very subject-matter of his exclusive right. It follows that an obligation imposed upon the proprietor of a protected design to grant to third parties, even in return for a reasonable royalty, a licence for the supply of products incorporating the design would lead to the proprietor thereof being deprived of the substance of his exclusive right, and that a refusal to grant such a licence cannot in itself constitute an abuse of a dominant position."

37. Thus the basic issue is where between the two propositions lies the dividing line. In this connection we have been referred, as was Lawrence Collins J, to a line of cases in which this issue has arisen. The only test of general application to emerge is that stated in Magill (RTE and others v European Commission) [1995] ECR I 743, 823 para 50 that

"...the exercise of an exclusive right by the proprietor may, in exceptional circumstances, involve abusive conduct."

No doubt the pleader of Via's defences had this in mind when including paras 48 and 25 in the defence in the Chipset and CPU Actions respectively. Thus the issue before us is whether Via has pleaded facts which are capable of constituting exceptional circumstances for the purposes of ascertaining which side of the dividing line the exercise by Intel of its rights as patentee of the five patents in suit may fall.

38. Given the limited nature of the issue before us it is unnecessary to do more than consider what indications are to be gleaned from the cases to which we were referred as to the circumstances likely to be regarded by the European Court of Justice in this context as "exceptional circumstances".
39. The first is Volvo v Veng [1988] ECR 6211. That case concerned the infringement of a registered design for body parts of a car. The question dealt with by the Court of Justice predicated a dominant position from that right alone. The Court of Justice, having expressed the principle quoted in paragraph 36 above observed at 6235 paragraph 9 that

"It must however be noted that the exercise of an exclusive right by the proprietor of a registered design in respect of car body panels may be prohibited by Article 86 if it involves, on the part of an undertaking holding a dominant position, certain abusive conduct such as the arbitrary refusal to supply spare parts to independent repairers, the fixing of prices for spare parts at an unfair level or a decision no longer to produce spare parts for a particular model even though many cars of that model are still in circulation, provided that such conduct is liable to affect trade between Member States.

As no instance of any such conduct had been referred to by the national court the other questions referred to the Court of Justice did not arise.

40. In Magill [1995] ECR I 743 the broadcasting authorities used the copyrights vested in them with regard to their forthcoming programmes to prevent the publication of such information in a new weekly TV guide. The Court of Justice considered the existence of the abuse alleged in the light of the principle I have quoted in paragraph 37 above and continued (p. 824)

"53. Thus the appellants - who were, by force of circumstance, the only sources of the basic information on programme scheduling which is the indispensable raw material for compiling a weekly television guide - gave viewers wishing to obtain information on the choice of programmes for the week ahead no choice but to buy the weekly guides for each station and draw from each of them the information they needed to make comparisons.

54. The appellants' refusal to provide basic information by relying on national copy-right provisions thus prevented the appearance of a new product, a comprehensive weekly guide to television programmes, which the appellants did not offer and for which there was a potential consumer demand. Such refusal constitutes an abuse under heading (b) of the second paragraph of Article 86 of the Treaty.

55. Second, there was no justification for such refusal either in the activity of television broadcasting or in that of publishing television magazines (RTE judgment, paragraph 73, and ITP judgment, paragraph 58).

56. Third, and finally, as the Court of First Instance also held, the appellants, by their conduct, reserved to themselves the secondary market of weekly television guides by excluding all competition on that market (see the judgment in Joined Cases 6/73 and 7/73 Commercial Solvents v Commission [1974] ECR 223, paragraph 25) since they denied access to the basic information which is the raw material indispensable for the completion of such a guide.

57. In the light of all those circumstances, the Court of First Instance did not err in law, holding that the appellants' conduct was an abuse of a dominant position within the meaning of Article 86 of the Treaty."

41. Tiercé Ladbroke v European Commission [1997] ECR II 923 concerned copyright in films of horse races. Tierce Ladbroke wished to show them in its betting shops and complained that the owners of the copyright were in breach of Article 86 in refusing to allow it to do so. The Court of Justice rejected the complaint on the ground that no restriction on competition in the relevant market was involved. It continued in paragraph 131

"Even if it were assumed that the presence of the sociétés de courses on the Belgian market in sound and pictures were not, in this case, a decisive factor for the purposes of applying Article 86 of the Treaty, that provision would not be applicable in this case. The refusal to supply the applicant could not fall within the prohibition laid down by Article 86 unless it concerned a product or service which was either essential for the exercise of the activity in question, in that there was no real or potential substitute, or was a new product whose introduction might be prevented, despite specific, constant and regular potential demand on the part of consumers (see in that connection Joined Cases C-241/91 P and C-242/91 P RTE and ITP v Commission [1995] ECR 1-743, paragraphs 52, 53 and 54)."

It will be noted that the examples given are alternatives.

