BREAKING: TQ Delta proceeds to September RAND Trial after partial win before Mr Justice Carr

Comparable kittens - ideal for identifying
F/RAND licence terms?

Eagle-eyed readers of UK standard essential patents litigation, will know there are about 4 SEP/FRAND cases that are listed to be heard this year and in the early part of 2020.  One of those cases is the battle between TQ Delta and ZyXEL concerning two of TQ Delta's patents which they claim to be essential - EP 1 453 268 “Multicarrier communication with variable overhead rate” (“the 268 Patent”); and EP 1 792 430 “CRC counter normalisation” (“the 430 Patent”).  In his decision handed down this morning - TQ Delta v Zyxel [2019] EWHC 562 -  Mr Justice Carr found the 268 Patent valid and infringed and the 430 Patent obvious in light of ADSL2/02 (but infringed if valid).  The patents are two of TQ Delta's patents from a large portfolio of patents that relate to digital subscriber line ("DSL") technology.  In 2012 they acquired these patents from Aware Inc.  DSL technology will be familiar to readers as it is used to provide fixed lined broadband internet to your home and office.

Today's decision - the 430 Patent

The AmeriKat was only able to quickly scan the decision over the briefest of lunches.  But finding what was of interest in today's technical decision was not too difficult as Mr Justice Carr, himself, quickly identified that the interesting issue on law related to the 430 Patent.  At paragraph 2, he stated:

"The case in respect of the 268 Patent involves the application of settled principles of law to complex facts. The case in respect of the 430 Patent is more unusual, in that TQ Delta accepted that once the problem addressed by the patent is known, the claimed solution is obvious. However, it contends that invention lay in perceiving the problem at the priority date."

The 430 Patent, with a September 2004 priority date, related to cyclic redundancy checksums ("CRCs").  CRCs are used to detect errors in a received bit-stream.  CRCs are counted in DSL in order to identify problems with a DSL line, such as noise and accuracy.  The CRC failure rate is one of a number of line diagnostics information that can be used by operators of DSL networks to identify problems in their networks.  Errors are tolerated to a certain extent, but if too many errors are being generated then action needs to be taken.  To know when that point arises, the recording of each Severely Errored Second ("SES") is conducted on a counter. 

When SES was first introduced, the number of measurements would be about 59 computations per second.  Over time, the period of CRC computations became variable. The 430 Patent concerned a method for normalizing a CRC anomaly counter, namely by incrementing the CRC anomaly counter by a value of M wherein the value of M is equal to PERp/K (where PERp is the value for a CRC computation period and K is a positive integer).  As noted above, TQ Delta admitted that this solution was obvious, just that the problem wasn't.  Thus the extent to which the problem to be solved by the 430 Patent would have been known to the skilled addressee was a matter of dispute, as was the skilled person's ability to assimilate the prior art, their interest in any particular aspect of the prior art and whether it was appropriate to consider a skilled person working for an ISP, who is therefore interested in SES reporting and management.

Assimilation of complex documents 

After setting out the key legal principles on identifying the skilled person and their attributes at [220], Mr Justice Carr dealt with the assimilation of complex documents.  Here, as in several telecoms cases, the cited prior art was a standard - the ADSL2/02 standard.  Standards are comprehensive and often very long documents.  This standard ran into 312 pages.  TQ Delta argued that the law requires that the skilled person's real life attributes be taken into account (which the Judge agreed), but ZyXEL's approach was to treat the skilled addressee as having exceptional powers of assimilation and ability to hold detail in their mind throughout the reading.  Mr Justice Carr at [224] and [225] stated:

"Insofar as this submission suggests that hindsight “cherry-picking” from the prior art is impermissible, then I agree. Insofar as it suggests that the skilled person will not assimilate the contents of long and complex documents which are cited as prior art, and relevant documents which are incorporated by reference in the prior art, then I disagree.
The skilled person is deemed to read and assimilate a prior art document properly and with interest. Having done so, she or he may conclude that it is in fact of no interest, or of no relevance to the problem with which she or he is concerned, but that is a different question. This was explained by Laddie J in Inhale v Quadrant 2002 RPC 21 at [47]....[and] in Ashai Medical v Macopharma [2002] EWCA Civ 466 (as per Aldous LJ at [21])." 

