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18 Mar 2021

Adaptive Spectrum and Signal Alignment Incorporated v. Koninklijke KPN N.V., KPN B.V., Telfort Zakelijk B.V., XS4ALL Internet B.V. and Nokia Solutions and Networks Nederland B.V., 16 March 2021, Case No. 200.272.142/01

On 16 March 2021 the Dutch Court of Appeal of The Hague rendered an early decision in the appeal proceedings between ASSIA, KPN (and several of its group entities) and Nokia Solutions and Networks (“Nokia”). The Appeal Court annuls the decision of the District Court of The Hague in first instance (EPLAW headnote here), insofar it had found the claims 8, 10, 11, 12, 15 and 18 of EP 2259456 (“EP 456”) valid, now finding those claims invalid and for the rest confirming the rest of the judgment in first instance. The new cost order limits in place since 1 September 2020 are used, despite objections by Nokia that those limits were not in place when the appeal proceedings were initiated by ASSIA.

ASSIA is the exclusive licensee for EP456, which is entitled “Dynamic digital communication system control” and relates to the vectored VDSL2 / G-Vector standard communication protocol. KPN, a Dutch telecom network operator, uses VDSL2 in its Digital Subscriber Line Access Multiplexer (hereinafter: “DSLAM”).

In first instance, ASSIA sought an injunction against KPN for infringement of EP456. Since it alleged that KPN refused to accept the license offered by ASSIA against FRAND conditions, ASSIA alternatively requested the Court to declare that KPN infringes its patent EP ‘456 and that KPN should be ordered to accept a license for a fee of € 2.25 for every existing or new user of KPN’s broadband network in the Netherlands that uses the method protected by EP456. Nokia intervened in the proceedings and the Dutch court found both independent claims of EP 456 invalid for added matter and ordered ASSIA to pay the full cost of the proceedings for KPN and Nokia, in the amount of 1.25 million euros.

Defense arguments

Nokia raised a number of defense arguments in the appeal, namely

1) that ASSIA was inadmissible in its appeal since it had extended the scope of the proceedings from infringement regarding downstream crosstalk (in first instance) to also infringement regarding upstream crosstalk (in appeal);
2) that the patent was non-essential to the G-Vector standard and infringement was insufficiently shown in evidence outside of infringement by compliance to the standard; and
3) that the patent was invalid, for lack of novelty or inventive step, added matter or insufficient disclosure.

Court assessment

The Court of Appeal rejected the admissibility argument and focused on the added matter defense. On that point, the Court of Appeal emphasised that when assessing the presence of inadmissible added matter, it is not a question of whether a certain explanation, with present knowledge, can be found in the original application, but whether this explanation, considered as a whole by the original application, was directly and unambiguously, implicitly or explicitly, disclosed on the priority date to the average person skilled in the art using his general professional knowledge. Only that which the average person skilled in the art reads ‘automatically’, as it were, or which follows logically from the text for him, can be considered (implicitly) disclosed. However, the average professional is not considered capable of inventive or creative thinking. In so far as a certain explanation of the original application requires such thoughts, this explanation cannot be deemed to have been directly and unambiguously revealed to the average person skilled in the art.

Applying this test, the Court of Appeal found that claims 1 and 16 of EP 456 were invalid, since they contained added matter. On the priority date the person skilled in the art would not directly and unambiguously have read into the original application that precoding (whatever precoder is used) would not result in significant increase of energy of the signal. The feature 1k (“the method being characterised by including the further step of allocating energy in frequency independently within each of said communication lines being used by each said user”) later added in the prosecution was thus incorrectly not limited to non-linear precoding with preferred precoder disclosed in EP 456. Where the court of first instance left several dependent claims of EP456 ‘alive’, the court of appeal now follows Nokia in revoking these as well.

Nokia sought to have the Court also declare EP456 as a whole invalid, arguing that otherwise, some slimmed-down version of EP456 might one day return to haunt Nokia. The Court of Appeal found that in such a hypothetical case, a different form of the patent would be in suit and such a declaratory judgement would then have no effect. Nokia’s claim was thus refused.

Some final discussion regarded the cost orders: although ASSIA insufficiently refuted Nokia’s claim that it had been forced to make additional costs because of ASSIA’s stance in the FRAND licence discussions, including reports by a FRAND expert.

Effect of the new Dutch legal cost order limits in patent cases

The new cost order limits or patent cases (other IP enforcement cases have had them for many years now) have been in place since 1 September 2020. The new limits were applied in this case, despite objections by Nokia that those limits were not in place when the appeal proceedings were initiated by ASSIA. These objections were set aside by the Court, since article 14 of the EU Enforcement Directive and the resulting Dutch legislation merely require that the cost order be “reasonable and proportionate”: the new limits merely fill in this criterium.

The Court of Appeal finds this case to be a ‘highly complex’ matter and thus sets the maximum legal cost order at 250 000 euros, albeit plus some 19.000 euros for its expert (those are not limited under the new rules). Note that Nokia’s actual costs amounted to 435 754 euros. KPN spent 239 818 euros, but its preparation costs were deemed excessive in view of the fact that Nokia took care of the FRAND argumentation, so that it only was awarded a cost order of 200 000 euros, plus its expert costs of some 61 000 euros. This is a good example of how the new cost order limits for patent cases in the Netherlands work out in practice.

The judgment (in Dutch) can be found here.

Headnote: Maurits Westerik, Coupry