Nokia OYJ v IPCom GmbH & Co Kg [2013] EWHC 1158 (Ch)

[2013] EWHC 1158 (Ch)

Case No HC10C01233

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 02/05/2013

Before

MR JUSTICE MANN

Between

Nokia OYJClaimant

IPCom GmbH & Co KGDefendant

IPCom GmbH & Co KGClaimant

(1) HTC Europe Co LimitedDefendants

(2) Brightpoint Great Britain LtdDefendant

(3) HTC CorporationDefendant

Adrian Speck QC (instructed by Bird & Bird LLP and SJ Berwin LLP) for Nokia and HTC

James Abrahams (instructed by Bird & Bird LLP) for Nokia

Josh Holmes (instructed by SJ Berwin LLP) for HTC

Mark Vanhegan QC and Kassie Smith (instructed by Bristows LLP) for IPCom

Hearing Hearing dates: 23 rd April 2013

Judgment

Introduction

[1]This is an application by Nokia OYJ, claimant in one of the actions before me, and the HTC defendants (whom I will call simply “HTC”) in the other for the adjournment of a hearing which is currently scheduled for July in which the terms of a FRAND (fair, reasonable, and non-discriminatory) licence are to be determined and, in the case of the Nokia action, at which there is to be an inquiry as to damages. The background to the application is somewhat complex, and one of the sources of difficulty in this case is the interaction between English and European patent dispute tribunals. The two actions before me are two of the actions in the series of mobile phone patent cases which is currently before a number of courts.

Background

[2]The patent in suit in these two cases is one which concerns a method of controlling access to a random access channel in mobile phones. The standard for the UMTS phone system requires that some classes of device must take part in a “lottery” to see if they are allowed access to the channel. Other classes of phone do not have to participate in this lottery. The lottery is conducted by the phone networks sending out a value, and a random number generator in a telephone generating a value to see whether it falls within the value specified by the network transmission. The claim refers to “access authorisation data”, which is the threshold value used to determine access and “access class bits” which determines which classes of device must take part in the lottery and which may simply access the channel without doing so (for example, phones of the emergency services might be allowed to fall into the latter category). That will suffice as a general description of the area of the patent. For further details the prior judgment of Floyd J at

[2011] EWHC 1470 (Pat)

should be read.

[3]IPCom GmbH & Co KG (“IPCom”) own the patent in suit, having previously acquired it from Bosch. On 9th April 2010 Nokia commenced proceedings for revocation of the patent and IPCom counterclaimed for infringement. The patent in suit is (or is accepted by IPCom to be) essential to the standards for operating the UMTS system, and under European arrangements IPCom (like other patentees of essential patents) is under an obligation to offer a licence on FRAND terms to those who wish to have such a licence. On 7th July 2010 an order was made separating questions of technical validity and infringement on the one hand from consequential matters such as the assessment of damages for infringement (if found) and an inquiry as to FRAND terms on the other.

[4]On 16th June 2011 Floyd J held the patent to be valid in an amended form, and infringed by Nokia in relation to certain devices but not infringed in relation to certain other hypothetical devices postulated by Nokia. In a hearing of consequential matters on 8th July 2011, Floyd J ordered the trial of the FRAND issues and gave directions in relation to the inquiries to damages which followed from his finding of infringement. He also determined that the patent in suit in its amended form was “essential” to the UMTS Standard. Meanwhile, on 17th June, IPCom had issued proceedings for infringement against HTC, and in due course in those proceedings HTC made its own revocation claim.

[5]Parallel proceedings were taking place in Europe. On 25th April 2012 the EPO Opposition Division decided that the patent was invalid for added matter (it did not consider other matters). IPCom appealed that decision to the EPO Technical Board of Appeal (“TBA”).

[6]On 10th May 2012 the Court of Appeal in this jurisdiction upheld the order of Floyd J that the patent in its amended form was valid and infringed. Nokia sought permission to appeal to the Supreme Court but was refused permission by the Court of Appeal. In due course it renewed its application to the Supreme Court. The next day (11th May) HTC applied to stay all aspects of the HTC proceedings “until the TBA hands down its written decision on the appeal…” In the Nokia proceedings, IPCom made an application for judgment and/or strike out in relation to certain other defences not ruled on by Floyd J. IPCom also sought a permanent injunction based on the infringement which had been found.

[7]That sets the scene for what then happened at a hearing before Roth J on 18th May. To summarise: in England, the patent had been held to be valid and infringed up to the level of the Court of Appeal. In Europe the patent had been revoked, but subject to an extant appeal to the TBA. The patent had been found by Floyd J to be “essential”, and that finding was not challenged. In the light of that finding by Floyd J, IPCom could be obliged to grant a licence to Nokia (if Nokia wished to take one).

