­Vodafone v Intellectual Ventures, High Court of Ireland

10 March 2017 - Case No. 2016 5102P, [2017] IEHC 160

http://caselaw.4ipcouncil.com/irish-court-decisions/TQ-Delta-LLC-v-Zyxel-Communications-UK-Ltd-and-Ors-UK-High-Court-of-Justice

A. Facts

The Claimant, Vodafone GmbH, is a German company offering communication services in Germany, including DSL internet connections based on the standards ADSL2+ and VDSL2 [1] .

The first Defendant, Intellectual Ventures II LLC (IV LLC), is a US company that holds patents declared as essential to the above standards (Standard Essential Patents or SEPs), including German designations of several European patents [2] . The second Defendant, Intellectual Ventures International Licensing (IV Licensing), is an Irish company engaged in patent licensing [2] . IV LLC granted IV Licensing a sub-licence which allows the latter to grant non-exclusive licences in respect to IV LLC’s portfolio [3] .

In January 2016, IV LLC brought infringement actions against the Claimant before the District Court (Landgericht) of Düsseldorf in Germany (Düsseldorf Court) based on the German designation of two of its SEP relating to the ADSL2+ and VDSL2 standards (German proceedings) [4] . In the German proceedings, IV LLC sought for a declaration that the Claimant is liable for damages arising from the infringement of the SEPs in suit as well as the provision of information and the rendering of accounts [4] .

During the course of the German proceedings, IV Licensing made an offer for a licensing agreement to the Claimant comprising the German designations of sixteen European Patents, including the two patents already asserted before the Düsseldorf Court [5] . The Claimant made a counter-offer which was, however, rejected [6] .

Subsequently, the Claimant filed an action for a declaratory judgement against the Defendants before the Dublin High Court (High Court) in Ireland (Irish proceedings). The Claimant requested the High Court inter alia to declare (1) that IV Licensing’s offer was not Fair, Reasonable and Non-Discriminatory (FRAND) and, therefore, amounted to an abuse of dominant position contrary to Article 102 of the Treaty on the Functioning of the EU (TFEU) and (2) that Claimant’s counter-offer was FRAND [7] . In case that the High Court held that neither IV Licensing’s offer nor Claimant’s counter-offer were FRAND, the Claimant also sought for a declaration as to which terms and conditions would be FRAND [7] .

The Defendants challenged the jurisdiction of the High Court. They requested the High Court – among other motions – to decline jurisdiction in favour of the Düsseldorf Court, or, in the alternative to stay its proceedings [8] .

With the present judgment the High Court refused to decline jurisdiction over the dispute brought before it [9] . The Court ordered, however, a stay in the proceedings, until the Düsseldorf Court delivered its final judgment in the German proceedings [9] .

B. Court’s reasoning

The High Court held that neither Article 24 nor Article 29 of the Recast Brussels Regulation [10] require the court to decline jurisdiction in favour of the Düsseldorf Court, even though the German proceedings were initiated prior to the Irish proceedings.

Pursuant to Article 24 of the Regulation, the Courts of each EU Member State have exclusive jurisdiction in proceedings concerned with the validity of any European Patent granted for that Member State. Both pending proceedings concern German designations of IV LLC’s European patens. However, this fact did not hinder the High Court to assume jurisdiction over the present case: In the High Court’s eyes, no issue as to the validity the patents which ought to be licensed has been placed in issue in the Irish proceedings; moreover, no part of Claimant’s cause of action concerning the (alleged) abuse of dominance depends in any way on the validity of the SEPs in suit [11] .

Furthermore, the High Court found that Article 29 of the Regulation does not apply to the present case, either. The High Court took the view that the Irish proceedings and the German proceedings do not involve the “same cause of action”, as Article 29 of the Regulation requires [12] . Although there are overlapping issues in both proceedings (for instance, Article 102 TFEU is mentioned in parties’ pleadings in both trials), this fact does not suffice to establish a “same cause of action” in terms of Article 29 of the Regulation [12] . In particular, Article 102 TFEU, to the extent that it features in the German proceedings is not concerned with an (alleged) abuse of dominant position by way of the offer made to the Claimant by IV Licensing [12] . Besides that, the High Court also pointed out, that – at least regarding to IV Licensing – it is not presented with proceedings “between the same parties” (since IV Licensing in not party to the German proceedings) which is, however, a further prerequisite for the application of Article 29 of the Regulation [13] .