42. Oscar Bronner v Mediaprint [1998] ECR I 7791 concerned the exclusion of a publisher of a newspaper, Oscar Bronner, from a distribution network maintained by Mediaprint. Thus it was not a case concerning a right of intellectual property but it contains a valuable analysis of the law by Advocate-General Jacobs and a comment by the Court of Justice on the scope of its decision in Magill.
43. The analysis by the Advocate-General (paras 45-51) draws attention to the increasing similarities between the doctrine of essential facilities as applied in the United States and the practice of the European Commission under Article 82, to which this court is to have regard pursuant to s.60(3) Competition Act 1998. In paragraphs 50 and 51 he observed

"50. It is therefore clear that the Commission considers that refusal of access to an essential facility to a competitor can of itself be an abuse even in the absence of other factors, such as tying of sales, discrimination vis-à-vis another independent competitor, discontinuation of supplies to existing customers or deliberate action to damage a competitor (although it may be noted that in many of the cases with which it has dealt such additional factors are to greater or lesser extent present). An essential facility can be a product such as a raw material or a service, including provision of access to a place such as a harbour or airport or to a distribution system such as a telecommunications network. In many cases the relationship is vertical in the sense that the dominant undertaking reserves the product or service to, or discriminates in favour of, its own downstream operation at the expense of competitors on the downstream market. It may however also be horizontal in the sense of tying sales of related but distinct products or services.

51. In deciding whether a facility is essential the Commission seeks to estimate the extent of the handicap and whether it is permanent or merely temporary. The test to be applied has been described by one commentator as 'whether the handicap resulting from the denial of access is one that can reasonably be expected to make competitors' activities in the market in question either impossible or permanently, seriously and unavoidably uneconomic'. The test applied is an objective one, concerning competitors in general. Thus a particular competitor cannot plead that it is particularly vulnerable."

44. The Court of Justice dealt with the matter on a more limited basis. Having considered its decision in Magill it stated at 7831 paragraph 41

"Therefore, even if that case-law on the exercise of an intellectual property right were applicable to the exercise of any property right whatever, it would still be necessary, for the Magill judgment to be effectively relied upon in order to plead the existence of an abuse within the meaning of Article 86 of the Treaty in a situation such as that which forms the subject matter of the first question, not only that the refusal of the service comprised in home delivery be likely to eliminate all competition in the daily newspaper market on the part of the person requesting the service and that such refusal be incapable of being objectively justified, but also that the service in itself be indispensable to carrying on that person's business, inasmuch as there is no actual or potential substitute in existence for that home-delivery scheme."

45. Finally I should refer to IMS Health Inc v European Commission [2002] 4 CMLR 58. That case concerned copyright in a brick structure used to divide up a country for the purposes of market research. A competitor's request for a licence was turned down and he complained to the Commission. The Commission made an interim decision requiring IMS to grant such a licence. IMS appealed. The President of the Court of First Instance granted a stay pending a final decision on the interim order.
46. The President noted that the Commission had interpreted the requirement in Magill for exceptional circumstances in the light of Oscar Bronner as requiring only that (1) the refusal of access to the facility is likely to eliminate all competition in the relevant market; (2) such refusal is not capable of being objectively justified; and (3) the facility itself is indispensable to carrying on business inasmuch as there is no actual or potential substitute in existence for that facility. The President continued at 95

"104. In Bronner, the Court of Justice recalls, by way of "exceptional circumstances" "found in Magill", each of the findings of the Court of First Instance confirmed by the Court of Justice in paragraphs 53 to 56 of its judgment in Magill. In Bronner, the Court of Justice then observes that Magill was concerned with "the exercise of an intellectual property right". It is beyond the scope of the review possible in the present proceedings to determine whether these passages in Bronner, and paragraph [131] of the Court of First Instance's judgment in Tiercé Ladbroke v Commission, support the prima facie conclusion reached in the contested decision. Although the Commission's interpretation may be correct, the existence of reasonable grounds for concluding that the "exceptional circumstances" envisaged by the Court of Justice in Magill, and recalled by it in Bronner, are concurrent cannot be excluded.

105. The applicant's assertion, having regard to the prevailing economic theories underlying the "essential facilities" doctrine, that this is particularly the case as regards the condition that the impugned refusal to licence of the dominant undertaking must prevent the appearance of a new product on a market separate from that on which the undertaking in question is dominant constitutes a serious legal question that merits full consideration by the Court of First Instance in the main action. This interpretation of Magill arguably finds support in much of the case law to which IMS refers. It would also seem to be echoed by Advocate General Jacobs who opined, in Bronner, that Magill could "be explained by the special circumstances of that case which swung the balance in favour of an obligation to license."

106 Accordingly, as there is, at the very least, a serious dispute regarding the correctness of the fundamental legal conclusion underpinning the contested decision, i.e. that "exceptional circumstances" exist in the present case capable of justifying the imposition of a compulsory licence obligation, the applicant has clearly established a prima facie case justifying relief sought."