[8]When the matter was open before Roth J discussions turned away from the question of injunctions and towards the question of licences (not least because it seems that Nokia was alleging that it already had one). IPCom confirmed its willingness to grant a licence, and Nokia confirmed to Roth J that it was prepared to take one. The result of debate and discussion was an order made by Roth J in the following terms:

“UPON hearing Counsel for the Defendant (“IPCom”) and Counsel for the Claimant (“Nokia”) AND UPON IPCom undertaking to the Court that it will grant Nokia a licence of patent EP(UK)1 841 268 (“the Patent”) on terms determined by the Court, or agreed between the parties to be fair, reasonable and non-discriminatory (“FRAND”) AND UPON Nokia undertaking to the Court that, as stated at paragraph 10 of its Reply and Defence to Counterclaim dated 21 July 2010 it will take a licence of the Patent on terms determined by the Court, or agreed between the parties, to be FRAND, subject only to the Patent not being found prior to determination by the Court of FRAND terms to be invalid either upon any further appeal from the judgment of the Court of Appeal dated 10 May 2012 in this action or by the European Patent Office Technical Board of Appeal and without prejudice to the effect of any such invalidity upon any such licence on and from the date upon which any such invalidity is determined, AND UPON the parties agreeing that the entering into of a licence pursuant to the undertakings above is without prejudice to each party’s right to appeal against the order of the High Court assessing FRAND terms and to seek to have those terms varied on appeal, AND UPON Nokia undertaking to the Court to give IPCom 2 months’ written notice prior to any intended use of the Patent in the United Kingdom, AND UPON the parties agreeing that there should be no stay of these proceedings pending the outcome of European Patent Office opposition proceedings concerning EP 1 841 268 AND UPON the Court giving directions as set out in this order for a trial of the royalty payable by Nokia to IPCom in the licence to be taken by Nokia and, if necessary, of the other terms of that licence, and of the damages payable by Nokia in respect of past infringements…” and the order went on to give directions for statements of case and the like with, at paragraph 14: “14. A trial for the determination of FRAND terms for a licence of the Patent to be granted by IPCom to Nokia be listed with a duration of 10 days to commence on the first available date between 4 June and 17 July 2013”

. Thus was the timetable set for the determination of a FRAND inquiry. Although the body of the order does not refer to any inquiry as to damages flowing from infringement, it was common ground before me that the timetabling was also to apply to such an inquiry, and that that inquiry was to take place at the same time as the FRAND inquiry. In other words, the same hearing was to deal with both. This is sensible and not surprising – it was common ground that the principal method of determining damages for infringement would be to determine them on a royalty basis, bringing in much the same sort of factors as would operate on the FRAND inquiry (Nokia would say that the royalty should be determined to be the same under both).

[9]It will be remembered that HTC had sought a stay of its proceedings pending the outcome of the TBA appeal. HTC was very concerned that the terms of any FRAND licence ruled on by the Court in July 2013 would impact on the terms of any FRAND licence that it might itself need to take in due course. It was anxious to participate in the hearing. Its application for a stay of the English proceedings, together with an application by IPCom for directions on matters concerning “a non-technical trial on relief”, came before Roth J and he made a further order in the HTC proceedings on 30th May (wrongly recorded as being made on 10th August 2012, which was the date of sealing), which brought about the stay and mirrored certain important aspects of the Nokia order of 18th May. Notwithstanding that HTC had not yet had its trial on revocation and infringement, HTC was prepared to undertake to take a FRAND licence. That enabled it to participate in the FRAND inquiry. On 30th May 2012 the order of Roth J read:

“[Upon the two applications referred to above] “AND UPON the Claimant undertaking to the Court that it will grant HTC Corporation a licence of the EP (UK) 1 841 268 [sic] (“The Patent”) on terms determined by the Court or agreed between the parties, to be fair, reasonable and non-discriminatory (“FRAND”) “AND UPON HTC Corporation undertaking to the Court that it will take a licence of the Patent on terms determined by the Court, or agreed between the parties, to be FRAND in respect of sales by HTC Corporation of devices that use the Patent from the date of such licence, subject only to the Patent not being found prior to determination by the Court of FRAND terms to be invalid either in these proceedings or by the European Patent Office Technical Board of Appeal, and without prejudice to the effect of any invalidity upon any such licence on and from the date upon which any such invalidity is determined AND UPON the parties agreeing that the entering into of a licence pursuant to the undertakings above is without prejudice to each party’s right to appeal against the order of the High Court setting FRAND terms and to seek to have those terms varied on appeal AND UPON HTC Corporation undertaking to the Court and the Claimant that all of the devices in HTC’s current and future ranges imported into the United Kingdom from the date of this Order will only use one of the approved work-arounds for the purpose of Random Access Channel (RACH) access, i.e. one of the variants in respect of which Floyd J granted a declaration of non-infringement in his judgment of 16 June 2011… AND UPON HTC Corporation undertaking to give the Claimant 2 months’ written notice prior to any intended use of the Patent in the United Kingdom…”

The order then went on to give directions, including a direction that the technical issues (infringement, validity and technical essentiality) would be heard separately from the remaining (non-technical) issues, and it made a direction that FRAND issues would be determined first by the Court. All issues except for the FRAND issues (the determination of FRAND terms) were stayed pending the TBA’s written decision (save for the provision of a PPD) and directions were given with the effect that the FRAND issues in this litigation were to be determined at the same time as the FRAND issues in the Nokia litigation.

