TQ Delta v ZyXEL - Court of Appeal cancels the RAND trial as ZyXEL no longer a ‘willing licensee’

Background

ZyXEL v TQ Delta [2019] EWCA Civ 1277 concerned the enforcement of a number of TQ Delta’s standard-essential patents (SEPs), which were subject to an undertaking to be licensed on reasonable and non-discriminatory (“RAND”) terms. Although two of the patents were found to have been infringed by ZyXEL in a High Court judgment in March earlier this year, one patent was held to be invalid, and the other would only remain in force for another three months.

ZyXEL opted against entering into a three month licence agreement, instead submitting to pay the full damages claimed by TQ Delta for past infringement and to a three month injunction. ZyXEL formally waived their right to a RAND licence for the UK under TQ Delta. TQ Delta, in an attempt to keep its RAND claim alive, responded by seeking declarations that ZyXEL were not ‘willing licensees’ to TQ Delta’s patent portfolio and that TQ Delta was not obliged to offer ZyXEL any licence. Meanwhile ZyXEL had also applied to cancel the RAND trial on the basis that ZyXEL did not rely on RAND as a defence, with TQ Delta insisting in response that a RAND trial was necessary since there was a live dispute between the parties.

In the first instance decision in April, Birss J had agreed with TQ Delta that there is indeed a “real and lively dispute as to RAND terms.” The RAND trial was therefore allowed to proceed for September of this year, but not without an appeal from ZyXEL first.

The Court of Appeal decision

On 18 July 2019 in the Court of Appeal, Floyd LJ cancelled the RAND trial and restated the principles from the Court of Appeal’s decision in Unwired Planet v Huawei [2018] EWCA Civ 2344, the leading authority for UK standard essential patent licensing. Floyd LJ clarified that the decision in Unwired Planet v Huawei does not suggest that a patentee has an independent right to ask the court for a declaration regarding the extent or scope of a licence he is required to offer an implementer, when the implementer has no interest in taking the licence.

Furthermore, Floyd LJ pointed out flaws in TQ Delta’s view that ZyXEL were not ‘willing licensees’ and that a declaration to this effect would have some utility, these being that: (1) there were no other existing proceedings between the parties anywhere in the world; (2) there was no pan-European or global approach to the interaction between the RAND undertakings and the grant of relief for patent infringement; (3) there was no evidence of how a UK court’s findings would be treated in foreign jurisdictions; and (4) the concept of a ‘willing licensee’ was not an internationally recognised term of the art.

Floyd LJ also noted that a RAND trial would have taken 10 days and cost approximately £4 million, taking up an inappropriate amount of the court’s resources contrary to CPR Part 1.1(2)(e).

In the circumstances, the Court of Appeal found that it would be an exercise in “jurisdictional imperialism” to impose the UK court's view as to whether ZyXEL were unwilling licensees or holding out in a yet to be determined jurisdiction.

Article co-authored by the CMS Trainee Solicitor Elijha Wong.