47. Counsel for Intel submits that these cases show that there can only be exceptional circumstances within the Magill test if all the conditions in either Magill or IMS are satisfied. Thus, the result of the refusal must be to exclude an entirely new product from the market (Magill) or all competition to the patentee (IMS). He contends that neither condition is pleaded or satisfied in this case for chipsets and CPUs will continue to be produced and competition to Intel from those it has licensed will continue to exist.
48. I do not accept either the premise or the conclusion. With regard to the premise Magill and IMS indicate the circumstances which the Court of Justice and the President of the Court of First Instance respectively regarded as exceptional in the cases before them. It does not follow that other circumstances in other cases will not be regarded as exceptional. In particular it is at least arguable, as the President recognised in IMS, that the Court of Justice will assimilate its jurisprudence under Article 82 more closely with that of the essential facilities doctrine applied in the United States. In that event there could be a breach of Article 82 without the exclusion of a wholly new product or all competition. This approach seems to me to be warranted by the width of the descriptions of abuse contained in Article 82 itself.
49. I would, in any event, reject the submission of counsel for Intel that the IMS test requires the exclusion of all competition from all sources. This was not a requirement in Oscar Bronner which referred in paragraph 41 only to all competition from the person requesting the service (see para 44 above). Accordingly the summary in IMS, to which I have referred in paragraph 46 above, must be read in that light. Were it otherwise liability under Article 82 could be simply avoided by the grant of a licence to an unenergetic rival.
50. I do not accept the conclusion either because it appears to me that the pleadings of Via in both the Chipset Action and the CPU Action satisfy either the Magill or the IMS test. Thus in the Chipset Action Via pleads in paragraphs 19 and 44 that access to the market in x86 compatible chipsets is impossible without the licence of Intel. In the CPU Action Via pleads in paragraphs 19(a) and 24 that Intel seeks to use its rights as patentee to exclude from the market both the Socket 370 and the EGBA format.
51. Accordingly in my view it is arguable that the range of exceptional circumstances which may give rise to the abuse by the owner of an intellectual property right of his dominant position contrary to Article 82 can extend to the facts pleaded by Via in both the Chipset Action and the CPU Action. Whether or not they do will depend on the findings of fact made at the trial. In a case such as this such findings are an essential preliminary to any reference under Article 234 EC Treaty. In those circumstances I consider that the defence Via seeks to advance under this head has a more than fanciful prospect of success. Further it is one which, in my view, should be disposed of at a trial. Accordingly I would grant permission to appeal and allow the appeal on this ground in both the Chipset Action and the CPU Action.
Agreements contrary to Article 81
52. The second issue to which I have referred in paragraph 30(2) above arises only in the Chipset Action. It is the basis for the contention that one or both of the Asymmetrical Licence or the Market Division term as proposed in the draft CLA is contrary to Article 81. It is not suggested by Via that there is a breach of that article now, only that there will be if Via enters into a licence with Intel in a form which contains those terms. Accordingly the issues are the effect of those terms and whether if concluded they could constitute breaches of Article 81.
53. The relevant terms of the draft CLA are the following:

"2.3 "P4 Bus" means the external microprocessor bus implemented on the first Pentium® 4 Processor generally commercially released for sale by Intel (currently code named Willamette). Voltage level changes to this bus without any other changes of any kind shall also be deemed to be within the definition of P4 Bus. P4 Bus expressly excludes any changes or modifications to this bus (other than the aforementioned voltage changes) including without limitation changes to any bus signaling protocol or clock speeds.

2.4 "P4 Chipset" means a product consisting of one (1) or more integrated circuits at least one (1) of which connects directly to an Intel microprocessor through the P4 Bus and provides (i) a data path between system memory and such microprocessor, and (ii) a data path between a PCI or other general purpose computer bus and such microprocessor. Notwithstanding the foregoing, P4 Chipset does not include any product that incorporates or is designed or marketed to allow incorporation of any of the following:

(a) a microprocessor or substantial portions of a microprocessor of any kind; or

(b) the capability to connect directly to any microprocessor through any bus other than the P4 bus; or

(c) a peripheral bus other than the P4 bus;

(d) an Intel Bus other than the P4 bus; or

(e) the capability to connect directly and simultaneously to more than two (2) Intel Pentium® 4 Processors.

2.5 "Patents" means all classes or types of patents, utility models and design patents (including, without limitation, originals, divisions, continuations, continuations-in-part, extensions or reissues), and applications for these classes or types of patent rights in all countries of the world (collectively "Patent Rights") that are owned or controlled by the applicable party or any of its Subsidiaries during the Capture Period of this Agreement, provided such applications have a first effective filing date prior to expiration of the Capture Period and to the extent that the applicable party or its Subsidiaries has the right to grant licenses within and of the scope set forth herein and without the requirement to pay consideration to any third party (other than employees of the applicable party or its Subsidiaries) for the grant of a license under this Agreement.

2.6 "Company Licensed Products" means any P4 Chipset that is sold by Company as Company's own product (subject to the limitations set forth in Section 4.3) and is not sold on behalf of another related or unrelated entity.

.......

4.1 Intel License to Company. Subject to the terms and conditions of this Agreement, Intel hereby grants to Company a non-exclusive, non-transferable, royalty-bearing, worldwide license, without the right to sublicense, under Intel's Patents to:

(a) make, use, and import, and directly or indirectly sell, offer to sell and otherwise dispose of Company Licensed Products; and

(b) subject to Section 4.2, have made Company Licensed Products by a third party manufacturer for supply solely to Company for use, import, sale, offer for sale or disposition by Company pursuant to the license granted above in Subsection (a).

.......