[10]On 15th November 2012 the Supreme Court dealt with an application by Nokia to appeal the decision on validity and infringement in this case. Permission to appeal on validity (added matter) was refused. On what was described as the revocation issue it adjourned an application for permission to appeal in respect of the order that there be an inquiry as to damages for infringement pending the determination of the appeal in the TBA and the determination of the fate of another appeal pending in the Supreme Court which was capable of raising similar issues (as to which see below).

[11]Negotiations to settle this case then started, and on 16th January 2013 IPCom and Nokia agreed a four-week stay of the proceedings to facilitate a global settlement of mobile telecoms patent litigation. Some sort of agreement in principle was reached, but it is not asserted that a final binding agreement was reached. When there was no agreement by the end of the stay the parties agreed a further two-week stay. The period of agreed stays expired on 22nd February 2013 without any binding agreement. The evidence of Nokia is that they remained content to finalise the agreement reached in principle, but IPCom was dragging its heels on that. I do not need to go into the question of what gloss should be put on the facts relating to this agreement. The agreement in principle is relevant only because Nokia did not fully revive its efforts to get ready for the FRAND/damages inquiry once the stay period had expired because it thought there was still mileage in the negotiation even though there was no longer any formal stay. Now that it appears that the negotiation has ground to a halt, Nokia claims to have been disadvantaged because it was not preparing during the post-stay period and will find it hard to get itself into the same state of preparedness as it would have been in had it started work again immediately on 22nd February.

[12]On 7th March 2013 the TBA orally pronounced its decision on the appeal in the EPO proceedings. It indicated that it would not follow the full scope of the revocation ordered by the Opposition Division and rejected the added matter as an irremovable blot on the validity of the Patent. However, it did indicate that the patent could survive only in an amended form. There is a dispute as to what precisely then happened at that hearing. It is said that IPCom proposed various amendments to the claim in the patent in order to address certain adverse views of the TBA and after some of them were apparently rejected the TBA received and accepted one last amendment to the claim and remitted consideration of the validity of the patent thus amended to the Opposition Division so that it could consider other attacks on the patent (which had not hitherto been dealt with). The written determination of the TBA is still awaited.

[13]As a result of this it is now apparent that the patent will not survive in the form ruled on by Floyd J. It cannot be ruled out that, when the matter goes back to the Opposition Division, it will emerge in a yet different form (if at all). Faced with this situation, Nokia and HTC make their present application. It is based both on the result of the TBA hearing and on other more extraneous matters.

Nokia’s and HTC’s case for the adjournment

[14]Nokia and HTC rely on the following factors as requiring an adjournment.

[15]Uncertainty introduced by the TBA decision. It is said that there is now no purpose in conducting the FRAND inquiry because that inquiry can take place only in relation to the form of patent ruled on by Floyd J (“the Floyd form”), and that patent no longer survives as a result of the TBA decision. Their skeleton argument says that there is therefore no need for HTC or Nokia to take a licence for future use of a patent in that form. Furthermore, there is no finding of essentiality in relation to what I will call the TBA form (because the previous finding was in relation to the Floyd form only), and no finding of infringement either. In the absence of such a finding there is no need to take a licence, and the licence only applies to patents which are essential to the standard. Since it would make no sense to have the FRAND inquiry on the basis of the Floyd form, it would have to be on the basis of some other form. One can only have a meaningful inquiry if one knows the form of patent one is talking about, because the scope of the patent, and its technical contribution, is capable of affecting the royalty payable. If the FRAND inquiry considers a licence in the TBA form (which a large part of Mr Speck’s submissions pre-supposed it would), there are major uncertainties about all that in this case. The meaning of the amended claim, and its scope, are not all immediately apparent. This means that there is a serious risk that either the FRAND trial would not be useful, or even that it would not (in practical terms) be possible.

[16]Disadvantage through delay in preparation due to the negotiation process. After the formal stay came to an end, Nokia considered that there remained an informal stay for another two or three weeks. As a result of that period, and the preceding formalised stay, it said it has not been preparing for the FRAND trial, or at least not in the way it would otherwise have been preparing. The result of those combined periods is said to be that Nokia would not arrive at the currently fixed FRAND trial in the same state of readiness as it would have been in had those delays not occurred. That, it is said, introduces a degree of unfairness which supports the case for an adjournment, though it is not put forward as a primary reason (it comes under the heading of “Other considerations” in the skeleton argument).

