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Koninklijke Philips NV v Asustek Computer Inc., HTC Corporation and others, UK Patents Court, Arnold J, 9 September 2016, Neutral Citation Number [2016] EWHC 2220 (Pat)

This judgment relates to a preliminary issue in a dispute between Philips and ASUS/HTC.  In the main dispute Philips have alleged that the defendants have infringed patents that are essential to the Universal Mobile Telecommunications System (UMTS) standard.  HTC has claimed that the patents are not in fact essential to the standard and that, in any event, HTC has the benefit of a covenant given by Philips in a 1998 agreement between Philips and Qualcomm, to the effect that Philips will not to sue licensees of Qualcomm under any of Philips’ patents that are (or are claimed to be) essential to the UMTS standard.  Philips’ position was that, although HTC did indeed have the benefit of this covenant, the covenant did not extend to the infringing acts complained of.

The UK court directed that the question of whether the covenant covered HTC’s allegedly infringing acts should be tried as a preliminary issue.  The agreement in question was governed by Californian law and the court accordingly heard evidence from experts in Californian law regarding the interpretation of the agreement, as well as evidence from technical experts.

The covenant in question was contained in clause 4.3 of the agreement.  This provided, inter alia, that Philips would not assert any of their “CDMA Technically Necessary Patents” against acts of infringement relating to a “CDMA Wireless Industry Standard of a CDMA Technically Necessary Patent Beneficiary”, subject to a proviso that affirmed Philips’ right to assert its patents in relation to “TDMA” equipment or systems.  The main issue was whether the alleged infringements by HTC were acts of infringement relating to a CDMA Wireless Industry Standard.  “CDMA” stands for “code division multiple access”, a technique for permitting multiple access between mobile stations and a base station within a cellular network.  “TDMA” is another technique called time division multiple access (“TDMA”).

The system employed by HTC was a hybrid TDMA/CDMA system.  The question was therefore whether the covenant in clause 4.3 of the agreement covered hybrid systems or was restricted to “pure” CDMA systems.  The judge’s conclusion was that he preferred Philips’ interpretation and that the clause 4.3 covenant did not cover hybrid systems.  The proviso also supported Philips’ view, as the examples given in the agreement of TDMA systems included hybrid systems.  Finally, had clause 4.3 extended to HTC’s acts of infringement, it would only have applied to acts relating to Qualcomm-based products, not chipsets purchased from third parties.

Subject to any appeal that may be brought against this decision, the court will now proceed to hear the issues of validity and infringement.

A copy of the judgment can be read here.

Headnote: Graham Burnett-Hall, Marks & Clerk