Notwithstanding the above, the High Court held that some form of relief under Article 30 of the Regulation ought to be granted to the Defendants [14] . Under this provision, a court is allowed (meaning that the power given to the court is discretionary) to either stay its proceedings (Article 30 para. 1) or decline jurisdiction (Article 30 para. 2), in case that a “related action” is already pending before another court [15] . The objective of Article 30 of the Regulation is “to improve co-ordination of the exercise of judicial functions” within the EU and to avoid “irreconcilable judgments” [16] . In the matter at hand, the High Court found that these ob­jectives are served by an order to stay the proceedings according to Article 30 para. 1 of the Regulation [9] .

Looking at the present case, the High Court explained that a risk of “irreconcilable judgments” exists, since at the heart of both the Irish and the German proceedings lies the question whether the parties have complied with their conduct obligations under the judgment of the Court of Justice of the EU in the matter Huawei v ZTE [17] (Huawei requirements), especially with the obligation to exchange licensing offers on FRAND terms [18] .

In the Irish Proceedings, the claims made by the Claimant expressly address this question. In the German Proceedings, the same question will be of “direct relevance” for the nature and scope of the claim for damages and the accessory claim for the rendering of accounts asserted by IV LLC [19] . Although compliance with the Huawei requirements is – in contrast to claims for injunctive relief – no direct prerequisite for the enforcement of SEP holder’s damage claims (including the auxiliary claims for information and the rendering of accounts) [20] , it has an impact on the scope of such claims: according to the case law of the Düsseldorf Courts, if the patent holder does not meet the Huawei requirements or both the patent holder and the potential licensee comply with the Huawei requirements, the patent holder’s damage claim is limited to the FRAND licence fees and the claim for the rendering of accounts is limited to the information needed in order to calculate the respective damages (using the so-called “licence analogy” method) [21] . Accordingly, the Düsseldorf Court would not be able to decide on the merits of the claims raised by IV LLC before it, without first determining whether the parties fulfilled the Huawei requirements [22] .

In addition, the High Court pointed out that setting the FRAND terms and conditions for the patent portfolio offered to the Claimant, as the latter requested in the Irish proceedings, could also lead to “irreconcilable judgments”, particularly if the Düsseldorf Court would be asked by IV LLC at a later point in time to fix the damages for the two SEPs asserted in the German proceedings (since these SEPs were also part of the portfolio offered) [23] . Insofar, the High Court was not convinced by the Claimant’s argument, that fixing of rates for a patent portfolio usually involves different considerations to the fixing of a rate for individual patents [23] . On the contrary, the High Court recognized that within the “longstanding industry practice” of portfolio licensing, the fixing of rates for a portfolio of patents does, in general, involve the same methodology as the fixing of rates for individual patents. Consequently, rates set by the High Court in the Irish proceedings might conflict with any rates determined by the Düsseldorf Court with respect to the damage claims made in the German proceedings [23] .

• [1] Vodafone v Intellectual Ventures, High Court of Ireland, 10 March 2017, para. 1.
• [2] Ibid, para. 2.
• [3] Ibid, para. 3.
• [4] Ibid, para. 37.
• [5] Ibid, paras. 10-12 and 93.
• [6] Ibid, paras. 13-16.
• [7] Ibid, para. 5.
• [8] Ibid, para. 7.
• [9] Ibid, para. 180.
• [10] Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12th December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast), OJ L 351/1 of 20th December 2012.
• [11] Vodafone v Intellectual Ventures, High Court of Ireland, 10 March 2017, para. 122.
• [12] Ibid, para. 146.
• [13] Ibid, para. 148.
• [14] Ibid, para. 166.
• [15] Ibid, para. 119.
• [16] Ibid, para. 165.
• [17] Huawei v ZTE, Court of Justice of the European Union, judgment dated 16 July 2015, Case No. C-170/13.
• [18] Vodafone v Intellectual Ventures, High Court of Ireland, 10 March 2017, para. 52.
• [19] Ibid, paras. 52 and 60.
• [20] Ibid, paras. 55 et seqq.
• [21] Ibid, para. 61 et seq.
• [22] Ibid, para. 62.
• [23] Ibid, para. 93.