[17]The damages inquiry and the Unilin point. There has been a finding of infringement in relation to the Floyd form. That gives rise to a claim for damages. On the law as it stands the amendment of the patent in the European proceedings, and indeed its ultimate revocation (if that were to happen) would not affect the liability to pay damages for infringement up to the date of the change of form (Unilin Beheer BV v Berry Floor NV

[2007] FSR 25

). This point is subject to a pending appeal to the Supreme Court in Virgin Atlantic Airways v Contour, apparently to be heard shortly. That seems to be why the Supreme Court adjourned Nokia’s application for permission to appeal on what it described as revocation. As appears above, at the same time the Supreme Court invited consideration of a stay of the inquiry as to damages in the present case. The parties did not pursue that suggestion because at that date the FRAND inquiry was going ahead and the inquiry as to damages was closely connected with it. However, if the FRAND inquiry goes then Nokia submits that it would be appropriate to stay the inquiry as to damages until the outcome of the Virgin case is known. They say it would make no sense to have an inquiry as to damages which might never be payable. In the interim, and to make sure that IPCom is not prejudiced by a delay in assessing damages (should such an assessment be required after the Supreme Court decision) Nokia has offered to make an interim payment in excess of what it says is the full amount claimed by IPCom – it offers €1m.

[18]The amount of potentially wasted costs. Nokia and HTC point to the amount of costs that could potentially be wasted if a pointless FRAND inquiry and inquiry as to damages were to take place. Nokia estimates that its costs of preparing for trial for the period from here to the trial would be between £2m and £2.5m. HTC estimates that its future costs would be about £1.5m. They assume that IPCom’s costs would be similar. These, it is said, are significant costs whose waste should not be risked.

The Orange Bookcase

[19]As a subsidiary point, HTC and Nokia rely on an outstanding reference to the CJEU in a German case which they call Orange Book. IPCom has pleaded that the other side’s conduct in negotiations is a “potentially relevant” factor in the determination of the terms of a FRAND licence. In the Orange Book case the German court has referred some questions which, it is said, are capable of going to the point which IPCom has raised. An adjournment would give a chance to find out the answers to those questions, and those answers might have a bearing on the FRAND inquiry.

[20]Does the undertaking still apply? This is a point which emerged during the course of the hearing. At the opening of the hearing the assumption behind Mr Speck’s submissions on behalf of Nokia and HTC were that the FRAND inquiry would take place either in relation to the patent in the Floyd form (which was said to be pointless) or in relation to the patent in the TBA form (which might be pointless for a number of reasons, and would be difficult or impossible because of current uncertainties as to its scope and essentiality). As a result of further debate, Mr Speck took the point that the “Patent” referred to in the relevant undertaking in the order means the Patent in Floyd form. He submitted that as a result of the TBA decision, that patent has been found to be “invalid” within the terms of the undertaking so that Nokia’s undertaking no longer applies and it is neither necessary nor appropriate to have the FRAND inquiry.

IPCom’s case for opposing the adjournment

[21]IPCom opposes the adjournment for the following reasons.

[22]No basis for departing from the previous order. For IPCom, Mr Vanhegan submits that the parties submitted themselves to a regime under an interim order and Nokia and HTC were in reality seeking to vary undertakings given to the court (and, in the case of HTC, given by consent). That would require a change of circumstances and there has been no material change of circumstances for reasons which appear below. He drew attention to Chanel v Woolworth

[1981] 1WLR 485

and Beloit v Valmet

[1996] FSR 718

[23]The principal change of circumstance on which HTC and Nokia might be said to rely would be the TBA decision. That is not material, not least because it was within a range of possibilities that the parties (and particularly Nokia and HTC) had in mind when the order was made and when they gave their undertakings. Both the Nokia and the HTC orders plainly contemplated the possibility of the patent being held to be invalid in due course, but nonetheless they agreed to take a FRAND licence. If the patent had been declared invalid before the FRAND inquiry then there would have been no inquiry. If there had been no determination before the inquiry then all parties accepted the risk that there might be a determination of invalidity thereafter, and that fact did not deter both sides from giving undertakings. Furthermore, in the case of HTC, there is express reference to amendment by HTC’s counsel (Mr Speck) at the hearing of HTC’s application for a stay of its proceedings and at which the consent order for the FRAND inquiry was made. At page 37 of the transcript Mr Speck is clearly shown as drawing the attention of the judge (Roth J) to the fact that in EPO opposition proceedings a patentee often puts forward alternative claims. Those claims would be ruled on. All that has happened is that that particular possibility has been shown to be a reality in this case, but that does not make it a material change in circumstances, because it was always on the cards.This position is even starker in relation to HTC, because they agreed to a FRAND inquiry before any technical issues relating to validity or infringement have been decided.

