England and Wales High Court (Patents Court) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT

		Royal Courts of Justice Strand. London. WC2A 2LL
		26/02/2007

MR. JUSTICE PUMFREY:

1. Last Tuesday and Wednesday I heard a number of applications in respect of this litigation and I reserved judgment on three of them. This is my decision on the outstanding matters and I include also a record of certain points which I think ought to be made about a fourth of them.
2. The background to the first application concerns the defendant InterDigital's application, which is largely unopposed, to amend its defence in action HC 05C02026 as follows. This action is the second action in which Nokia Corporation (to which I shall refer as "Nokia") seeks declarations to the effect that a manufacturer of mobile telephones does not need to infringe certain patents belonging to InterDigital while complying with the relevant standards. I shall call the standards "the 3GPP standards".
3. There are 29 patents in total and InterDigital have notified these patents to the Standards Setting Agency ("ETSI") as being essential to compliance with the 3GPP standards. ETSI's definition of "essential" is as follows:

"Essential as applied to IPR means that it is not possible on technical but not commercial grounds taking into account normal technical practice and the state of the art generally available at the time of the standardisation to make, sell, lease, otherwise dispose of, repair, use or operate equipment or methods which comply with a standard without infringing that IPR. For the avoidance of doubt in exceptional cases where a standard can only be implemented by technical solutions all of which are infringements of IPRs, all such IPRs shall be considered essential."

4. All the patents have been notified as essential by InterDigital to ETSI, and until the amendments now sought to be made to the defence there was a dispute as to the meaning of the word "essential", used in the context of a notification to ETSI. This is not a sterile dispute because the effect of such a notification is that the patentee offers to license the patent to all comers on fair, reasonable and non-discriminatory terms, usually abbreviated to FRAND terms. Nokia's underlying complaint against InterDigital and InterDigital's complaint about Nokia is that too many patents are notified to ETSI as essential and so the strength of the respective patent portfolios is exaggerated in subsequent licensing or cross-licensing negotiations.
5. InterDigital did not accept that "essential" had the narrow literal meaning for which Nokia contended. In summary, it said that the word had the broader connotation of "relevant" or "potentially relevant" to the specified standard. It contended further that this broader meaning was the meaning adopted by Nokia in notifying its own patents and that to adopt the narrow meaning would result in ETSI's standards setting process not being pro-competitive but would have the contrary result that it would restrict the

amount of technology available on FRAND terms in a manner which would be anti-competitive since it would have a tendency to limit technical development.

7. InterDigital contended that if "essential" had the narrower meaning for which Nokia contends, its operation of its licensing policy would offend against the prohibition of Article 81 EC. The reasoning doesn't matter, because InterDigital now abandon this case based upon the wider meaning of the word "essential" and consequently the competition law objection to the narrower meaning falls away. Instead, it concentrates upon the second limb of the definition which I repeat for convenience:

"In exceptional cases where a standard can only be implemented by technical solutions all of which can be infringed by IPRs, all such IPRs shall be considered essential."

8. The purpose of this deeming provision is clear enough. Where there are a number of ways of implementing a standard all of which are patented, the relevant patents must be considered essential as a group because, whichever solution is chosen, one of them will have to be used and so licensed on FRAND terms. The purpose of this limb of the definition of the word "essential" is thus to ensure that a licence is available in respect of any patent which is chosen.
9. With this introduction, I can turn to those amendments of the defence that are opposed or have given difficulty. They fall into three groups. First, paragraph 6 of the proposed amendment should be briefly mentioned, although a solution to the problem it presents was arrived at during the hearing. Paragraph 6 of the defence is an answer to Nokia's pleading that not only have InterDigital notified the patents as essential to ETSI, but that InterDigital has represented to Nokia that some of the patents in suit are essential (paragraph 4.6 of the Particulars of Claim) and that it is to be inferred that similar representations had been made to InterDigital's licensees, which includes a long list of names. This allegation and the grounds upon which the inference is to be drawn are set out in paragraphs 4.7, 4.8, 4.9 and 4.10 of the Particulars of Claim.
10. The proposed plea in answer is in paragraph 6 of the Re-Amended Defence as follows:

"6(c) The bare existence of discussions with actual and some potential licensees is admitted as is the second sentence of paragraph 4 (ix). The claimant's pleas do not support the inference that any of the European patents UK the subject of these proceedings were mentioned in such negotiations at all. Whether or not they were is not admitted.

