Case Law post CJEU ruling Huawei v ZTE

Conversant v LG, Court of Appeal of Paris

16 April 2019 - Case No. 061/2019

http://caselaw.4ipcouncil.com/french-court-decisions/conversant-v-lg-court-appeal-paris

A. Facts

On 1 September 2011, the Claimant, Conversant Wireless Licensing SARL (Conversant; previously named Core Wireless Licensing SARL), acquired from Nokia more than 2,000 patents declared essential to the GSM, UMTS or LTE standards (Standard Essential Patents, or SEPs) towards ETSI [1] .

Conversant contacted the Defendants, LG Electronics France SAS and LG Electronics Inc. (LG) for a licence under the patents in March 2012. The parties held a few meetings to find an agreement on a Fair, Reasonable and Non-Discriminatory (FRAND) rate for a global license under Conversant’s essential patents [2] .

On 30 September 2014, Conversant brought an infringement action against LG based on five patents before the Paris Court (Court), asking inter alia for a FRAND rate determination [3] .

In first instance, the Court rejected Conversant’s claims, as it held that Conversant had not demonstrated the essentiality of the patents in suit [4] .

On appeal, Conversant solely asserted two out of the five patents asserted in first instance [5] . With the present judgment, the Court of Appeal of Paris (Court of Appeal) confirmed the first instance decision, finding the patents in suit valid but not essential [6] .

B. Court’s reasoning

Validity, Essentiality and Infringement

In first instance, Conversant alleged five patents to be essential and infringed by LG [1] . On appeal, both parties acknowledged that, for three of them, the essentiality was not sufficiently supported [7] .

Therefore, the Court of Appeal limited the analysis of validity, essentiality and infringement to the two other patents, EP 978 210 (EP 210) and EP 950 330 (EP 330) [3] . LG raised prior art documents to challenge the validity, novelty and inventive steps of the patents. The Court of Appeal analysed those documents to determine that none was destroying the validity of the patents [8] .

Regarding the essentiality, Conversant had alleged that EP 210 was essential to both UMTS and LTE standards [9] and EP 330 was essential to the LTE standard [10] . The Court of Appeal rejected those claims by comparing the patent specifications to the technical specifications of the relevant standards [11] and found hold that standard compliant devices do not necessarily have to use the patents in suit. The Court considered that it is possible to comply with the UMTS and LTE standards without implementing said patents. The Court, therefore, found that the patents are not essential [3] .

FRAND determination

Conversant and LG both had requested the Court to make a FRAND determination. However, as Conversant’s infringement claim was based on the essentiality of the patents, the Court of Appeal declared any request concerning a FRAND rate determination, past damages and the nomination of an expert without object [12] .

FRAND duties and abuse of a dominant position

In its decision, the Court of Appeal also briefly summarized two points addressed by the first instance Court regarding parties’ duties in negotiation and a potential abuse of dominant position without any further analysis.

One of them is the determination of bad faith of the parties in the negotiations. In first instance, the Court stated that it was difficult to assess bad faith in view of the history of the negotiations. The Court had underlined that the fact that the parties negotiated for more than two years tended to demonstrate that none of them was of particularly bad faith to push the other not to further pursue the negotiations [5] . The Court had further stressed that as each company passed the buck to the other, it was difficult to declare that bad faith lied more on one side than the other [3] .

Regarding a potential abuse of dominant position through the filing of an action based on SEPs by Conversant, the Court had stated that filing a judicial complaint to have a FRAND rate determined that could not be amicably fixed, without any other circumstance demonstrating among others the express willingness to deprive LG of its rights to exploit the patents against a fair and proportionate compensation, could not constitute an abuse of a dominant position [3] .

Confidentiality and Trade Secret Protection

The Court of Appeals also briefly referred to the rules for the protection of trade secrets that had been agreed upon by the parties and accepted by the Court of Appeal.

In application of Article L153-1 of French Commercial Code, the parties had set up a protection mechanism for confidential documents, which included the following steps [13] : (1) access to some licensing agreements from Nokia and Conversant would be restricted to the parties’ legal representatives, the court and persons (translators or experts) obliged to confidentiality by a Non-Disclosure Agreement, (2) the parties would submit two versions of each party’s written conclusions to the Court of Appeal, one with a reference to all disclosed agreements in full with confidential information highlighted and one without any reference to any confidential information [14] .

  • [1] Court of Appeal of Paris, judgement dated 16 April 2019, page 3.
  • [2] Ibidem.
  • [3] Ibid.
  • [4] Court of Appeal of Paris, judgement dated 16 April 2019, pages 5-6.
  • [5] Court of Appeal of Paris, judgement dated 16 April 2019, page 6.
  • [6] Court of Appeal of Paris, judgement dated 16 April 2019, pages 15-24.
  • [7] Court of Appeal of Paris, judgement dated 16 April 2019, page 15.
  • [8] Court of Appeal of Paris, judgement dated 16 April 2019, pages 15 and subsequent.
  • [9] Court of Appeal of Paris, judgement dated 16 April 2019, pages 19-21.
  • [10] Court of Appeal of Paris, judgement dated 16 April 2019, pages 23-24.
  • [11] Court of Appeal of Paris, judgement dated 16 April 2019, pages 19-21 and 23-24.
  • [12] Court of Appeal of Paris, judgement dated 16 April 2019, pages 24-25.
  • [13] Court of Appeal of Paris, judgement dated 16 April 2019, page 13
  • [14] Court of Appeal of Paris, judgement dated 16 April 2019, page 14