4.4 License to Intel. Subject to the terms and conditions of this Agreement, Company hereby grants to Intel a non-exclusive, non-transferable, royalty-free, worldwide license, without the right to sublicense, under Company's Patents to make, have made, use, and import, and directly or indirectly sell, offer to sell and otherwise dispose of products made by or for Intel."

54. The Asymmetric Licence point arises on the disparity between Clauses 4.1 and 4.4. As will be seen the licence from Via is under "Company's Patents" and without limitation whereas the licence to Via is limited by reference to "Company's Licensed Products". Via contends that this gives rise to an asymmetry in two directions. First, Via has, but Intel has not, granted a licence for use of its patents in the making of CPUs. Second, the licence to Via limits the use of the technology to x86 chipsets compatible with Intel's original Pentium 4 CPUs. The second relates more properly to the Market Division term and I will deal with it in that context.
55. The judge concluded that first point was open to Via notwithstanding the apparent allegation that the vice in the licence from Via to Intel was the fact that it was free of charge. He considered in the light of the terms of the Technology Transfer Regulations (EC) 240/96 that a cross-licence was not per se anti-competitive. His conclusion in paragraph 130 was

"But VIA's pleading of the vice of the cross-licence is so devoid of specificity that it falls plainly within that category of Euro-defences which is so vague and imprecise that it does not really amount to a serious allegation at all. The starting point is that a cross-licence in the circumstances of this case is not per se anti-competitive. The fact that VIA's licence to Intel would not be restricted in the same way as Intel's licence to VIA does not in itself make it anti-competitive. Nor does the mere fact that VIA is innovative, and is one of the only 3 significant suppliers of x86 microprocessors, raise a triable issue that Intel's acquisition of its technology would be anti-competitive. VIA's pleading is purely formulaic, since every licensor could say that granting a licence reduces or cancels its incentive to continue investment and research, and that it may therefore lose its innovative edge and thereby its position in the market. This is pure unparticularised assertion or argument. If it had any commercial substance, facts would have been pleaded to support it. In my judgment there is no triable issue on the validity of the cross-licence in the draft CLA."

56. This is disputed by counsel for Via. He contends that the Technology Transfer Regulations recognise that a cross-licence may be anti-competitive and that it has been properly pleaded that this one is. He relies on paragraphs 33, 37, 38 and 44 of the defence and counterclaim in the Chipset Action. Both submissions are challenged by counsel for Intel.
57. The Technology Transfer Regulations start by exempting certain licences of patents and know-how from Article 81(1). But by Article 5.1(3) and 5.2(2) the regulation does not apply to cross-licences between competitors which are not reciprocal. Given the evident disparity between the subject matter of the licence from Via to Intel and that from Intel to Via, it is in my view arguable with real prospects of success that the Technology Transfer Regulations do not cure the objection based on asymmetry.
58. With regard to the pleadings I agree with the judge that the asymmetry point is open to Via. The heading to paragraphs 31 and following and paragraph 34 refer to the Asymmetric Licence in terms. Paragraph 33 expressly draws the distinction between Intel's licence enabling Via to make chipsets compatible with the Pentium 4 and Via's licence extending to all its patent rights enabling Intel to make unrestricted commercial use of them. I do not think that the references in paragraph 37(b) to "free of charge", "no cost to itself" and "free" are sufficient to exclude the asymmetry on which Via relies.
59. Paragraphs 37, 38 and 39 plead in detail the anti-competitive effects on which Via relies. They include the allegations that the Asymmetric Licence would, if agreed to,

"reduce or cancel the incentive for Via to continue investing in research and development and that would distort competition by stifling invention"

in relation to both chipsets and CPUs. In paragraph 38(b) Via asserts that it would be at risk of being driven from both the x86 CPU market and the x86 compatible chipset market, thereby affecting the structure of competition in the market.