(d) The alleged common sense pleaded in paragraph 4(x) does not support the inference pleaded. The claimant operates an aggressive licensing programme in relation to its patent portfolio and therefore well knows (i) that patents exist in families of corresponding case both internationally and within the same Patent Office and (ii) that licensing negotiations generally include specific discussion of certain exemplary patents but seldom involve foreign equivalents to such exemplary patents and (iii) once exemplary patents have been discussed, negotiations move onto commercial matters."

11. In my judgment these are in substance non-admissions. If the amendments are allowed, they add nothing but an allegation that an inference pleaded cannot be drawn and no positive case can be raised by InterDigital in respect of the allegation. This is contrary to the modern rules of pleading and in particular CPR 16.51 and 2. 16.51:

"In his defence the defendant must state (a) which of the allegations in the particulars of claim he denies; (b) which allegations he is unable to admit or deny but which he requires the claimant to prove; and (c) which allegations he admits.

2. Where the defendant denies an allegation he must state his reasons for doing so and (b) if he intends to put forward a different version of events from that given by the claimant he must state his own version."

12. Essentially, therefore, it is not open to parties seeking to not admit an allegation in relation to matters falling within their own knowledge. The non-omission is therefore no doubt appropriate where InterDigital itself lacks the means of knowledge but is inappropriate here. Disclosure will have to be given in respect of this plea unless it is struck out. I should record, therefore that the problem can be met if the amendment is allowed and InterDigital gives disclosure in the first instance of presentations made to one or two of the licensees within a short time and the best way forward considered when Nokia has considered these presentations. As I have indicated, this solution to the problem was arrived at during the hearing but I wish to record my views on the position of the pleading.
13. The first substantial problem is raised by paragraph 8 of the amendment, which raises for the first time the question of the second limb of the definition of the word "essential." The effect of these amendments is that the patents listed in Part 1 of Schedule 1 to the pleading are alleged to be essential upon the narrow meaning. There are 12 of them. The patents listed in Part 2 of Schedule 1 are not said to be essential on the narrow meaning of that word but are said to be capable of being essential under the second limb: that is, they are said to be capable of covering one implementation of the standard where a number of implementations are possible and all the alternatives are also patented.
14. InterDigital does not allege that this is the case in respect of any one of these patents and indeed makes a positive virtue of its contention in the corresponding amendments made to its statement of case on infringement, which I quote:

"The defendant does not have a positive case that any given patent is essential on the same limb of the definition. The limit of the defendant's positive case is that the facts and matters below establish that a patent is capable of being essential IPR on the second limb. To resolve whether such a patent is in fact essential IPR under the second limb would require consideration of IPRs other than the patent concerned. The claimant has not sought to set out a case on that basis and the defendant does not plead further to it."

