Koninklijke Philips NV v Asustek Computer Incorporation & Ors [2017] EWCA Civ 1526
This was an appeal from the decision of Arnold J [2016] EWHC 2220 (Pat) in respect of a preliminary issue in a three standard-essential patent infringement action. Philips alleges that ASUS and HTC infringe the patents by implementing high speed packet access (HSPA) technology in mobile telecommunications networks. The preliminary issue decided by Arnold J was whether a covenant not to assert patents in an agreement between Philips and Qualcomm Inc. provided a defence for HTC.
Arnold J had held that Philips’ covenant not to assert its “CDMA Technically Necessary Patents” against nominated customers of Qualcomm did not extend to HSPA patents on the grounds that: (1) HSPA is not within the scope of the definition of “CDMA Wireless Industry Standards” in the Qualcomm agreement, properly construed according to the governing law, California Law; (2) the proviso to the covenant carved out hybrid CDMA/TDMA technologies, including HSPA, in any event; and (3) the covenant did not extend to HTC’s products that incorporated third-party (i.e. non-Qualcomm) chipsets.
HTC appealed, contending that the judge had misconstrued the Qualcomm agreement by wrongly applying California law, including in respect of the admissible extrinsic evidence under California law. HTC argued inter alia that HSPA, being a subsequent release of the proposed ETSI UMTS standard, was included within the scope of the covenant.
Arden, Kitchin and Floyd LLJ dismissed HTC’s appeal. They held that California law takes a holistic attitude to interpretation of a contract and that the relevant extrinsic evidence includes the strength of the parties’ patent positions with regard to CDMA and TDMA. Philips had a much stronger position in TDMA than Qualcomm and they agreed with the Judge that HSPA is not within the scope of the definition of “CDMA Wireless Industry Standards” in the Qualcomm agreement, including because the absence of a royalty is a powerful indicator in favour of Philips’ construction. They also agreed with the Judge that equipment implementing HSPA is TDMA equipment, so the proviso carved out HSPA from the scope of the covenant. Finally, they dismissed HTC’s appeal in respect of HTC’s products that include third-party chipsets because the result contended for by HTC would be contrary to the interests of both Qualcomm and Philips, as the Judge had held.
Mark Vanhegan QC and Adam Gamsa appeared for Philips.