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UK – Koninklijke Philips v. Asustek Computer / Appeal

14 Jan 2020

Koninklijke Philips N.V. v Asustek Computer Inc [2019] EWCA Civ 2230 (17 December 2019)

In this judgment the Court of Appeal (Floyd LJ giving the only judgment) upheld the decisions of the Patents Court on the validity of three patents owned by the Claimant, Koninklijke Philips (‘Philips’). Arnold J (as he then was) had previously heard the two technical first instance trials in this ongoing FRAND dispute between Philips and the Defendants (three Asustek companies (‘Asustek’) and two HTC companies (‘HTC’)) finding two of the patents valid and one invalid.

Philips is the proprietor of three patents which it had declared were essential to the European Telecommunications Standards Institute (‘ETSI’) Universal Mobile Telecommunications System (‘UMTS’) standard (the ‘Standard’), in particular the sections relating to the High-Speed Pack Access (‘HSPA’):
• EP (UK) No. 1 440 525 (‘525’);
• EP (UK) No. 1 685 659 (‘659’); and
• EP (UK) No. 1 623 511 (‘511’).

Both the Asustek and HTC sell HSPA compatible mobile phones, which Philips allege infringe these patents by reason of their essentiality to the HSPA sections of the Standard.

The Appeals
The appeal concerned all three patents; in each case the unsuccessful party or parties (Philips in respect of the 659 patent and Asustek/HTC in respect of the 525 and 511 patents) appealed by challenging Arnold J’s conclusions on the issue of obviousness (and also on an issue of construction in the case of the 511 patent).

525 Patent
The 525 patent concerns the ability of a mobile phone to send back a message to the base station acknowledging safe receipt of a packet of data (an ‘ACK’ message). If the data packet is not received then the mobile should send a negative acknowledgement (a ‘NACK’) message back to the base station, thereby requesting it to retransmit the data. It is commonly accepted that these acknowledgments may be sent in error and create false ACKs or NACKs. The 525 patent seeks to reduce the room for error by transmitting the ACK and NACK signals at different at different power levels.

The only issue on appeal was whether the trial judge was right to reject the case of obviousness over prior art from 2001 (the ‘Shad’ document), which proposed that ACKs and NACKs were transmitted using different powers and that power savings could be made by differentially powering ACKs and NACKS.

The key question Floyd LJ asked was whether it would have been obvious to the skilled person, rather than implementing the method in the Shad document as proposed, to implement this method at the base station instead of the mobile station. Arnold J had concluded that the skilled person would have followed Shad’s proposal to optimise his algorithm and not have been prompted to think of alternative ways of implementing it.

Floyd LJ found that the trial judge correctly applied the law and found that there was no error of principle and that his evaluation of obviousness is entitled to great respect by an appellate court (citing Biogen v Medeva [1997] RPC 2).

He also warned against the danger of hindsight when considering small seemingly simple steps from the prior art which, when analysed, often turn out not to be obvious. In this case he agreed with Arnold J that there was nothing to prompt the skilled person to implement the Shad idea elsewhere. The 525 patent effectively “took the blinkers off” and made its case for implementing in the base station and enabling the skilled person to see how that might be advantageously implemented. The judge was correct to find the patent 525 valid.

659 Patent
The 659 patent purports to address the recurring problem of how to make the most efficient use of system resources for wireless mobile telecommunications It discloses a method of freeing up system resources by dispensing with the Designated Physical Control Channel (DPCCH) and using the Common Pilot Signal or transmit power control commands or bits (TPCs) instead.

Arnold J found the patent to be obvious over prior art that was in effect a single citation, consisting of two contributions made to working groups ahead of the priority date in 2003 (‘the Nortel Documents’) which disclosed a code-sharing technique to free up system resources by removing pilot bits.

Philips’ appeal against Arnold J’s finding of obviousness, included submitting that commercial considerations (namely concerns about the impact on backwards compatibility and the cost of implementation would prevent the skilled person from removing the pilot bits as per the Nortel Documents) ought not, in law, to be excluded from a consideration of obviousness.

Citing Hallen Co and another v Brabantia (UK) Ltd [1991] RPC 195 and Dyson Appliances Ltd v Hoover Ltd [2002] RPC 22, Floyd LJ summarised:

‘that a commercially driven mindset can be a relevant aspect of the skilled person’s common general knowledge. Thus, what the skilled person did in the light of a given prior disclosure had to be decided with that mindset in mind. If the technical differences from the prior art to the invention were trivial, then the mindset might not matter, but if more substantial changes were involved, the court might conclude that the reluctant and prejudiced skilled person would not make them. If the court reaches the conclusion that the claimed invention would be arrived at by the skilled person, there is no further hurdle to be crossed concerned with whether the invention would be perceived as likely to lead to sufficient commercial success to make its manufacture worthwhile.’

Floyd LJ agreed with Arnold J that it was obvious to the skilled person reading the Nortel Documents that the dedicated pilot bits could be dispensed with if you were prepared to dispense with the functions for which they were technically necessary. Given the preliminary conclusion that the invention was technically obvious, Floyd LJ agreed that no error of law had been made by treating the commercial considerations as irrelevant. The judge was correct to find the patent 659 to be invalid for obviousness.

511 Patent
The 511 patent discloses a transmitter power control scheme that seeks to address the issue of increased power consumption when channel conditions are poor, which increases interference to other users and can degrade system efficiencies.

There were two issues in this appeal; first regarding the construction of the claim and secondly, the judge’s dismissal of an obviousness case, advanced by the Defendants in the alternative.

The Defendants’ construction argument was rejected. Floyd LJ held that the trial judge had correctly considered the entirety of the patent’s specification and not just the introductory paragraphs, stating that:

‘the skilled person would understand that the 511 patent describes a counterintuitive strategy for dealing with bad channel conditions. He or she would readily understand from the specification as a whole that the strategy could be applied to the transmit power of a single data signal. The fact that the invention permitted an overall reduction in transmission power would not drive the skilled reader to the conclusion that it was only intended to claim the use of the inventive strategy in that situation.’

In the alternative (if the 511 patent is construed so widely as to include a system in which there is a reduction in transmission power only on some channels), the Defendants argued that the 511 patent was invalid for obviousness over a piece of prior art, namely the Physical Layer Standard for a code-division multiple access method (‘CDMA’). The Defendants argued that the trial judge had misconstrued the contents of the CDMA, in particular one paragraph, on transmission power reduction, referred to in the judgment as the ‘disputed paragraph’.

Floyd LJ arrived at the same conclusion as Arnold J, albeit by a different interpretation of the CDMA and upheld his decision that the disputed paragraph did not render the 511 patent obvious. The judge was correct to find the 511 patent valid.

The Court of Appeal upheld the findings of trial judge and the appeals by both Asustek and Philips were dismissed.

The full judgment can be accessed here.

Headnote: Gabriella Simon and Amy Crouch, Simmons & Simmons