A new form of declaratory relief in patent actions has recently been sanctioned by the English Court of Appeal. The Court has ruled, in a dispute relating to patents which the patentee has declared are essential for compliance with the GSM (Global System for Mobile Communications) standard, that it is legitimate to seek a declaration that the patents are not essential to the standard.
Such a declaration falls outside the standard form of declaration covered by section 71 of the Patents Act 1977 – a declaration of non‑infringement of a specific article. Accordingly, the Judge at first instance had been in two minds as to whether this was a possible approach to a patent action. He concluded, however, that the new form of declaration should be allowed, stating that the Court should, if at all possible, resolve the commercial issue in the terms that it is understood by the parties. The Court of Appeal upheld the Judge’s conclusion holding that the issue, one way or another, was clearly enough defined to be the subject of the Court’s inherent jurisdiction.
The decision may have far‑reaching implications not only in the telecommunications field but also in other technical fields where standards are applicable. In such fields, where commercial exploitation revolves around the standards, the Court of Appeal has demonstrated a willingness to determine the real commercial issue between the parties – are the patents essential for operation of a standard – rather than requiring the parties to express their dispute in terms of the traditional issues of infringement or non‑infringement of particular products.
The issue arose in the context of an action for the revocation of three UK patents by Nokia Corporation against InterDigital Technology Corporation. The three patents had been notified by InterDigital to the relevant standards institute (ETSI – the European Telecommunication Standards Institute) as being essential for compliance with the internationally agreed technical rules comprising the GSM standard. Accordingly, InterDigital required a licence under the patents from anyone who wished to make or market GSM compliant equipment in the UK.
In relation to construing the scope of the patent claims, Nokia pleaded that, in view of its position on essentiality, InterDigital was likely to argue for a broad construction. InterDigital objected to this approach and sought to strike out that part of Nokia’s pleadings. Nokia therefore sought, and was granted, by the Judge at first instance, permission to seek a declaration of non‑essentiality to GSM of the patents in suit.
On appeal, InterDigital objected to this form of pleading and to Nokia’s subsequent request for a declaration of non‑essentiality. They stated that the declaration did not refer to any GSM product whatsoever. It was not about patent infringement but about the meaning of the requirements for something to be essential to the ETSI GSM standard. The procedure for seeking a declaration for non‑infringement under Section 71 was not applicable and, InterDigital argued, this was not a proper application under the inherent jurisdiction of the Court as no claim of a legal right had been identified. Determining whether or not a patent was essential for compliance with a standard would not determine any final legal rights between the parties. InterDigital contended that Nokia products could fall within the patents whether or not they fell within the standards and the patents could cover Nokia products whether or not any of the patents were essential to the standards. In short, it argued that it is products not standards which infringe.
The Court of Appeal rejected InterDigital’s arguments. It observed that the definition of “essential” was clear. The standard was clear. To determine essentiality you take the standard, you take the patents and you take the definition of “essential” and see whether there is any way around or not. Although the declaration sought was not a declaration of non‑infringement of a specific article as covered by Section 71 of the Patents Act 1977, the Court of Appeal considered that the issue was clearly enough defined to be the subject of the Court’s inherent jurisdiction. The fact that the standard might provide for options and that only some of the options might be covered by the patents made no difference. The ultimate declaration might be qualified to indicate which options were covered and which were not but this would not be a theoretical exercise. It would tell everybody exactly where they stand and which options are covered and not covered by the patents.
The Court of Appeal’s conclusion was not affected by the fact that Nokia had a licence under the patents. InterDigital had argued on that basis that there was no real dispute between the parties but the Court of Appeal was satisfied that that was not the case. The essentiality or its degree affected the value of a patent. The opinion of the Court as to “essential” or not was not merely an advisory opinion. It was a real, live, commercial question between the parties.
This decision demonstrates the willingness of the Court of Appeal in England to be flexible in permitting disputes and remedies to be framed such that they address the real commercial question between the parties. In this case, the Court was prepared to exercise its inherent jurisdiction to sanction a remedy which is tailored to the commercial realities of an industry which revolves around standards. It will be interesting to see the extent to which this approach is adopted in the future in fields where standards are prevalent.
Bird & Bird, London acted for the Claimant, Nokia, in the case.
First published in the July 2005 issue of World Intellectual Property Report.