60. No doubt, in one sense, these assertions are formulaic but it does not follow that they are on that account defective. Given that they are alleging a future hypothetical state of affairs they cannot be as specific as a pleading of past or present fact. If details are required then they may be obtained under CPR Rule 18.1, though the contents of the expert's reports would seem to be the more appropriate method. For my part I do not consider that the pleading in relation to the Asymmetric Licence is so defective as to warrant summary judgment on that issue being given against Via.
61. I turn then to the Market Division term. This arises from the effect of the definitions which bear on the meaning of "Company Licensed Products" by reference to which the licence from Intel is limited. Counsel for Via contends that such products are inevitably limited by the definition of "P4 Bus" which, by means of the definition of "P4 Chipset", is introduced into the definition of "Company's Licensed Products". This is not disputed by counsel for Intel. But he submits that the limitation so derived is a restriction on manufacture and not subsequent sale and the words "or marketed" are mere surplusage. If, as he submits, it is the former alone then it could not constitute an infringement of Article 81.
62. This is disputed by Counsel for Via. He instances the case of a chipset made under the licence and compatible with the P4 CPU. In his submission the terms of the draft CLA would permit its making but would preclude its sale to a purchaser for use with an improved version of the P4 with which it is also compatible. In this way, he submits, the Market Division term has the effect of regulating the market in the P4 chipsets after and separately from their manufacture. In these circumstances the words "or marketed" in the definition of P4 Chipset are intended and effective.
63. For my part I do not feel that terms such as these are suitable for interpretation on an application for summary judgment. The surrounding circumstances or matrix are of crucial importance. On the face of it the limitation is in respect of the licence contained in clause 4.1. That permits sales direct or indirect and other dispositions of Company Licensed Products. The limitation imported from the definition of "P4 Bus" is likewise a limitation on sales as well as manufacture. If this is correct then the effect of the Market Division term is to preclude Via, having legitimately used Intel's licensed technology to make a chipset, from selling it to a person for use with an improved version of the P4 CPU. I do not consider that the construction on which counsel for Via relies can be dismissed as without real prospect of success
64. Counsel for Intel submits that such a construction is not open to Via either on its pleadings, its arguments in the court below or its notice of appeal. Counsel for Via disagrees. In my view the point is certainly open to Via on its pleading. Paragraphs 35 and 40(a) refer to it in terms as a restriction on supply. Similarly in relation to the notice of appeal paragraphs 15 and 17 (b) clearly relate to a restriction on supply in contrast to a restriction on making.
65. In summary in my view Via has a real prospect of success in establishing that the Asymmetric Licence confers on Intel rights in relation to Via's patents concerning CPUs over and above what could be regarded as reciprocal and the Market Division term does seek to regulate the sales of P4 Chipsets independently of their making. Would such terms infringe Article 81?
66. Both parties addressed us at some length on the ambit of the decision of the European Court of Justice in Windsurfing International Inc v European Commission [1986] ECR 611. This case concerned sailboards. In essence a sailboard consists of a rig, comprising a mast, sail and spars, and a board, comprising a hull and centre-board. The case concerned the terms of a licence under a German patent in relation to the rig. The European Commission regarded the patent as covering the rig alone, not the complete sailboard. The Court of Justice considered that they were right to do so.
67. The licence under that patent contained four relevant terms, namely (1) to fit licensed rigs only to approved boards, (2) to market the rigs only in combination with boards as complete sailboards, (3) to fix to the boards notices indicating that they were made under licence from the patentee and (4) to pay royalties on net sales or rental income derived from complete sailboards. Each of these terms was considered by the European Court of Justice in the context of its compatibility with Article 85.
68. With regard to the first of those provisions the Court of Justice observed (para 46) that the discretion to approve the board to which the rig must be attached

"would in effect enable a licensor to impose his own selection of models upon the licensees, which would be contrary to Article 85."

69. In the case of the second the Court of Justice reiterated (para 57) that the patent must be regarded as covering the rig alone

"That being the case, it cannot be accepted that the obligation arbitrarily placed on the licensee only to sell the patented product in conjunction with a product outside the scope of the patent is indispensable to the exploitation of the patent."

70. With regard to the third the Court of Justice considered (para 73)

"Despite Windsurfing International's contention that it was not the object of the clause to distort competition but merely to convey the information....that the production and sale of sailboards were made possible by a licence from Windsurfing International, it is nonetheless true that by requiring such a notice Windsurfing International encouraged uncertainty as to whether or not the board too was covered by the patent and thereby diminished the consumer's confidence in the licensees so as to gain a competitive advantage for itself."

The Court of Justice held (para 74) that such a provision was incompatible with Article 85.

71. The provision for the calculation of royalties on the basis of the selling price of the complete sailboard was held (para 67) to be

"of such a nature as to restrict competition with regard to the separate sale of boards, which were not covered by the German patent, but not the sale of rigs."

72. In my view this case clearly establishes the second of the propositions advanced by counsel for Via that a licence term is incompatible with Article 81 if it seeks to regulate the commercial market by controlling not only what is made with the licensed technology but also the use which is made of it thereafter. That is clearly the basis of the holding of the European Court of Justice in relation to the second term. It follows that the Market Division term, construed as I have accepted it can be, is incompatible with Article 81.
73. The first proposition advanced by counsel for Via is that the exclusivity conferred by a patent may not be used to license the invention on terms which restrict or distort competition in some respect going beyond what is strictly necessary to define the extent to which exclusivity is thereby surrendered. The conclusions of the Court of Justice in relation to all four clauses can be read in that way. For my part I consider that the principle is better expressed as recognising that an anti-competitive term collateral to licensing acts which would otherwise constitute an infringement must be justified, if at all, on its own merits and not because of its inclusion in a licence of an intellectual property right. In that sense the Asymmetric Licence is collateral to the licence from Intel to Via. Via alleges it to have the anti-competitive effect to which I have already referred. At this stage the only justification advanced by Intel is its inclusion as one of the terms of the licence Intel is prepared to grant in respect of its own patents. In my view that cannot justify the grant of summary judgment in its favour.
74. In summary, I conclude that Via has a real prospect of success in demonstrating that both the Asymmetric Licence and the Market Division term would be incompatible with Article 81 if contained in an agreement or undertaking. Via has not relied on any such agreement or undertaking. The possibility of an infringement of Article 81 in these respects appears to be to be relevant, if at all, in the context of the third issue to which I have referred in paragraph 30 above. That issue, to which I now turn, depends on the application of the decision of this court in British Leyland Motor Corporation Ltd v TI Silencers Ltd [1981] 2 CMLR 75.
British Leyland
75. In that case British Leyland sought to enforce its copyright in design drawings to inhibit TI from supplying replacement parts for cars made by British Leyland. TI denied the alleged breach of copyright. Amongst other defences it contended that the licence terms imposed by British Leyland on its licensees were in breach of Articles 30, 34, 36, 85 and 86 of the EC Treaty. Walton J considered that British Leyland were doing no more than making "ordinary use" of their copyright and that the paragraphs in the defence relying on those articles did not raise an arguable case in such a way as to afford a defence to the infringement claim. TI appealed. Templeman LJ with whom Lawton and Brandon LJJ agreed considered that Walton J was wrong.
76. In paragraphs 7 and 8 at pp. 78, 79 Templeman LJ said