[24]There remains some point in the FRAND inquiry. Mr Vanhegan accepted that the “Patent” which is the subject of the undertakings given by Nokia and HTC is a patent in the Floyd form. The FRAND inquiry would therefore take place to establish the appropriate terms of a licence under that patent, notwithstanding the fact that it was inevitable that, looking forwards, a patent in those terms would never be one which had effect. He said that that was sensible, workable and had useful effects because: a) The undertaking given by IPCom would apply to a patent in that form and to all amended forms. His clients stood by that undertaking. They regarded that patent and any subsequent amended patent as being “essential” for the purposes of the standard. b) A licence given under the patent in Floyd form would be good for any subsequent variations. c) A decision on that licence would be likely to promote a worldwide settlement of extensive litigation in which IPCom and others have been involved. There has as yet been no FRAND determination which would be capable of setting some sort of useful baseline or precedent for future negotiations. The result of the FRAND inquiry could set some principles in motion and promote a wider settlement. If there were a more global settlement arising out of the exercise then that would work to the benefit of all the parties to that litigation (which goes beyond the parties to the cases before me) and would prevent these courts (and others) having to devote a considerable amount of time to hearing disputes. (Within the last six weeks or so Nokia have issued five further sets of revocation proceedings).

[25]The need to consider technical considerations has been seriously overstated. IPCom dispute the assertion that it will be difficult if not impossible to have a sensible debate about technical contribution and its worth for licensing purposes. He points to Nokia’s case documents as submitted in the FRAND licence inquiry and points out that only one ground (with another associated one) raises questions of technical contributions, and one can see that the point does not turn on the detailed wording of the claim in Floyd form. That means that the FRAND determination can take place on a licence relating to that form, and the fact that there may be further amendments to the claims does not, for these purposes, materially change the nature of the invention.

[26]Nokia is now seeking to resile from its agreement not to seek a stay of the English proceedings pending determination of the European proceedings. Mr Vanhegan pointed to the agreement, recorded in the order, that Nokia would not seek a stay of the English proceedings. He submits that that is now precisely what they are doing. He also pointed to the transcript of the hearing before Roth J (at pages 30 and 31) in which counsel for Nokia was recorded as stating firmly that Nokia would not want a stay.

[27]Prejudice to IPCom. Mr Vanhegan says that an adjournment of the FRAND inquiry, as sought by Nokia and HTC, would cause serious prejudice to IPCom. The adjournment is apparently to allow the European proceedings to be determined. That, however, will take two or three years, by the time the matter has gone back to the Opposition Division and then (which is likely) the decision there goes up to the TBA again. It is wrong that IPCom should be kept out of a FRAND inquiry for that period, especially since the parties have agreed (or accepted) hitherto that they should have one. That period is too long, and he pointed out that the patent itself expires in 2020. If, as his clients feared, there were then to be an application to adjourn the HTC technical issues trial (which is to take place in December), and if that application were to be successful, and if matters are then postponed to the end of that trial, then one could add another couple of years to the timetable. All that is unfair on IPCom.

[28]The inquiry as to damages should go ahead in any event. Even if the FRAND inquiry were to be adjourned, it would be right to keep the date for the inquiry as to damages. IPCom has the benefit of an order for an inquiry as to damages which still stands, and even if the FRAND inquiry were to go there is no reason why the inquiry as to damages should go with it. The offer of an interim payment was not a satisfactory way of safeguarding IPCom’s interest because it was hedged around with too many conditions for repayment in various events. Furthermore, that inquiry would do useful work because it would assist in setting FRAND-like terms as the basis of a royalty-based damages calculation, and that, in the present context, is a great benefit. His client should not be deprived of its right to have damages assessed.

[29]Wasted time and costs. If the hearing were adjourned, and resumed at some stage in the future, then there would inevitably be some wasted time and costs because certain work would have to be done over again in order to enable the parties to get themselves up to speed again. There may even be a need to reinstruct experts or engage different experts. He expressed scepticism about the figures put forward by Nokia and HTC as to their costs to be incurred between now and the FRAND inquiry.

[30]The test for adjourning a hearing has not been made out. Mr Vanhegan points to the decision of Coulson J in Elliott Group Ltd v GECC UK

[2010] EWHC 409

at paragraphs 7-9 and says that the conditions there are not fulfilled in this case.

Determination

[31]In reaching a decision on this matter I can leave HTC and its position largely on one side for the moment. It does not have a really independent position. Its position is that it joins with Nokia in saying that there should be no party, but if there is one it still wants to be invited. It does not seek to have its own invitation independently revoked. Furthermore, the terms of its own order are not significantly different from that in the Nokia action. Accordingly, if I decide the fate of Nokia’s application I effectively decide the fate of HTC’s. Accordingly I can focus on Nokia.

[32]It is also appropriate to start with the FRAND inquiry. If that stays where it is then there is no independent application to adjourn the inquiry as to damages.