Mr Justice Carr held that although the prior art was a very long document which was concerned with the entire implementation of ADSL2, the 430 Patent is not concerned with the entire implementation of ADSL2 - just the limited issue of error reporting and management.  This issue of error reporting and management was, itself, a known field at the priority date.  It therefore followed that, because:

"[a] patent specification is addressed to those likely to have a real and practical interest in the subject matter of the invention, and the relevant person or persons must have skill in the art with which the invention described in the patent is concerned. I accept ZyXEL’s submission that the skilled person to whom the Patent is addressed is interested in error reporting and management. That skilled person would be specifically interested in the impact of ADSL2 on error reporting and management, as that is the field in which the 430 Patent claims to have made an improvement." (see [227]-[228])

Inventive problems, obvious solutions 

After a trot through the case law on "perception of the problem" (including Actavis v Novartis [2010] FSR 18, Haberman v Jackel International [1999] FSR 683 and the Case Law of the Boards of Appeal), Mr Justice Carr recognized it was possible to have a case where the invention was the identification or perception of the problem (even if the solution was obvious).  However, at [245] he also noted that:

"However, I agree with the logic of the Board of Appeal in the case law referred to above. In a field where the person skilled in the art regularly confronts technical problems and is used to solving them, if a real problem exists, she or he is likely to be aware of it. " 

At  [256], he concluded that a "superhuman ability [was not] required to identify the problem from the standard", nor did it require any "cherry picking".  He accepted ZyXEL's submissions which relied on the fact that:

"it was common ground that the allegedly inventive solution of the 430 Patent was acknowledged to be obvious, once the problem was known. It contended that, insofar as there was a real problem at the priority date, it required no invention to perceive it. On the contrary, it would have been evident to the skilled person from consideration of ADSL2/02, when read in the light of common general knowledge."

After discussion, at [265-266] and [270], Mr Justice Carr held:

"The invention in the present case is said to lie in the perception of a problem, and not in its solution. If there was no problem worth solving at the priority date, then I would have concluded that the 430 Patent had made no technical contribution to the art. 

However, in my judgment, the evidence demonstrated that it was widely known by the priority date that a general increase in the range of PERp [i.e. the period of the CRC computation or "period of the overhead channel") was going to be introduced. . . 

This analysis does not show any longstanding, unresolved problem. The 15-20ms range existed between 2002 and January 2005. No normalisation was carried out. In January 2005, it was amended in the new version of the G.992.3 Standard. Table 7-8 introduced a possible PERp range from 1.875 to 160ms where online reconfiguration had taken place. Normalisation of the CRC count was introduced simultaneously with this change, but not in relation to the 15-20ms period for which the count remained as before. There was no period of long-felt want."

What's next?

With one patent held as valid and infringed, this means the parties are headed to the RAND trial this September before Mr Justice Birss (with an estimate of 10 days in trial, with two days pre-reading).  The date of this RAND trial was subject to intense debate and an interim hearing before Mr Justice Carr last month (see TQ Delta v Zyxel [2019] EWHC 353), which resulted in a clear message to litigants in telecoms disputes to be sensible and stop wasting time fighting over trial dates or lengthening F/RAND determinations longer than is really necessary.

In the RAND trial, TQ Delta has pleaded that it will adopt a comparable licence approach, relying on two licences - one which is referred to as "the Zhone licence" and another which is referred to as "the confidential December licence".  ZyXEL's case is based on a "economic benefits" or "profits available" approach, in that it argues that the terms of the licence for one of more SEPs should reflect the economic value of the patented technology.  The licence fee should therefore be assessed by reference to the share of its profits relating to the manufacture of the equipment at issue, then apportioning a fraction of that to DSL functionality.  This fraction is then representative of TQ Delta's share in the overall patent pool that is essential to the DSL standards in issue.

We will have to wait until September to see how these arguments play out in practice.  In the meantime, the AmeriKat recommends that you read Mr Justice Carr's interim decision in TQ Delta as it sets out some interesting practice and procedural points for how to handle FRAND determinations.