(7) ".....But if English legislation, though not invalid, is used or abused by British Leyland in a way and by means of activities which themselves create a breach of the Treaty of Rome, then British Leyland may not be able to obtain all the relief to which they would otherwise be entitled.

(8) If, for example, it was proved in evidence that the owners of English copyright were only prepared to grant a licence on terms which created, or helped to create, a breach of Community law, this court, I apprehend, would not grant an injunction against an infringer who desperately needed a licence for his business purposes and was willing to pay a reasonable royalty for the privilege, but was unwilling to accept or assist or acquiesce in any breach of Community law. The court could award damages in lieu of an injunction based on a reasonable royalty, or the court could accept an undertaking by the defendant to pay a reasonable royalty to be assessed if not agreed. The court would strive to prevent any breach of Community law while, at the same time, preserving for the copyright owner the benefit of and the right to make, in the learned judge's words, 'the ordinary use of their copyright.' But I do not accept that the court would lend countenance to an argument that the ordinary use of copyright included a use which enabled the owner of the copyright to flout European Community law."

77. Lawrence Collins J reached no final decision on the rationale and scope of this decision because he considered that the Asymmetric Licence and Market Division term were not arguably contrary to Article 81. I have reached a contrary conclusion on the latter points and must, therefore, reach some conclusion with regard to the ambit of British Leyland. For that purpose I will start with the observations of Lawrence Collins J.
78. Having set out the passage in the judgment of Templeman LJ which I have quoted in paragraph 76 he observed that the decision had been applied in two later cases, Holleran v Daniel Thwaites plc [1989] 2 CMLR 917 and Philips Electronics NV v Ingman [1998] 2 CMLR 839, but in the context of actual agreements which were or were alleged to infringe Article 81. He accepted that, as established in Bayer AG v European Commission [2001] 4 CMLR 4, an unaccepted offer which if accepted would be incompatible with Article 81 was not itself an infringement of Article 81. He did not consider that Templeman LJ had decided otherwise.
79. In paragraphs 113 to 115 Lawrence Collins J said

"113. Nevertheless the legal rationale of British Leyland is not easy to isolate. It seems to follow from VIA's argument that it means that wherever the holder of an intellectual property right offers a licence on terms which offend Article 81, and the offeree is faced with accepting the terms or not carrying on the business in relation to articles which are the subject of the right, then the offeree cannot be sued for infringement if he offers a reasonable royalty. But in my judgment, there are two reasons why this cannot be right. First, it would be contrary to common sense, and wholly disproportionate, for every unaccepted offer of a licence, which (if accepted) would have infringed Article 81, to result in an offeree who wished to manufacture the goods in question being entitled to infringe on payment of a reasonable royalty. Secondly, if the offer were accepted, and the unlawful restrictions were accepted, those restrictions would be null and void under Article 81(2), and it is likely that they would not be severable (see below, section XXI) with the result that there would, once again, be no licence. It is odd that the offeree is to be treated so much more favourably if he rejects the offer and then infringes.

114. Consequently I do not consider that British Leyland necessarily leads to the result in all cases that the offeree automatically obtains a licence on its own terms if a patent holder proposes a licence which contains terms which offend against Article 81(1) and which the offeree rejects. The case had the following special features: first, the intellectual property right was special to United Kingdom law; second, the defendants would not have been able to carry on their business at all unless they could make body panels for British Leyland cars and therefore desperately needed a licence; third, Templeman LJ emphasised that it was arguable that the use of a copyright monopoly granted in respect of one article did not justify the copyright owner insisting, as a condition of granting a licence, on a royalty applicable to articles over which no copyright existed, and he concluded that on the assumed facts "it does not seem to me that that what British Leyland are attempting to do can accurately be described as the normal use of copyright" (at 89); fourth, as Neuberger J said in Sandvik (at 788) British Leyland was seeking to put pressure on the body panel manufacturers to agree arguably illegal terms.