[33]It is necessary to start by identifying what it really is that I am being asked to do. I am being asked to adjourn an inquiry which is necessary to fulfil undertakings given by both parties. It is not just a case management decision, in which I am being asked to postpone a particular step in an action. The date, as a procedural matter, is a necessary consequence of what the parties have, in effect, agreed via their undertakings to the court. The first, and important, question is what have they actually agreed or undertaken via the order. If they have undertaken, come what may, to have a FRAND inquiry on a patent in the Floyd form, then there might be much to be said for having it now if it has to happen at some stage in the future anyway. So the first question is – have they done that? This raises the point taken by Nokia in the latter part of Mr Speck’s submissions.

[34]It starts with a question of construction, albeit one on which, once identified, there was no material dispute. IPCom accepted that in Nokia’s undertaking the “Patent” was the patent in Floyd form. Mr Speck agreed with that. I think they are both right. The FRAND inquiry has to take place in relation to a proposed licence under a particular IP right. One has to identify the patent in question, and on the true construction of Nokia’s undertaking that can only realistically be the patent in Floyd form. The only alternative candidate would be a patent which is an amended (any amended) version of the Floyd form, but that is not a realistic construction. Nokia cannot be taken to be submitting to a FRAND inquiry on a patent in whatever final form it ended up after a couple of trips through the EPO. Suppose that Nokia did not want such a licence, because of its final form. While it could avoid the consequences of a royalty-based licence by simply not using any of the technology, it would still have had to go through the process of fixing the terms of a licence it did not want. That cannot be what it was undertaking to do. Hence the correctness of the shared position of the parties. Mr Vanhegan said that in IPCom’s own undertaking the “Patent” was the numbered patent in whatever form it finished, but (if it matters, which I do not think it does) I do not think that that is right. The two undertakings match – they are both dealing with the same patent. That must be the Patent in Floyd form.

[35]That conclusion means that some of the original reasoning of Nokia and HTC falls away. So far as Mr Speck’s submissions relied on a need to determine the terms of a licence in the TBA form, without knowing its full effect or its essentiality, then they fail because that would not be the form of the licence under debate in the FRAND inquiry.

[36]One then has to consider Mr Speck’s submission that the determination of the EPO, with the patent surviving only in an amended form, is a determination that it is “invalid” in the proviso (beginning “subject only to …”) in the Nokia order.

[37]It could be said that the technical state of the patent is that it has not (or not yet) been found to be invalid. It was declared to be invalid by the Opposition Division, but there was an appeal which had a suspensory effect on the determination of invalidity. It has now been held not to be irredeemably invalid on the basis of added matter, but it is no longer capable of existing in its Floyd form because of the TBA decision because it has survived only in an amended form. Mr Speck submitted that that made it invalid for the purposes of his undertaking. IPCom does not accept that. The invalidity which the Opposition Division found has been overturned, and the patent survives.

[38]It is correct that the patent has not been found, in terms, to be invalid, so if Mr Speck is correct then it must have been so found in a sense which is less than strict. Its status seems to be that it is still valid, but cannot survive in the Floyd form. Its ultimate fate will not be known until challenges other than added matter have been dealt with by the Opposition Division. It may survive in its TBA form; it may survive in a further amended form; it may be revoked completely. However, one thing is clear. The best that can happen is its survival in the TBA form. The Floyd form does not survive. It seems to me that the best way of testing the construction and effect of the undertakings and the rest of the two orders is to consider what the position would be if that were now known to be the final decision. On that assumption, has the “Patent” been found to be invalid as a result of what has happened in the TBA? Although the TBA has not yet given its decision in writing, its decision is clear enough and no party before me suggested that the position would be any different if the present debate were taking place after the written determination.

[39]At a purely linguistic level, the patent has not been found to be invalid. It still survives. An amended patent is still the same patent, linguistically speaking. In other ways, too, it is the same patent, because of the backdating effect of the amendment. However, these two factors, while relevant, do not necessarily determine the question that I have to decide which is whether “the Patent” has been found “to be invalid” by the TBA within the meaning of the Nokia order.

[40]The internal scheme of the order does not clearly determine the matter. The following points emerge from that scheme:(a) The parties knew that there were still validity questions to be tried, both in the English courts (potentially) and the European courts.

(b) Notwithstanding that point, they were still content to have a FRAND inquiry. That appears from the proviso, and the express agreement not to stay the English proceedings.

(c) It was apparently thought possible that a determination on complete invalidity might be available before the FRAND inquiry took place. If so, then there would be no such inquiry. That much must be read into the word “invalid”.

(d) It was possible that a determination of invalidity might come after the FRAND inquiry. This is catered for by the closing words “without prejudice …”. The consequences of that are not spelled out in the order. Those consequences would be likely to depend on the terms of the licence, which in turn might (on a FRAND basis) be expected to deal expressly with the point.

(e) It is obvious that if there were an inquiry, and the validity were upheld, then the FRAND licence would apply for the duration of the patent (or whatever period it applied to).

