Lenovo v InterDigital

A. Facts

The Defendants are companies within the InterDigital group (InterDigital), all incorporated outside England and Wales. [1] InterDigital holds a significant portfolio of patents. [2] For the purposes of this judgment, those patents fell into three categories. [2] First, patents declared (potentially) essential to 2G–5G cellular standards by the European Telecommunications Standards Institute (ETSI) (Cellular SEPs). [3] Second, patents declared (potentially) essential to cellular standards other than 2G–5G, or to standard-setting organisations other than ETSI (Other SEPs). [4] Third, patents not declared essential to any standard-setting organisation (non-essential patents or NEPs). [5]

InterDigital's Cellular SEPs are encumbered by the ETSI FRAND Commitment. [6] That Commitment arises under Clause 6.1 of the ETSI IPR Policy. [6] It obliges InterDigital to offer licences on fair, reasonable and non-discriminatory (FRAND) terms to implementers. [6]

The Claimants are companies within the Lenovo group (Lenovo). [7] Lenovo manufactures and sells devices implementing cellular and other standards. [6]

There had been significant prior litigation between the parties concerning Cellular SEPs (the Earlier English Proceedings). [8] In those proceedings, InterDigital asserted infringement of UK Cellular SEPs by Lenovo. [8] Lenovo raised, as a defence, that InterDigital's ETSI FRAND Commitment entitled it to a worldwide Cellular SEP licence on FRAND terms. [8] In March and June 2023, Mellor J issued two judgments setting terms of a global licence of InterDigital's Cellular SEPs (the Cellular Licence) including FRAND rates. [8] The Cellular Licence only covered Cellular SEPs and did not extend to InterDigital's Other SEPs or NEPs. [9] Parties were granted permission to appeal to the Court of Appeal which was listed for June 2024. [8]

The Court-set Cellular Licence expired on 31 December 2023. [10] Subsequent negotiations for a new licence commencing 1 January 2024 were unsuccessful. [10]

On 24 September 2023, Lenovo initiated new proceedings before the UK High Court (the Court). [11] Lenovo sought declarations of invalidity, non-essentiality, and non-infringement of two of InterDigital's UK SEPs. [11] Lenovo further sought a determination of global FRAND terms for a licence commencing 1 January 2024. [11] Unlike in the Earlier English Proceedings, Lenovo contended that InterDigital's ETSI FRAND Commitment required a licence extending beyond Cellular SEPs. [11] That licence would cover Other SEPs and NEPs. (Portfolio Licence). [11] Moreover, since all InterDigital entities were incorporated outside England and Wales, Lenovo applied for permission to serve the proceedings out of the jurisdiction. [12]

Between 23 and 25 September 2023, Lenovo prepared for the instant proceedings using disclosure material from the Earlier English Proceedings. [13] This material was subject to a confidentiality protocol that prohibited its use in other matters. [13]

On 13 October 2023, Mellor J granted permission to serve the proceedings out of the jurisdiction following a without notice application on an ex parte basis. [12]

On 22 November 2023, InterDigital filed an application contesting jurisdiction (the Jurisdiction Application). [14] While the parties agreed on the Court's jurisdiction over a Cellular SEP licence starting 1 January 2024, no such agreement existed for a Portfolio Licence. [14] As part of this Jurisdiction Application, InterDigital also sought to set aside the service out order. [15] InterDigital contended that Lenovo had failed to provide full and frank disclosure to Mellor J in its without notice application for out of jurisdiction service. [15]

On 3 December 2023, Lenovo became aware that it potentially committed a breach of CPR 31.22 and the confidentiality protocol applicable to the Earlier English Proceedings. [16] The breaches were subsequently considered by Zacaroli J in a separate judgment reported at [2024] EWHC 742 (Pat). [17] Zacaroli J found that the breaches did take place but were inadvertent. [18] While Lenovo had deliberately used the material for the present proceedings, it did not appreciate that such use was not permitted. [18] Zacaroli J described the breaches as serious. [19] He nonetheless made an order giving Lenovo limited retrospective permission to use the information. [17]

In the course of Interdigital jurisdictional contest Lenovo accepted that its particulars of claim needed amendment. [20] Lenovo accordingly made an application for permission to amend its Particulars of Claim (the Amendment Application). [7]

By the present judgment, dated 25 April 2024, Richards J ruled on both applications. [7] The Jurisdiction Application was dismissed, and the Amendment Application was granted. [21] The order for service out of jurisdiction was not set aside. [22]

B. Court's reasoning

The Merits Test

The Court held that both applications depended on the same question: whether the Portfolio Licence claim had a real, rather than fanciful, prospect of success. Its answer was dispositive of both. [23]