115. I doubt if British Leyland goes any further than holding that infringement proceedings may not be brought where the holder of the intellectual property right is abusing that right in order to force terms unrelated to that right (such as the royalties in that case and in Philips) on a trader who desperately needs the licence in order to trade. I do not consider that the decision could apply in every case in which a manufacturer wishes to gain access to the technology of the holder of a patent who is willing to grant a licence but only on terms which arguably infringe Article 81(1). If I am right, and even if the alleged restrictions were in contravention of Article 81(1), VIA would not be able to bring itself within what Templeman LJ said. First, all that VIA is really saying in the Chipset action is that if it does not obtain a licence it will be unable to manufacture chipsets for the Pentium 4. It may have a strong wish to compete with Intel and its licensees in selling chipsets for the Pentium 4, but its evidence on the economic effect of it not being able to manufacture and sell such chipsets (in relation to which I made a confidentiality order) falls far short of an allegation that it desperately needs a licence to allow it to trade. Second, although VIA pleads that Intel insists on these terms, VIA does not suggest that Intel is putting any pressure on it to agree the terms. But I need not make a final decision on the rationale and scope of British Leyland if the alleged restrictions are not arguably contrary to Article 81(1), and I will therefore go on to consider that question."

80. For Via counsel contends that the principles behind British Leyland are those normally applied by the courts in England when faced with illegality. In relation to his contention that the conduct of Intel was in breach of Article 82 he submitted that it is plain that the court would not lend its support to such conduct by granting relief for patent infringement to which Intel would not have been entitled had it granted the licence Article 82 required. I did not understand counsel for Intel to challenge this part of the submission of counsel for Via. In my view it is plain that if the conduct of Intel is contrary to Article 82 in the respects alleged then such illegality may constitute a defence to any liability for infringement or any remedy therefor.
81. Accordingly the point arises only in respect of a potential infringement of Article 81 by the conclusion of a licence containing the Asymmetric Licence and the Market Division term. In that respect it is similar to Philips Electronics NV v Ingman [1998] 2 CMLR 839. In that case Laddie J struck out the defence which relied on Article 86 but refused to strike out the defence which relied in Article 85. The circumstances sufficiently appear from paragraph 83 at p 869 of his judgment where he recorded that

"The plea that the standard licence is void appears at first a little odd. The defendants have not yet entered into such a licence. Therefore in respect of the standard licence there is at present no relevant agreement between undertakings as required by Article 85. [Counsel for the defendants] says that this does not matter because it cannot be right for the court to give relief in this action which will force the defendants to enter into an agreement which, once executed, will offend against the Article. Furthermore, as noted above, one of the pleas advanced by the defendants is that a purpose of these proceedings is to force prospective licensees – not just these defendants – to accept a licence of the patents on the terms of the standard licence."

82. Laddie J considered that, in the light of the reply of the plaintiff, it was arguable that the proceedings had been brought, inter alia, to force the prospective licensees to accept a standard licence. In paragraph 93 on p 873 he concluded that

"...it is at least arguable that the purpose of these proceedings is to force the defendant or others to enter into standard licences. If such licences offend against the Treaty of Rome, then it is at least arguable that the court may decline to give the plaintiff all the relief it seeks in its writ."

83. Counsel for Via criticises the reasoning of Lawrence Collins J on the basis that he distinguished British Leyland on inadequate grounds. Counsel for Intel submits that British Leyland is distinguishable because there is no suggestion in this case that the form of licence offered to Via is a standard form nor does it have the effect of excluding from the market products not covered by the patent. He re-iterated the points to which Lawrence Collins J referred in paragraph 113 of his judgment, quoted in paragraph 79 above. Counsel for Via responds by pointing out that British Leyland is a decision of this court and binding on us with regard to its ratio. He contends that the logical conundrum to which the judge referred in paragraph 113 of his judgment envisages that the consequence of infringing Article 81 is "voidness" rather than "voidability" and appears to ignore the penal consequences of concluding an agreement in contravention of Article 81.
84. I start with the special features the judge considered (paragraph 113) distinguishes this case from British Leyland. First, I do not see why it should make any difference that the intellectual property right in question was special to the United Kingdom. Most, if not all, intellectual property rights are conferred by national law. Second, Article 81 applies to any agreements having as their object or effect the prevention, restriction or distortion of competition. The existence of "a desperate need" describes the severity of the restriction; it does not determine its existence. The third distinction cannot be maintained if the Asymmetric Licence and the Market Division term are found to have the meanings I have held to be arguable. The fourth appears to me to be not dissimilar to the second.
85. These considerations also undermine the two reasons given by the judge in paragraph 115 of his judgment for considering that Via does not fall within the principle expounded by Templeman LJ. For the reasons I have already given Via is saying a good deal more than the case attributed to it by the judge. Even if it be the case that Intel is not putting pressure on Via to agree to the terms it puts forward I do not see why that fact should undermine any defence which might otherwise exist.
86. But, like the judge, I remain concerned at the commonsense aspect of Via's case to which he referred in paragraph 113 of his judgment. Why should Intel be in a worse position than it would have been if the licence containing the Asymmetric Licence and the Market Division term had been concluded? Counsel for Via suggests that the comparison to be made is not between no licence and an unlawful licence but between no licence and a lawful licence.
87. Ultimately I am unpersuaded that the position is so clear as to justify granting Intel summary judgment on this issue. First, the appeal to commonsense can be made in every case of a threat to enter into an illegal agreement. In such a case it can be said that there is no occasion for the intervention of the court because the contract, if made, will be unlawful. In many cases that may be true but it will not be true in all cases. Particular circumstances, such as the potential effect on third parties, may well justify the intervention of the court. Second, in this case, for the reasons I have given there is also the defence under Article 82. If the willingness to grant licences but only on terms which involve breaches of Article 81 is part of the abusive conduct of which complaint is made then I see no reason why those facts may not be relied on both for the purposes of the defence under Article 82 and as a free-standing defence under Article 81. Third, unless I am prepared to say that Laddie J was wrong in Philips Electronics, and I am not, then at least arguably there is a defence under Article 81 even if there is none under Article 82. Fourth, even if the case under Article 81 is insufficient to found a defence to liability it may yet constitute a defence to the remedies of injunction, delivery up and an account of profits. The conduct of Intel will have demonstrated that it does not seek to prevent the use of its invention; rather it seeks to exploit it by licensing others to make chipsets compatible with its own technology. If some of the terms of that licence are invalid then the proper remedy may be thought to be to make Via pay proper compensation as opposed to preventing it from using the technology on a normal commercial basis.
88. For all these reasons I would also grant permission to appeal and allow it so that the Article 81 defences may be reinstated.
Conclusion
89. The ingredients of computer technology, patent infringement and Articles 81 and 82 EC Treaty make a somewhat indigestible dish. Inevitably the court becomes buried in the minutiae of whichever ingredient is being considered. So it is appropriate to stand back and consider the result. Are the defences under Articles 81 and 82 ones for which Via has real prospects of success? Are there other compelling reasons why these defences should only be disposed of at a trial? In my view the answer to both questions is in the affirmative.
90. The issues in relation to Articles 81 and 82 only arise if the patents in suit are both valid and infringed. At this stage it is impossible to say whether any and if so which claims in any of them is both valid and infringed. Until it has been determined that at least one of them is the issues relating to Articles 81 and 82 are hypothetical. Moreover unless and until it has been determined which claims in the patents in suit are valid the extent to which any of the patents in suit is capable of restricting competition and therefore capable of giving rise to infringements of Articles 81 and 82 is uncertain. If the issues under Articles 81 and 82 do arise then it seems likely that at some stage a reference to the European Court of Justice will be necessary. Such a reference cannot be made at this stage because it is not necessary to enable the court to dispose of this appeal and should not be made at any stage before the facts have been determined.
91. If what Via alleges is made out then the dominance of Intel in the world-wide market in the important and developing technology for PCs is buttressed by its enormous portfolio of patents and restrictive licensing policy. This may be true of others but in the case of this technology the commercial and technical requirement for compatibility of hardware and software confers on the industry leader an even more impregnable position.
92. For all these reasons I would