[41]In addition to those points the following points arise from the context of the

[42]From all this material one can now understand the terms and purpose of the undertakings. So far as IPCom is concerned, it was prepared to grant a licence. Nokia was prepared to take one, and to undertake to take one, to avoid the injunction which might otherwise have followed from the finding of validity and infringement. The parties were prepared to do this notwithstanding that the European proceedings were still extant and the latest state of play on that was that the Opposition Division had determined the patent to be invalid. However, the matter was still live in the TBA (and potentially in the Supreme Court). It is apparent from the express reference to invalidity that the parties were not intending to create a licence come what may. If the patent were declared invalid (in the TBA or elsewhere) before the inquiry, the undertakings would lapse. The parties obviously thought that in those circumstances there was no point in having an inquiry. The licence would be irrelevant to an invalid patent. However, absent such finding before the inquiry the inquiry would go ahead. It would be conducted with the parties taking the risk that it would turn out to be rendered irrelevant by virtue of a subsequent invalidity decision. The order does not spell out what would happen in that event. The closing words of the order are somewhat elliptical, but it may be that that eventuality could have been dealt with by an express term of the licence. So the basis of the arrangement under the order, was that there would be no inquiry if it had been rendered irrelevant by then (by invalidity) but otherwise there would be one notwithstanding the possibility that it might be rendered irrelevant by a subsequent invalidity finding.

[43]That analysis helps in determining whether the concept of invalidity in the order should be extended to cover what has happened. In my view it should. What has happened is not a clear finding in terms that the patent is invalid, because it is still alive. However, the Floyd form of the patent has, apparently, implicitly been determined to be invalid (for added matter). That is implicit in the TBA decision. It is not a forced construction so to treat it. One is construing an order, with a heavy consensual element, not a statute. The underlying purpose of the order was to produce an inquiry if the result might be relevant, but not to have one if it could be seen it was not. The TBA decision has produced a situation in which the inquiry is irrelevant, in a similar way to that in which it would have been irrelevant had there been a straight finding of invalidity. The FRAND inquiry could only proceed on the footing that the putative licence under consideration was one which permitted use of the invention in the Floyd form of patent. But such a form can never be an effective patent. The final form will at best (from IPCom’s point of view) be the TBA form, could be even narrower i.e. (conceivably) at worst non-existent (if the other attacks on the patent render it invalid). It seems to me that such an inquiry would be as irrelevant as one proceeding after a determination of complete invalidity.

[44]Mr Vanhegan resisted this idea. He said that a licence of the Patent in Floyd form could do useful work because it would cover acts which would otherwise infringe any form narrower than Floyd form, and he pointed to the form of licence which he has pleaded in the FRAND inquiry. I agree that it would be possible to have a form of licence which would have that effect, but his point does not overcome the difficulties about the debate on the rest of the terms. The debate would have to a debate about the terms of a licence to exploit the patent in Floyd terms. For example, the debate would have to be about the royalties applicable to a patent in that form. But what would the point of that be? It is known that such a patent can never be in force. I accept Mr Speck’s submissions that the technological contribution of the patent would be capable of influencing the royalty terms of the licence, so one cannot ascertain the royalties without knowing what that technological contribution is. I accept his submissions that there are serious questions to be decided about the construction and scope of the amended claim which would make a debate about that at the FRAND inquiry very difficult to conduct at present. Decisions about future cut-down forms (which would be relevant if the licence was to govern all future forms) would be impossible. There is no point in assuming the technological contribution of the Floyd form of patent in the events which have happened, and it is unrealistic to assume any other. Therefore Mr Vanhegan’s approach does not work.

[45]There are other reasons for construing “invalid” to cover the present circumstances. The order proceeded from a finding of infringement. The licence would protect against the consequences of that infringement. But it is no longer clear that Nokia will have infringed the final form of patent, not least because it is not known what that form is. If it be said that Nokia infringes the TBA form, then the appropriate riposte is that that has not been determined.

[46]Mr Speck made a similar point about essentiality. He said that the Floyd form had been found to be essential (which it had) and that the TBA form (and a fortiori any other future form) had not, so again the basis of the original inquiry arrangements had gone. I do not consider that this argument works for him in the same way. Its factual basis is true, but it does not make the inquiry as inappropriate as the lack of a finding of infringement. Essentiality is not something that triggers the commercial need for Nokia to take a licence (unlike infringement). It triggers IPCom’s obligation to grant one, which is different. The point does not work in Nokia’s favour.

[47]I have borne in mind the fact that the possibility of amendment was something that was in the minds of both parties before the order was made. It might be said that if they were aware of that then that lends weight to “invalid” meaning “totally invalid”, and excluding the sort of situation which has currently arisen. I agree that there is a point there, but I do not think that it is strong enough to outweigh the other factors which point in favour of “invalid” having the meaning that I have attributed to it.

