TQ Delta LLC v ZyXEL Communications UK Limited & anr [2019] EWCA Civ 1277

The Claimant, (“TQ Delta”), is the proprietor of a portfolio of patents which it maintains to be essential to various digital subscriber line (DSL) broadband internet standards.  TQ Delta had given undertakings to the relevant standards-setting organisation that it would offer licences to third parties on reasonable and non-discriminatory (RAND) terms.  It was common ground in the proceedings that there was no material difference between FRAND principles (as developed in the Unwired Planet case) and RAND principles.

TQ Delta commenced proceedings agains the Defendants (“ZyXEL”) for infringement of two patents in 2017.  Following the technical trial before Henry Carr J in January 2018, one patent was held to be invalid for obviousness but the other was found to be valid and essential to DSL standards, although it was to expire in June 2019.  ZyXEL declined to give an undertaking to enter into a RAND licence on whatever terms might, at the non-technical trial (which was to take place in September 2019), be determined to be RAND and were therefore subject to an immediate injunction.  ZyXEL suggested that the non-technical trial had therefore become redundant and should be vacated.

TQ Delta then commenced a claim for infringement of further patents and for free-standing declaratory relief as to: (i) the terms of a RAND licence to its portfolio of DSL patents; and (ii) whether ZyXEL were “unwilling licensees” for the purposes of RAND licensing.  In response, ZyXEL irrevocably waived “any and all rights they might have to seek to enforce TQ Delta’s RAND obligations to licence TQ Delta’s UK-designated DSL SEPs in the United Kingdom”  (“the Waiver”) and applied to strike out the claims for declaratory relief concerning RAND licensing, arguing that because there was now no prospect that ZyXEL would take a RAND licence in the UK there was no utility in the declarations sough.

Birss J declined to strike out the TQ Delta’s claims for declaratory relief, holding that a number of factors (relating to apparent uncertainty surrounding the effect of the waiver which ZyXEL had given) gave rise to at least an arguable prospect that the trial judge would grant TQ Delta the declaratory relief it was seeking.

ZyXEL sought and were granted permission to appeal on an expedited basis and the appeal came before Lewison LJ and Floyd LJ on 11 July 2019.

Allowing ZyXEL’s appeal, the Court of Appeal held that as a result of the Waiver there was no longer any prospect that the Court would grant the declaratory relief sought by TQ Delta.  The principle justification for the relief sought which was put forward by TQ Delta – that the declarations would be of utility before foreign courts in proceedings against members of ZyXEL’s corporate group – was dismissed on the basis that RAND issues, if they arose in foreign proceedings, should be determined by the relevant foreign court.  It would be an exercise in “jurisdictional imperialism” for the English court to decide such issues without being invited to do so.

The Court of Appeal held that the Unwired Planet decisions were not authority for the proposition that a patent owner has an independent right to come to the court for a declaration as to the scope and extent of the licence he is required to offer an implementer when the implementer does not wish to take such a licence.  ZyXEL had decided that it did not want a RAND licence to any of TQ Delta’s UK patents and there was therefore no basis for them to be compelled to participate in a determination of the terms of such a licence.

This judgment provides important insight into the limits of the English F/RAND jurisdiction, which is due to be given further consideration by the Supreme Court in the Unwired Planet and Conversant appeals  later in 2019.

Brian Nicholson QC and David Ivison appeared for ZyXEL at first instance and on appeal.

[2019] EWCA Civ 1277