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Thursday, 25 January 2018

Trial sequence in SEP litigation - time for a rejig?

The IPKat relies upon its network of eagle-eyed readers to draw its attention to matters of interest that might otherwise be beyond the reach of the IPKat team's paws.  An interesting judicial observation of Carr J. regarding the sequencing of SEP trials was recently drawn to this blogger's attention by David Barron of Gowling WLG. 

DSL technologies are those commonly used to provide fixed line broadband internet to residential and commercial premises.  The case concerns infringement proceedings in relation to two patents that are said to be essential to ITU recommendations, which allow for interoperability between DSL products.   The comment of interest is made in a short case management judgment in TQ Delta v Zyxel [2017] EWHC 3305 (Pat), and the relevant paragraph is set out below:

"The parties are agreed that the issues relating to validity and infringement of the patents should be tried separately from, and before, the non-technical trial relating to RAND. It has become the practice in this jurisdiction that FRAND trials should come after technical trials. It is a practice that may need to be reviewed following the recent jurisprudence of the Court of Justice in Huawei Technologies (C-170/13) and the judgment of Birss J in Unwired Planet v. Huawei [2017] EWHC 2988 (Pat). If the real dispute between the parties is the issue of a global licence for a global portfolio, it is worth considering whether it makes sense to allow one or more technical trials to take place, as a peg on which to hang the non-technical trial, or whether it would be better case management for the non-technical trial to come first. If the FRAND trial is heard first, and a defendant wishes to say that it does not need to take any licence under any of the patents, the defendant is not compelled to take the licence, and may take the chance that it will subsequently be injuncted in infringement proceedings. But this is not the occasion to rule upon this question, as the parties have accepted that the technical trial should come first."

  David comments as follows:

"Over the years the standard practice in SEP litigation in the UK has been to split the proceedings between what gets called the "technical trial" (sometimes multiple trials if multiple patents are involved), and non-technical issues. The technical trial(s) dealt with traditional patent infringement/validity issues, with the non-technical part of the case addressing issues such as FRAND determinations or the suitability of declaratory relief. Yet the technical/non-technical distinction is something of a misnomer as the non-technical part of the case can often involve significant technical issues. However, the system generally worked, especially as so many cases settled along the way, meaning that the non-technical issues rarely ended up troubling the court.

Mr Justice Henry Carr's comments in this TQ Delta judgment indicate a change in thinking of the Patents Court, and in particular a recognition that it may be more appropriate for the non-technical issues to be resolved before any of the asserted patents are put to the test at trial. The rationale for this approach is that, with large SEP portfolios, it is almost inevitable that some of the patents in the portfolio will be infringed by a party practising the standard, so the real argument is not whether a licence should be taken at all, but rather the value of that licence. This is particularly so if the SEP owner has made it clear that, if the first wave of patents falls at trial, there are plenty more in reserve; thus it is a matter of when infringement is established rather than if. So the thinking goes that the portfolio should be reviewed as part of a FRAND (or, in this case, RAND) determination which, at least at a high level, can take account of the strength of the portfolio and set a FRAND/RAND rate accordingly. If that occurs first in time, it could lead to the parties agreeing that a series of technical trials is not necessary at all, thereby saving very substantial costs and very significant amounts of court time.

This indication of flexibility from the Patents Court is to be welcomed; it should help parties to SEP litigation to focus on the real issues between them from the outset of the litigation, which may in turn promote settlements at earlier stages."

Gowling WLG represent the Claimant in these proceedings.

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