a) allow the appeal for which Lawrence Collins J gave permission;

b) give permission to appeal and allow the appeal for all the other issues for which permission was sought in the Appellant's notice except those relating to the claims for relief contained in paragraphs (6) and (7) of the prayer for relief in Via's counterclaim in Action HC 01 2 C04135;

c) discharge paragraphs 1, 2, 4 and 5 of the order of Lawrence Collins J made on 14th June 2002;

d) direct the parties to apply to Jacob J for further directions as to the conduct of these actions.

Lord Justice Mummery :

93. I agree that the appeal should be allowed for the reasons given by the Vice Chancellor.
94. In cases of this novelty, which are conducted on this scale, it is important to stand back from the detail and consider the matter in the round. My provisional view at this stage of the litigation is that the defence under Article 82 is stronger than that under Article 81 and that there are serious difficulties in the way of either of the competition defences eventually succeeding at trial. But it is too soon to have sufficient confidence in the ultimate outcome to decide summarily that the defences have no real prospect of success.
95. I am not confident about the direction of future developments in the Court of Justice in this area. No one has yet asked for a reference. The Court has no jurisdiction to make a reference at this stage, as it impossible to say, ahead of the determination of the issues of validity and infringement of patent at trial, that a ruling on the interpretation of Articles 81 and 82 is necessary in order to decide the cases. Indeed, it will never be necessary to try the competition defences at all, if the validity or infringement defences succeed.
96. VIA has not raised the Euro defences to attack the existence of the patent rights or to challenge every use of them. This is not a straightforward case of an alleged infringer simply being refused a licence by the patent holder. The more complex question is, given Intel's assumed dominance in the markets for microprocessors and chipsets, is it abusing that dominance by adopting a policy for the exploitation and enforcement of its large portfolio of patent rights, which has the effect of distorting competition in the EC? Magill indicates that, in exceptional circumstances, the exercise of an exclusive intellectual property rights (e.g. by unjustifiably refusing to grant copyright licences to competitors, who cannot produce a competing product without a copyright licence) can constitute an abuse of a dominant position. This question necessarily involves a factual investigation into Intel's licensing policy (whom it licenses or refuses to license, in what circumstances, on what terms and restrictions) and an examination of the effects of the implementation of the policy on competition from other products in the relevant market, which has special features of "industry standard" requirements and needs for compatibility of components with hardware and software technology. A trial is needed to establish the facts and to resolve the question. The momentous issues raised by the proceedings are not simply questions of law suitable for summary treatment.

Tuckey LJ:

97. I agree that the appeal should be allowed for the reasons given in both judgments.
Order: Appeal allowed with an agreed minute lodged with court. (Order does not form part of the approved judgment)