[48]For these reasons I find that what has happened is a determination of invalidity for the purposes of the inquiry. That is not only a finding which makes the order work. It is also a finding that coincides with common sense in terms of the practicalities of the situation. IPCom wishes to spend 15 days of court time, at a combined cost of £4m-£5m (or more) having an inquiry about a licence under a patent which in reality no longer exists, and can never exist, in the form which would be the subject of the inquiry. That would be, to say the least, an odd state of affairs. The parties did, of course, obtain an order and give undertakings which presupposed a possible state of affairs of there being an inquiry which would subsequently be rendered irrelevant, but there was at least a possibility of the patent in Floyd form being upheld and found to be valid at the end of the day. That possibility has now been removed.

[49]This conclusion means that it is not necessary to consider matters of change of circumstance raised and dealt with by both parties and which were held to justify (or to be insufficient to justify) an adjournment. This is not a matter where an adjournment is justified by a change of circumstances. It is one where an adjournment is justified because the legal basis on which an inquiry was ordered has gone. I will merely make the following observations on a couple of the points raised:(a) The extent to which Nokia is now said to be behind in its preparation as a result of the stay for negotiations was not a matter which impressed me. Nokia does not say it cannot be ready; it says that it would not be able to approach the inquiry in the same state of readiness as it would have been in had there been no stay (and further period of inaction). That would not be enough to justify an adjournment, and in any event I am very sceptical as to whether any shortfall in readiness would really be material.

(b) IPCom’s desire to have a hearing which might promote settlement of the raft of mobile phone litigation was not a very weighty factor either. It would only have settled one case, in one jurisdiction. Nokia (plausibly) made it clear that it would not have induced them not to challenge other patents that seemed challengeable. And if IPCom were that keen to promote a global settlement, they had their chance at the beginning of the year to engage in that sort of activity, and it has (at least so far) come to nothing. The evidence that I have seen suggested that the delays have come from the IPCom side, but I accept that the details of who was delaying what and why were not gone into fully in the evidence before me, and there may be other views of the negotiation.

(c) Reliance on the desirability of waiting for an CJEU ruling in the Orange Book case seemed to me to be highly questionable.

The HTC inquiry

[50]The wording of the undertakings in the HTC action is for material purposes the same as that in Nokia. Accordingly, its inquiry should also be adjourned because the relevant Patent has been found to be “invalid”. Furthermore the reason for bringing on HTC’s FRAND inquiry before a finding on validity and infringement has now gone. HTC applied to join in an inquiry in which they were interested but which had not otherwise arisen in its litigation. Had it not been for the Nokia FRAND inquiry it would not have sought and agreed its order. Now that the Nokia inquiry has gone, the main reason for the otherwise premature HTC inquiry has gone.

[51]In those circumstances that inquiry, too, falls to be adjourned.

The inquiry as to damages in the Nokia action

[52]Now that the Nokia inquiry has been adjourned, it becomes necessary to consider the fate of the inquiry as to damages. It will be recalled that the basis of this damages claim is the subject of a stayed application to appeal to the Supreme Court, pending the determination of another appeal which it is thought will deal with the point in Nokia’s appeal. The Supreme Court invited this court to consider staying the inquiry pending those two appeals.

[53]What the Supreme Court did not know when it made its invitation was that many if not most of the issues arising on the inquiry as to damages would arise in the parallel FRAND inquiry. The parties knew this, however, and since the FRAND inquiry was then going ahead the parties did not seek to stay the inquiry as to damages. The latter naturally went with the former.

[54]That position has now changed. The Nokia inquiry will no longer take place in relation to the patent in Floyd form. That means that the damages inquiry has the potential to have a separate life in that it will, if at all, relate to a patent in that form. However, it also means that the desirability of pursuing that inquiry now, ahead of a decision on whether damages are recoverable at all (the Unilin point), has to be considered afresh. In my view that inquiry should now be adjourned to await the decision of the Supreme Court in Virgin. The inquiry would attract much if not most of the expense and cost of the FRAND inquiry, and it is not a cost-effective way of conducting proceedings to proceed to that inquiry when it might become otiose. The sensible and correct thing to do with that inquiry is to stay it pending the decision in the Virgin case with permission to restore it once the result of that decision is known. The correctness of that course is reinforced by the offer of Nokia to pay a sum (€1m) by way of interim payment in that inquiry. IPCom’s complaints about its terms are misplaced, but if it does not want the money it does not have to accept it.

Conclusion

[55]I shall therefore adjourn both the FRAND inquiries generally, and adjourn the damages inquiry generally with liberty to restore.

order

(a) The order was arrived at at a hearing which had been convened to consider, inter alia, injunctive relief.

(b) That hearing took place on the basis of Floyd J’s order holding the patent in its then form to be valid and infringed.

(d) The patent in Floyd form had been held to be essential to the standard.

(e) European proceedings were still extant, as was (at the time) a potential appeal to the Supreme Court.

(f) The parties would have known that amendments were possible in the EPO proceedings, but would not have been able to anticipate what those amendments would be.