Vodafone GmbH v IV International Licensing and Intellectual Ventures II LLC

• Jurisdiction: Ireland
• Judge: Mr Justice Max Barrett
• Judgment Date: 14 June 2016
• Neutral Citation: [2016] IEHC 321
• Docket Number: 2016 No. 5102P
• Court: High Court
• Date: 14 June 2016

Between

VODAFONE GmbH

Plaintiff

- and -

IV INTERNATIONAL LICENSING

AND

INTELLECTUAL VENTURES II LLC

Defendants

[2016] IEHC 321

2016 No. 5102P

THE HIGH COURT

Intellectual Property – Telecommunications – Patents – Service of notice – O.11, r.2 of the Rules of the Superior Courts 1986 – Art. 1 of the Reg. 44/2001 (Brussels Regulation) – Forum conveniens

Facts: The plaintiff, by way of the present ex-parte application, sought leave to serve the notice of plenary summons to the defendant whose main office was situated outside the jurisdiction in relation to the intended proceedings concerning the licensing of certain European patents.

Mr. Justice Max Barrett granted leave sought by the plaintiff. The Court held that the power to grant leave to serve summons outside the jurisdiction was discretionary. The Court held that it should grant leave under o. 11, r. 2 of the Rules of the Superior Courts, 1986 after a careful scrutiny, after being satisfied that the plaintiff had met the threshold to prove that the domestic forum, that is, Ireland in the present instance was the forum conveniens where the tort was alleged to be committed. The Court observed that it should consider the cost and expediency of the proposed proceedings along with the availability of witness and substantial evidence that warrant the grant of leave. The Court found that since the defendant and the other party with German designations both jointly acted together for the offer of relevant patents to the plaintiff, it was appropriate that both should be made party to the proposed claim in tort intended to be initiated by the plaintiff.

JUDGMENT of Mr Justice Max Barrett delivered on 14th June, 2016.

TABLE OF CONTENTS

Part 1: Introduction

1 Last Thursday, Vodafone GmbH made an ex parte application for leave to serve notice on a party outside the jurisdiction of intended proceedings concerning the licensing of certain European patents. It is not every day that such an ex parte application would merit a written judgment. However, there are a number of features to the within application, not least certain patent and competition law dimensions presenting that make the application something of a first in the Irish courts and hence an ex parte application in respect of which it may be worthwhile for the court to commit to writing the background facts, the critical issues arising, and its reasons for deciding as it did.

Part 2: The Parties

I. The Plaintiff.

2 Vodafone GmbH is a company domiciled in Germany. A member of the well-known Vodafone group of companies, it is engaged in the provision of communications services (including digital subscriber line or “DSL” services) in Germany.

II. The Defendants.

3 The defendants are purchasers and/or owners and/or licensors of intellectual property rights. The Intellectual Venture group of companies (the “IV Group”) is what is known as a non-practising entity (NPE). It is apparently well-known for its significant patent portfolio acquisitions and its vigorous exploitation of such rights as those patents confer. IV International Licensing (“IV International”) is a private limited company incorporated in Ireland, having a registered office and a place of business here in Dublin. Intellectual Ventures LLC (“IV LLC”) is a limited liability company domiciled in the US state of Delaware.

4 To this time, the allegedly complex structure of the IV Group has apparently had the result that it has not been possible for Vodafone GmbH to ascertain the nature of the precise relationship between IV International and IV LLC. However, it appears to Vodafone GmbH, from certain representations that have been made to it in the course of the negotiations and proceedings described hereafter, that IV International and IV LLC are combining and acting together with regard to the licensing of the patents that are the subject of the within proceedings, in a tortious manner that is alleged to be (and alleged alsoto be intended to be) harmful to the economic interests of Vodafone GmbH and also an abuse of a dominant position.

