In the latest twist to the ongoing litigation between TQ Delta and ZyKEL the Court of Appeal has agreed to stop the RAND trial due to start in September, following ZyKEL's waiver of their right to a RAND licence.
In our blog of 3 April 2019 we commented on the decision of the now very sadly and recently deceased Carr J in the case of TQ Delta LLC v ZyXEL Communications Ltd. In that decision, Carr J had held that one of two standard essential patents (SEPs) in dispute was valid and infringed - that patent had three months to run before it expired. ZyXEL evidently thought they would take their chances on an injunction restraining their activities for that three month period rather than face the risk of a RAND licence on global terms (following Unwired Planet v Huawei - see our November 2018 blog) and waived their right to a RAND licence. An injunction was duly ordered.
As is common practice in England & Wales for patent disputes relating to SEP patents, this trial on validity and infringement was to be followed (six months' later) by a separate RAND trial. As ZyXEL already had announced that they would no longer seek a RAND licence in respect of the UK generally, ZyXEL sought from Carr J an order to vacate the RAND trial scheduled for this September. Carr J adjourned that question and it came on before Birss J one month later.
High Court's decision on cancelling the RAND trial
Birss J declined to vacate the RAND trial. This was because of concerns over the effect of the waiver and because TQ Delta had sought a declaration that:-
"[ZyXEL] are not willing licensees to [TQD's] portfolio of patents essential to the Recommendations and/or that [TQD] is not obliged to offer a licence to such patents on RAND and/or any other terms to them."
This was, according to Birss J, "a real and lively dispute as to RAND terms" that had not gone away: a RAND trial therefore was required to resolve it. Birss J also felt that there was uncertainty as to the scope and effect of ZyXEL's waiver of entitlement to a RAND licence.
Court of Appeal's ruling
ZyXEL appealed this decision; the Court of Appeal upheld the appeal (in a judgment published on 18 July). Although the court agreed with Birss J that there were concerns over the effect of the waiver, Floyd LJ (giving the leading judgment) records:-
"I accept that it may not be open to ZyXEL selectively to claim the right to be granted a RAND licence. If the licence is a unitary, portfolio, worldwide, group to group licence, it is arguable that ZyXEL must take it as a whole or not at all. They cannot claim it for the UK only, or for certain patents or for certain companies in the group. That follows from the proposition that it is arguable that the RAND licence is a unitary, worldwide licence, and ZyXEL have no right to a country by country, company by company licence because such a licence is not RAND.
It does not follow from the above that ZyXEL are somehow prevented from saying to TQD and the court that they no longer rely on any licence to which it is entitled to resist the grant of relief for infringement of the UK patents. That is what the waiver does, however. It waives any and all rights ZyXEL might have to seek to enforce TQD's RAND obligation to licence TQD's UK-designated DSL SEPs in the United Kingdom. I can see no basis whatsoever for saying that such a waiver should be treated as ineffective or invalid. To say that the waiver is ineffective is equivalent to saying that the proceedings must go on as if ZyXEL were still relying on the RAND undertaking to resist the grant of the injunction in the UK, when ZyXEL are prepared to give an irrevocable undertaking not to do so."
In other words, if an infringer effectively consents to the usual relief in the UK, it matters not whether the RAND licence was global or territory restricted and consequently the court need not be troubled with determining the scope of a RAND licence. As regards the declaration that TQ Delta had sought, Floyd LJ concluded that it was of limited benefit and applying the overriding objective of proportionality it was not justified to use court time, and the parties' costs, to resolve such issue - there was no justification for "continuing with proceedings when their utility has fallen away."
The case demonstrates the continuing friction between the relief a SEP holder is entitled to at a national level when the court holds that a RAND (or FRAND) licence would be of global, or broader territorial scope. The case of Unwired Planet v Huawei which gave rise to the English court determining that a RAND/FRAND licence might be global in scope and an infringer would be liable to an injunction in the UK if they did not sign up to such a global licence comes before the Supreme Court in October, as does the decision in Huawei v Conversant - everyone concerned with SEPs awaits these decisions with considerable interest.
(For our earlier blog on the Court of Appeal decision in Huawei v Conversant, see Court of Appeal keeps its FRANDs to itself. Permission to appeal to the Supreme Court was given in both cases in April 2019.)