The Court identified that Lenovo was required to satisfy three conditions to obtain permission to serve out:
(i) that there was a serious issue to be tried on the merits,
(ii) that there was a good arguable case that the claim fell within a Practice Direction 6B gateway, and
(iii) that England and Wales was clearly the appropriate forum. [24]

Similarly, to obtain permission to amend under CPR 17.3, Lenovo was required to show that the claim as amended had a real prospect of success. The parties agreed this test was identical to the merits limb of the service out test. [25] Since InterDigital did not contest the gateway or forum limbs, it was common ground that the merits test was the sole issue in dispute. [23]

Adopting the approach in case Kawasaki Kisen Kaisha Ltd. v James Kemball Ltd. [2023] EWCA Civ 33, the Court confirmed that the claim had to carry a degree of conviction beyond being merely arguable and had to be pleaded coherently and properly particularised. It also had to be supported by evidence establishing a factual basis meeting that standard. [26]

The Court established guidelines for applying the merits test. It should not engage in a mini trial without the benefit of disclosure, should not resolve conflicts of fact, and should consider evidence that could reasonably be expected to be available at trial. It also noted that it should think carefully before deciding a single issue where a full trial on liability involving evidence and cross-examination would be required. [27] The Court emphasised that each claim must independently satisfy the merits test. This requirement prevents a permissible claim from acting as a 'Trojan horse' for other claims over which the Court would otherwise lack jurisdiction. [28]
 

The Portfolio Licence Claim

The Court found that Lenovo's Portfolio Licence claim had a realistic prospect of success. [29] The Court held that Lenovo explained why the FRAND Commitment, combined with the undertaking, produced an obligation to offer a Portfolio Licence. [30] The Court conveyed the gist of that argument by reference to publicly available material: InterDigital had entered licences with other parties, for example, a licence with Xiaomi covering SEPs relating to 3G, 4G, 5G, Wi-Fi and HEVC video technology. Moreover, there were other instances of similar arrangements extending beyond Cellular SEPs. Those facts, together with Lenovo's own experience of InterDigital's practice, were suggestive of a wider pattern of behaviour. Given that pattern, it would be discriminatory for InterDigital not to offer Lenovo a similar deal, and therefore a Portfolio Licence would be FRAND. [31]

The Court further clarified that Lenovo's claim was 'based squarely' on InterDigital's specific factual position and licensing practices. It was not on any general proposition that an owner of a single SEP must licence its entire portfolio. [32]

The Court held that the prior determination of a Cellular SEP-only licence as FRAND does not necessarily compel the same conclusion at present. Mellor J could only decide based on the evidence before him, and no party had argued for a Portfolio Licence in that instance. New comparable licences might emerge through disclosure, and existing licences could be examined 'with different eyes'. [33]

The Court rejected the argument that InterDigital's "right to choose" rendered a Portfolio Licence determination pointless. [34] The right to choose, as established in Nokia v Oppo [2023] EWHC 1912, is the principle that a patentee meets its FRAND obligation by offering any licence on FRAND terms. Where more than one set of terms qualifies as FRAND, may elect which to offer. [35] The Court noted that the relevant jurisprudence is still evolving and that 'there was a realistic prospect that 'a court might balk at the full consequences.' The Court pointed out that in any event, InterDigital can only exercise its choice after the court has already determined the FRAND terms. This objection could therefore apply to any licence determination. Moreover, InterDigital might ultimately find the court's terms attractive and decide to offer them. The Court also found that such a declaration has utility even if InterDigital offers different terms. Findings on licensing practices could support future damages or competition law claims. [36]

Finally, the Court held that it was 'too early' to deny Lenovo the opportunity to prove at trial, by reference to the full suite of evidence, that a Portfolio Licence would be FRAND. It was 'highly likely' that InterDigital would be required to give disclosure of comparable licences with other counterparties, and whether Lenovo's claim was ultimately 'runnable' would depend substantially on the weight of that disclosure. [37]
 

French Law and Obligation to Offer a Portfolio Licence

The Court held that the ETSI FRAND commitment operates as a contractual obligation toward ETSI in the form of a stipulation pour autrui governed by French law. [38] However, it found it "difficult to see" how French contract law could generate a specific obligation to offer a Portfolio Licence. [39] The Court reasoned that any licence offered by InterDigital would constitute a separate contract from the ETSI stipulation under Clause 6.1 of the ETSI IPR Policy. There was no legal basis for such a separate contract to be governed by French law. [39] The Court accepted that Lenovo used French law as a "shield" rather than a "sword." This deployment aimed to counter a hypothetical argument (never actually raised by InterDigital) that French law precluded the ETSI stipulation from requiring a Portfolio Licence offer. [40] Accordingly, the Court clarified that the alleged "discrimination," was meant in its ordinary English sense rather than a specific French legal sense. It referred simply to the act of offering one thing to some parties and something else to others. [41]
 