15. The facts and matters set out below include the case on essentiality not only of the Schedule 1 Part 2 patents but also the Schedule 1 Part 1 patents. It accordingly introduces the possibility that all the patents in Schedule 1 Part 1, if inessential in the narrow sense, are capable of being deemed to be essential by the second limb of the definition.
16. In my judgment, this is not an acceptable plea. Its premise is that Nokia establish that the use of the invention described and claimed in a patent is not essential to the standard, in the sense that it is possible to comply with the standard and not infringe the patent. This may be for one of two reasons. The first is that there is only one way of complying with the standard and that that way does not fall within the claim. The second is that there are a number of ways of complying with the standard and that at least one of those ways does not infringe the patent.
17. It must be acknowledged that, in such a case, the question whether the non-infringing alternative is practicable will or may have to be investigated, but the result will be a determination that the use of the patented invention is not essential to compliance with the standard. If it is sought to suggest that a declaration to this effect should be refused on the footing that notwithstanding the inessentiality of the patent in question it is none the less a member of a group of patents which cover all the possible ways of complying with the standard and are all therefore to be considered essential, then it seems to me that a case for saying this must be put up. Given the size and complexity of the 3GPP standards and the patents in suit, it is not profitable to speculate as to when such a plea may be a viable one.
18. I am satisfied, however, that the question cannot be resolved as InterDigital seeks to do by an appeal to the onus lying on Nokia to prove its case. The reason is as follows. There is no doubt that if it is to obtain declaratory relief in respect of a patent, Nokia must establish that the standard may be complied with without infringing that patent. Once evidence and argument are adduced to this effect, the evidential burden shifts on to InterDigital to adduce rebutting evidence and argument. The second limb of the definition is essentially a matter of rebuttal. It becomes relevant only when it is demonstrated that a patent is not in fact essential, and unless it is affirmatively demonstrated that there is some reason for supposing that the second limb of the definition is relevant (for example by pointing to a patent which covers an alternative way of complying with a standard) there is no logical reason for considering it at all.
19. In the legal context, it seems to me that it is plainly up to InterDigital to demonstrate the reason for supposing that the second limb of the definition is relevant in the particular case. To plead merely that it might be the case but without saying why and without identifying the relevant patents is not giving a reason for supposing that the second limb is relevant. It is not enough to say that it might be relevant without grounds for that application. If this were not the case, the contention that a patent was essential would be at risk of becoming unfalsifiable without a disproportionate expenditure of time. To disprove the contention that the second limb of the definition applies to a particular patent would involve identification of all practical alternatives and the identification of all patents covering those alternatives in order to demonstrate that one alternative is not covered, in other words, what amounts as a matter of substance to an attempt to prove a negative.
20. So while I accept that the legal burden lies on Nokia, I consider that the second limb of the definition does not call for consideration unless InterDigital give cogent reasons in a particular case for supposing that it does, otherwise the challenge will become impossible to meet. I conclude that the proposed paragraph 8 cannot be added by amendment in its present form. Unless InterDigital are prepared to advance some reason for supposing that the patents listed in Part 2 of Schedule 1 are to be considered as essential by reason of the second limb of the definition, the present position is that they are accepted to be inessential in the same way as the patents listed elsewhere are accepted to be inessential.
21. The next issue to be considered affects a different part of the case. InterDigital seek to add new paragraphs 11-13 of their Re-Amended Defence. These paragraphs are as follows:

"11. At all material times, it has been the established practice of the claimant: (a) to notify as "essential IPR" to ETSI ('IPR Declarations'); and (b) to maintain as IPR Declarations patents and patent applications which fall outside the definition of 'Essential IPR' (as defined in paragraph 4(iii) of the Re-Amended Particulars of (Claim).

12. Further, or in the alternative, at all material times the claimant has been unable to confirm that the patents and/or patent applications that it has declared to ETSI actually fall within the definition of 'Essential IPR' (as defined in paragraph 4(iii) of the Re-Amended Particulars of Claim).

13. Without prejudice to the generality of the foregoing, the defendant relies upon:

(i) The research conducted by Goodman and Myers and published in a paper entitled '3G Cellar Standards and 'Patents';

(ii) The statements made in Mr. Harri Honkasalo's second witness statement in this action and, in particular, paragraphs 8-12 therein, and.

(iii) The statements made by the claimant's counsel, Mr. Henderson, QC, to the Court of Appeal on 24th May 2006. A copy of the relevant extract of the transcript of that hearing is annexed hereto as Annex 1."

22. It will be observed that it is not alleged that the notifications complained of by InterDigital were made deliberately or recklessly by Nokia. No element of intention therefore arises to be considered. It seems that the facts set out in paragraphs 11-13 are relied on as being grounds which should affect the exercise of the court's discretion in making the declaration sought. The basis for this approach to the exercise of the discretion is said to be the decision of the Court of Appeal in Messier -- Dowty v Sabena [2001] 1 All ER 275, where Lord Woolf, The Master of the Rolls, with whom Lord Mustill and Lady Justice Hale agreed, said this of the use of negative declarations in both domestic and transnational litigation:

"36. ....I can see no valid reason for taking an adverse view of negative declaratory relief. This is whether it is claimed in relation to transnational disputes or domestic litigation. In this respect I would treat with reservation the observations of Kerr LJ in First National Bank of Boston v. Union bank of Switzerland [1990] Lloyd's Rep 32, at 39 and in ... (reads to the words) ... [1988] 2 Lloyd's Rep 361, at 391. The use of negative declarations domestically has expanded over recent years. In the appropriate cases their use can be valuable and constructive."

23. Then in paragraph 39, after referring to such well-known authorities as re Clay [1919] 1 Ch 66, Lord Woolf continues:

"As against these authorities there are the numerous cases where without objection negative declarations have been granted. There are also the judgments of Lord Denning MR in this court and Lord Wilberforce in the House of Lords ... (reads to the words) ... and [1976] 2 Lloyd's report 10. Lord Denning said: 'It has been said that a declaration as to non -- liability ought very rarely to be made, see Dyson v Attorney-General and Guaranty Trust Company of New York v Hannary & Company And re Clay is sometimes cited for the proposition that it cannot be made. But it is nothing of the kind. In modern times, I think that a declaration as to non-liability can be made whenever it will serve a useful purpose. I would not limit it in any way.'