Part 3: Patent Law and Competition Law Intertwined

I. Standard Essential Patents

5 The intended proceedings concern the licensing of 16 European patents (the “relevant patents”) whose current registered proprietor, at least as regards the German national designations, is IV LLC. It appears that IV LLC has delegated its rights to licence the relevant patents to IV International. (As it happens, the original application for the relevant patents was by a company called Aware Inc. and, doubtless, one of the relevant issues that will fall to be resolved in the proceedings – indeed Vodafone GmbH has expressly reserved its rights in this regard – is whether and how the defendants have valid title to the relevant patents). The relevant patents relate to DSL technology, a type of broadband technology that connects a user to a high speed/bandwidth internet connection across a telephone network. DSL services operate in accordance with standards (so-called “xDSL standards”) set by the International Telecommunications Union (commonly known as the “ITU”).

6 There are, it seems, alternative ways of providing broadband services when, e.g., cable or fibre has been laid and connected to a customer's premises. However, when the only connection available is a conventional telephone line, the xDSL standards offer the primary, if not the sole, means of providing broadband services to customers. This exclusiveness or near-exclusiveness has the result that patent proprietors whose patents fall to be infringed by implementation of the xDSL standards enjoy obvious and – it would not be an exaggeration to say – great market power. Why so? Because a patent proprietor can restrict those to whom it grants licences and may impose unfavourable terms on parties wishing to implement the xDSL standards. Patents which fall necessarily to be breached by implementation of the xDSL standards are known as “Standard Essential Patents” or “SEPs”. It is, the court understands, asserted by both IV LLC and IV International that the patents that are the subject of the intended proceedings are SEPs.

7 As a result of the considerable market power that SEP-holders enjoy, the ITU, as a standard-setting organisation (or “SSO” to the initiated) has, in common with other SSOs, developed policies with regard to intellectual property rights that require SEP proprietors to license them on fair, reasonable and non-discriminatory (FRAND) terms to anybody who wishes to implement the relevant standard(s). Though this may seem, to some extent, a contravention of the very exclusivity of the rights that patents are intended to confer on patent proprietors, in fact FRANDs are meant to achieve a balance between conferring a fair reward on a patent proprietor and encouraging adoption of the relevant standard. It is the licensing of the relevant patents on FRAND terms that is at the heart of the claims made in the within proceedings.

II. The Decision in Huawei.

8 In recent years, the European Commission and the national courts of the European Union have been concerned to ensure that the natural dominance that an SEP proprietor enjoys is not abused. Thus, for example, in its settlement with Samsung and its decision in relation to Motorola, the European Commission has made clear that the usual right of a patentee to exclude infringers from a market (by means of injunction) would not necessarily apply in respect of SEPs. This approach was confirmed by the Court of Justice of the European Union in Huawei Technologies Co Ltd v. ZTE Corp and another [2015] Bus LR 1261. It is worth turning briefly to consider the facts and decision in that case.

9 So far as appears relevant to the within proceedings, the facts in Huawei were as follows. Huawei is a multinational company active in the telecommunications sector, and also an SEP proprietor. Huawei, as SEP proprietor, had been discussing the possibility of concluding a licence on FRAND terms with ZTE; however, in the absence of agreement between the two, Huawei came to court claiming that ZTE was in breach of its patent and sought an injunction, the rendering of accounts, the recall of products, and damages. ZTE for its part maintained that the action brought by Huawei was an abuse of a dominant position contrary to article 102 of the Treaty on the Functioning of the European Union (TFEU). It will be recalled that article 102 provides, inter alia, as follows:

‘An abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between member states.

Such abuse may, in particular, consist in:

(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;

(b) limiting production, markets or technical development to the prejudice of consumers…’.

10 The Landgericht Düsseldorf, which was hearing the Huawei proceedings in Germany, referred five questions to the CJEU. The thrust of its various questions was broadly twofold, being whether:

(1) an SEP proprietor's action seeking injunctive relief and the recall of products against an alleged infringer which had requested the conclusion of a licensing agreement was an abuse of the SEP proprietor's dominant position within the meaning of article 102 of the TFEU;

(2) article 102 prohibited a SEP proprietor which, as in Huawei, had given an undertaking to grant its SEP on FRAND terms, from bringing an action for infringement against an alleged infringer seeking the rendering of accounts or an award of damages in relation to past use of the SEP.

11 At the risk of over-simplifying a comprehensive judgment, the most critical conclusions of the CJEU,...