Sufficiency of Pleadings

The Court held that, notwithstanding certain drafting deficiencies, the pleadings articulated a claim with a realistic prospect of success. [29] Various remaining drafting deficiencies were questions of drafting rather than failures to articulate a viable claim. Lenovo's task was to plead a claim with a realistic prospect of success, 'not to produce a masterpiece of drafting perfection'. [42] The Court concluded that the merits test should focus on the fair meaning of the pleading as a whole, 'considered realistically'. [43]
 

Full and Frank Disclosure

The Court declined to set aside the order for service out for lack of full and frank disclosure. [15] The Court reiterated that an applicant obtaining a without notice order must show 'the utmost good faith'. The applicant must disclose and identify 'all facts which could reasonably be taken into account by the judge'. Failure to do so may lead to the order being set aside even if it would probably have been made in any event. [44] The Court confirmed that these principles apply equally to without notice applications for service out. [45] It was highlighted that non-disclosure gives rise to a discretion (not an automatic obligation) to set the order aside. [45] The materiality of the undisclosed fact and whether the non-disclosure was innocent or inadvertent are relevant to that exercise, though neither is determinative. [45]

The Court found that non-disclosure could only arise if Lenovo had known of the breaches at the time of the supporting witness statement or Mellor J's order. [46] Zacaroli J had found that, while Lenovo deliberately used the disclosed material for the present proceedings, it did not appreciate that such use was prohibited. Accordingly, the requisite knowledge was absent. [47] The Court further held that the continuing duty of full and frank disclosure had in any event ceased by the date Lenovo discovered the breaches. That duty continues only for as long as proceedings remain on an 'ex parte basis'. InterDigital had already served its Jurisdiction Application on 22 November 2023, thus, the inter partes process was 'already well under way'. [48] While Lenovo could be criticised for not notifying the court of the breaches earlier, setting aside the order was not the appropriate sanction where the Jurisdiction Application had been fully argued on the merits and had failed. [49]

The Court rejected the argument that Lenovo had been obliged to disclose that the Portfolio Licence claim was an 'ambitious try-on', finding that this characterisation set the bar 'too high'. [50] The Court found that there was 'nothing innately surprising' about Lenovo seeking a licence through the ETSI FRAND Commitment. [51] Based on its negotiations and public information, Lenovo had a reasonable basis to believe that SEP licences could be 'combined with wider arrangements' to 'secure patent peace'. [52]

• [1] Lenovo v InterDigital [2024] EWHC 1036 (Pat), para. 1.
• [2] Ibid, para. 4.
• [3] Ibid, para. 4(i).
• [4] Ibid, para. 4(ii).
• [5] Ibid, para. 4(iii).
• [6] Ibid, para. 5.
• [7] Ibid, para. 1.
• [8] Ibid, para. 6.
• [9] Ibid, paras. 6, 9.
• [10] Ibid, para. 7.
• [11] Ibid, para. 8.
• [12] Ibid, para. 10.
• [13] Ibid, para. 59.
• [14] Ibid, para. 11.
• [15] Ibid, para. 56.
• [16] Ibid, para. 59-62.
• [17] Ibid, para. 60.
• [18] Ibid, para. 61.
• [19] Ibid, para. 62.
• [20] Ibid, paras. 11, 47.
• [21] Ibid, paras. 55, 79.
• [22] Ibid, para. 78.
• [23] Ibid, para. 16.
• [24] Ibid, para. 13.
• [25] Ibid, para. 15.
• [26] Ibid, para. 17 citing para. 18 Kawasaki Kisen Kaisha Ltd. v James Kemball Ltd. [2023] EWCA Civ 33
• [27] Ibid, para. 18.
• [28] Ibid, para. 14.
• [29] Ibid, para. 50.
• [30] Ibid, para. 23.
• [31] Ibid, para. 23.
• [32] Ibid, para. 42.
• [33] Ibid, paras. 36–37.
• [34] Ibid, para. 34,36.
• [35] bid, para. 34.
• [36] Ibid, paras. 38–39.
• [37] Ibid, para. 45.
• [38] Ibid, para. 5.
• [39] Ibid, para. 29.
• [40] Ibid, para. 30.
• [41] Ibid, para. 31.
• [42] Ibid, paras. 47–49.
• [43] Ibid, paras. 54–55.
• [44] Ibid, para. 57.
• [45] Ibid, para. 58.
• [46] Ibid, para. 62.
• [47] Ibid, paras. 61–62.
• [48] Ibid, paras. 64–65.
• [49] Ibid, para. 66.
• [50] Ibid, para. 67.
• [51] Ibid, para. 68.
• [52] Ibid, para. 69.