40. In the House of Lords in [1976] 2 Lloyd's Rep, 10 at 14) Lord Wilberforce stated the position in his own words but the effect was very much the same. He said:

'The declaration claimed is of a negative character and as Lord Sterndale himself had said: "....a declaration that a person is not liable in an existing or possible action is one that will hardly ever be made."

'Hardly ever' is not the same as 'never' but the words warn us that we must apply some careful scrutiny. So I inquire whether to grant such a negative declaration would be useful. The liability which the English Court is asked to negative is any possible liability of the respondents on the basis of agency.

41. Lord Wilberforce and Lord Denning differed in the circumstances of that case as to whether the declaration would serve a useful purpose. However, if it would, that it would then be appropriate to grant a declaration was agreed. The approach is pragmatic. It is not a matter of jurisdiction. It is a matter of discretion. The deployment of negative declarations should be scrutinised and their use rejected where it would serve no useful purpose. However, where a negative declaration would help to ensure that the aims of justice were achieved the courts should not be reluctant to grant such declarations. They can and do assist in achieving justice. For example where a patient is not in a position to consent to medical treatment declarations have an important role to play. Without the use of negative declarations, recent extensions in the use of declaratory relief, including the beneficial intervention of the courts in cases concerning mentally incapacitated people would not have been possible. As Sir Thomas Bingham MR said in Re S....'any statutory rule, unless framed in terms so wide as to give the court an almost unlimited discretion, would be bound to impose an element of inflexibility which would in my view be wholly undesirable.' He considered that the different situation he was there considering was pre-eminently an area in which the common law should respond to social needs.' So in my judgment the development of the use of declaratory relief in relation to commercial disputes should not be constrained by artificial limits wrongly related to jurisdiction. It should instead be kept within proper bounds by the exercise of the court's discretion.

42. While negative declarations can perform a positive role, they are an unusual remedy in so far as they reverse the more usual roles of the parties. The natural defendant becomes the claimant and vice versa. This can result in procedural complications and possible injustice to an unwilling 'defendant'. This in itself justifies caution in extending the circumstances where negative declarations are granted, but, subject to the exercise of appropriate circumspection, there should be no reluctance to there being granted when it is useful to do so."

24. In my judgment, in this passage the Court of Appeal is contemplating that the relevant discretionary factors over and above the discretionary factors which always relate to declaratory relief are those which affect the utility of the negative declaration sought. Of course, the kind of negative declaration sought in that case related directly to liability, whereas the declaration sought in the present case does not, but I see no reason to suppose that utility is not one of the factors that will affect the court if one or more of the patents in suit are not essential to compliance with the 3GPP standards. So, too, might deliberate or reckless over-notification by Nokia. If Nokia were shown to have deliberately or recklessly over-notified, it might no doubt be submitted with force that it should not benefit from declarations made in respect of a system which it had itself abused.
25. Paragraphs 11-13, though, do not go this far. The allegation is one of over-notifying alone. Can this be enough to affect the exercise of the discretion? Initially InterDigital had alleged that over-notification was an industry-wide practice but this allegation has now been removed by amendment. I do not at present see why, absent any element of deliberation or recklessness, either the fact that Nokia over-notifies or that the industry over-notifies is relevant.
26. One would hope - perhaps a pious hope - that where a licensor becomes aware of notified patents which are not essential it will seek to draw industry's attention to that fact, and I think it must be assumed that when any patent's essentiality is disputed it is disputed in good faith. In such circumstances, I do not think that paragraphs 11-13 raise matters relevant to the discretion to grant or refuse a declaration and the amendment must to that extent be refused.
27. The final issue which I must decide is concerned not with the proposed amendment to the defence but to Nokia's request for further information in respect of InterDigital's amended statement of case on infringement. This document is responsive to Nokia's particulars of its case on non-essentiality - a very substantial document served as long ago as 22nd February 2006. Nokia's contentions are generally advanced in this document according to a scheme that can be seen in a typical entry such as, for example, that for EP 0515624, which is to be found on page 5 of the document itself.
28. The standard in respect of which it is assumed that the patent was notified as essential is identified. The basic scheme of the patent is summarised and a summary statement as to why it is that the patent is not essential is then set out. A table of all the features of the independent claims is provided, prefaced by the words "therefore the standard does not require", followed by a list of the non-required features of the claims.
29. InterDigital's reply to this was provided pursuant to an order of 12th April 2006, which was as follows:

"9. The defendant must by 4 p.m. on 3rd June 2006, serve a Notice setting out, for each of the patents-in-suit said by the defendant in its response to the claimant's Part 18 Request dated 1st November 2005 to be essential to the FDD mode of operations set out in the 3GPP's standard TS21.101 Release 5:

(a) which claim or claims of each patent are said to be Essential ('the Essential Claims');

(b) the reference number of the technical specification(s) to which each Essential Claim is said to be essential; and.

(c) the version(s) of the technical specification(s) to which each Essential Claim is said to be essential.

10. The defendant must by 4 p.m. on 5th July 2006, serve a statement of case, setting out:

(a) for each Essential Claim, the full facts and matters relied upon in support of the allegation that the claim is essential to Release 5; and.

(b) whether the defendant contends that any claim of any patent in suit (other than the Essential Claims), are said to be essential to the FDD mode of operation as set out in Release 6 of the 3GPP standard TS21.101."

30. I believe I have always thought that if InterDigital intended to make an allegation of essentiality they would do so and relate the features of the claim identified by Nokia as inessential to the requirements of the standard. This InterDigital did not do, as may be seen from their reply, and again it is helpful to look at the reply in relation to the '624 patent on page 3. It was Nokia's intention to amend their statement of case to take account of anything InterDigital said. In particular, this would make sense in respect of standards that had been misidentified. Whatever the reason, Nokia have not amended and after a very considerable delay have requested the further information with which I am asked to deal. What Nokia are now asking for is to be exemplified by the request in respect again of the '624 patent.
31. Again, a table of the features of the claim is set out and InterDigital are asked to identify which of the independent claims is or are said to be essential on Nokia's definition and, two, to identify all matter contained in the standard which InterDigital rely upon in relation to each feature of the claim.
32. InterDigital says that this is a crude attempt to reverse the burden of proof since it requires InterDigital to make a case for essentiality. It says that it is obliged only to meet Nokia's case which is advanced, as I have shown above, on the footing that the features of the claim are missing because the standard does not require the patented apparatus or method. Thus, it says, Nokia's case is answered by identifying a requirement for such apparatus or method in the standard, even if that requirement can be met without use of the patented invention. Nokia's lists of features of the claim are, on this view, just so much waste paper.
33. At the hearing of this application I considered that InterDigital's approach to these pleadings was merely obstructive and I expressed myself strongly to this effect to Mr. Watson, who stood his ground. I now think I was wrong to take this view, or at least wrong to criticise it so strongly. I had intended that the order of 12th April 2006 would have the effect of requiring InterDigital to respond to both aspects of Nokia's case, both the essentiality of the apparatus or method and the lack of any need for the features of the claim identified by Nokia.
34. Mr. Watson has satisfied me very much against my initial impression that this result has not been achieved, mainly, I think, as a result of the use of the word "therefore" in the Nokia pleading, coupled with the failure of the order to impose any obligation to deal with the individual features of the claims; in fact, the order tried to do too much. It might be better to require Nokia to plead expressly to InterDigital's contention that such-and-such an apparatus or method was essential and require InterDigital to plead an answer to that, including the case, if any, that it wished to advance on the footing that Nokia was correct about the requirements of the standard.
35. There is force in Mr. Thorley's submission that all this would be gone into in the preparation of the experts' reports, but it would be possible on these pleadings to find InterDigital with a strong submission at trial that no analysis of the patents was necessary having regard to the way in which Nokia's case had been advanced in its statement of case. In principle, it seems to me important to know whether Nokia has any case on the assumption that InterDigital's contentions in its statement of case as to the relevant contents of the standard are correct and to know what InterDigital has to say if Nokia is correct.
36. I should add that I am unwilling to be guided by the suggestion that this work cannot be done comparatively rapidly in respect of the 12 patents currently in contention. I find it difficult to believe that InterDigital, in particular, does not know how it says features of its claims match up to the standard if only in general terms. I will hear counsel on the best way forward in the light of this judgment.

(See separate transcript for post-judgment discussion)