13 July 2016
When Intellectual Ventures (IV), the world’s largest non-practising entity, sued Vodafone GmbH for infringement of a batch of its standard essential patents (SEPs) in Germany last September, it probably wasn’t expecting the communications services provider to launch a FRAND counterattack in Ireland. But that’s exactly what has happened. Last month, the Irish High Court gave an indication that Ireland was the appropriate jurisdiction for hearing Vodafone’s allegations that two companies in the IV group – IV International (based in Ireland) and IV LLC (based in Delaware, USA) – had breached their obligations to license their SEPs on FRAND terms. As far as we’re aware, this is the first Irish case on issues relating to FRAND and SEP licensing. As the Irish High Court noted in its judgment, the patent and competition law issues raised by Vodafone’s application made it “something of a first in the Irish courts”. According to the judgment, IV first approached Vodafone to discuss the terms of a licence to various IV patent portfolios in 2012. No agreement was reached, however; and IV LLC filed two sets of patent infringement proceedings against Vodafone GmbH in Germany in September 2015 and January 2016. The patents in question relate to DSL technology, a type of broadband technology which connects a user to a high-speed internet connection across a telephone network. DSL services operate in accordance with so-called ‘xDSL standards’, which are set by the International Telecommunications Union (commonly known as the ITU). Like other standard-setting organisations, the ITU has developed policies relating to IP rights which require SEP holders to license their patents on FRAND terms. Vodafone has alleged that IV abused its dominant position on the markets for the licensing of the relevant patents by making a licence offer to Vodafone on non-FRAND terms and failing adequately to explain how the patents in question are said to be infringed. In making these allegations, Vodafone has expressly relied on the CJEU’s July 2015 judgment in Huawei v ZTE (which we commented on here and here).
At this early stage, two aspects of the case are interesting:
1. Vodafone’s attempt to sue IV for breach of its FRAND obligations in Ireland
Vodafone’s ‘Irish torpedo’ strategy is noteworthy. We are not involved in the case and so can only speculate, but it is plausible that Vodafone’s aim in bringing FRAND proceedings in Ireland may be to seek to limit the prospect of IV obtaining swift injunctive relief in Germany (in the event that any of its patents are found to be infringed). Whether this will work is unclear. Immediately, it’s important to bear in mind that the Irish Court’s judgment is based on Vodafone’s ex parte application for permission to serve a defendant (IV LLC) out of the jurisdiction. IV has not yet had the chance to make any points about jurisdiction or the nature of its dispute with Vodafone. The Irish Court states that it has been “advised” that “none of the eleven sets of proceedings [which IV has commenced against Vodafone in Germany] involves or is related to issues of FRAND licensing”. This leads the Irish Court to take the view that it may have jurisdiction because the issues before it do not involve the same subject matter or cause of action as the issues already before the German Court. But if IV can show that FRAND / SEP licensing issues are in fact relevant to the German proceedings, this puts the Irish Court’s jurisdiction in issue. It remains to be seen whether IV will bring a jurisdiction challenge.
2. The types of declaratory relief sought
Vodafone has asked for a number of declarations (some in the alternative). In particular, the Irish Court’s judgment makes clear that Vodafone wants the Court to determine that: (i) the terms of the written licence offer made by IV in March 2016 were not FRAND; and (ii) the terms of the licence counter-offer made by Vodafone in June 2016 were FRAND. In addition, and perhaps more interestingly, if neither IV’s offer nor Vodafone’s counter-offer is deemed to be FRAND, Vodafone wants the Irish Court to determine the terms and conditions of a licence “of the relevant patents for use in Germany” which would be FRAND. It is not entirely clear from the judgment whether Vodafone is asking the Irish Court to identify FRAND terms and conditions just for the individual patents on which IV has sued in Germany, or whether it would instead like the Court to deal with some kind of wider IV patent portfolio. If it’s the latter, it would be interesting to see whether the Irish Court takes a similar approach to that taken by Mr Justice Birss in Vringo v ZTE ( EWHC 1591 (Pat) and [2015 EWHC 214 (Pat)). In that case, the English High Court judge held that the court should only be able to set the terms of a portfolio licence if both parties agree to be bound by such a determination.
The question of FRAND rates and “what is FRAND” has been of great interest in the TMT sector for some time (as we have discussed previously, for example here and here). A couple of cases have grappled with it, but guidance remains sparse. It will be very interesting to see whether the Irish Court is willing and able to grasp the thorny issue, and we will be watching closely the next move from IV in the litigation and whether it resists Vodafone’s FRAND manoeuvre.