HTC v Nokia: In the United Kingdom will an injunction be granted following a finding of patent infringement?

Author: Gary Moss: EIP Legal

HTC Corporation v Nokia Corporation [2013] EWHC 3778 (Pat), Patents Court, England and Wales, 3 December 2013

Journal of Intellectual Property Law & Practice (2014) doi: 10.1093/jiplp/jpu019, first published online: March 16, 2014

In this action Mr Justice Arnold granted a final injunction restraining HTC from continuing to sell products which he had previously determined infringed Nokia's patent. In doing so, he clarified the test to be applied when considering whether to grant a final injunction in patent cases.

Legal context

In May 2013 the author co-authored a paper (R Lundie-Smith and G Moss ‘Bard v Gore: to injunct, or not to injunct, what is the question? Is it right to reward an infringer for successfully exploiting a patent?’ (2013) 8(5) JIPLP 359) analysing the differences in approaches of the courts in the United States and the United Kingdom as to the grant of final injunctions in patent infringement cases. In particular, we drew attention to the fact that, following the decision of the US Supreme Court in eBay Inc v MercExchange, LLC, 547 US 388 (2006), the US courts had adopted a ‘balance of harm’ approach, whereas in the UK the approach still appeared to be that the claimant was entitled to an injunction unless the harm inflicted on the defendant by the grant of the injunction would be ‘grossly disproportionate’ to the continuing damage likely to be suffered by the patentee.

Further opportunity to assess the approach of the UK courts to this issue arose in HTC v Nokia. This followed the decision by Arnold J in October 2013 that HTC had infringed Nokia's European Patent (UK) No. 0,998,024 (the ‘024 patent) and that the patent was valid. The question which arose in the subsequent hearing was as to the consequences which flowed from this decision and, in particular, whether Nokia could secure an injunction?

Facts

An important aspect of the ‘024 patent was that it had not been declared essential to any telecoms standard. This meant that there had not been the usual fair, reasonable, and non-discriminatory (FRAND) undertaking in respect of this patent, and HTC could not avail itself of the defence that Nokia would have been obliged to grant it a licence under the patent had HTC been a willing licensee.

HTC nevertheless argued that, even though it had been found to be infringing Nokia's valid patent, Nokia's remedy should lie in damages alone. HTC relied inter alia on the following factors which, it said were present:

* the patented element formed only a small part of the overall commercial device;

* the royalties were likely to be small;

* Nokia was ‘only interested in money’ since it had licensed its patents to others and was on the verge of selling its handset business to Microsoft;

* Nokia had already granted licences to Apple and RIM and, according to HTC, Google, Samsung and LG were also infringing, but Nokia had not taken action to restrain their activities; and

* the grant of an injunction would have a disproportionately adverse impact on HTC given that the injunction would apply to its best-selling HTC One telephone.

All of which cut very little ice with the Arnold J. One matter which exercised him in particular was that it appeared that alternative, non-infringing solutions were available to HTC, but that HTC had not taken contingency steps to ensure that such alternatives could be implemented immediately, notwithstanding the fact that it had known since 2011 that Nokia was of the view that HTC's chips infringed a number of Nokia's non-standard essential patents.

Analysis

The UK law on whether an injunction will be granted following a successful finding of infringement derives from the decision in Shelfer v City of London Electric Lighting Co (1895) 1 Ch 287. In that case, A L Smith LJ stated that ‘it was a good working rule’ that damages could be given in substitution for an injunction:

* if the injury to the plaintiff's legal rights is small,

* it is one which is capable of being estimated in money,

* it is one which can be adequately compensated by a small money payment, and

* the case is one in which it would be oppressive to the defendant to grant an injunction.

Absent such factors, the claimant was entitled to the injunction.

In Navitaire Inc v EasyJet Airline Co Ltd (No 2) [2004] EWHC 2271 (Ch) Pumfrey J said that he understood the use of the word ‘oppressive’ in A L Smith LJ's formulation to mean that the grant of the injunction had to be ‘grossly disproportionate’ to the right protected. Pumfrey J's interpretation was cited with approval by Jacob LJ in Virgin Atlantic Airways Ltd v Premium Aircraft Interiors UK Ltd [2011] EWCA Civ 163.

However, commentators have queried how this sits with Article 3(2) of Directive 2004/48 on the enforcement of intellectual property rights which provides that remedies shall be:

… effective, proportionate and dissuasive and shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse.

The question raised was, how does one square the circle between something which is not ‘grossly disproportionate’ and something which is ‘proportionate’? Theoretically, each should be the mirror image of the other, but in that case what does the word ‘grossly’ add?

Arnold J stated that in his view the time had come to recognize that, in cases concerning infringement of intellectual property rights, the criteria to be applied when deciding whether or not to grant an injunction are those laid down by Article 3(2) of the Enforcement Directive. However, he also pointed out that the provisions of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) dealing with compulsory licences were of relevance in this context, since the effect of refusing an injunction following a finding of infringement was de facto the grant of a compulsory licence to the infringer. Article 30 of TRIPS provides that although Member States can provide limited exceptions to the exclusive rights conferred by a patent, such exceptions should not unreasonably conflict with the normal exploitation of the patent or unreasonably prejudice the legitimate rights of the patent owner. Arnold J concluded thus: I consider that Article 3(2) of the Enforcement Directive permits and requires the court to refuse to grant an injunction where it would be disproportionate to grant one even having regard to the requirements of efficacy and dissuasiveness. Where the right sought to be enforced by the injunction is a patent, however, the court must be very cautious before making an order which is tantamount to a compulsory licence in circumstances where no compulsory licence would be available. It follows that, where no other countervailing right is in play, the burden on the party seeking to show that the injunction would be disproportionate is a heavy one. Arnold J ended by commenting that he suspected that the practical effect of his conclusion was little different from the ‘grossly disproportionate’ test of Pumfrey J.

Applying these conclusions to the case before him, he decided that an injunction should be granted. Nevertheless, there was some relief for HTC in that, although he granted the injunction, he also stayed its implementation in respect of HTC's main product, the One, pending its appeal against his substantive findings on validity and infringement.

Practical significance

This case highlights that in the UK it is still the ‘norm’ that, following a finding of patent infringement, the presumption is in favour of the grant of an injunction. This is primarily due to the very nature of the right granted, ie a right to exclude all others from working the invention, and the fact that the injunction is the primary way of enforcing that right. That is not to say that injunctions follow automatically; each case will turn on its own facts. But, as Arnold J said, the burden on the party seeking to show that the grant of the injunction would be disproportionate is a heavy one.

Contrast this with the position in the USA where, following eBay, the question of whether or not a final injunction will be granted now appears to turn on the balance of equities. Moreover, as highlighted in our earlier paper, the US courts have not shied away from granting what is tantamount to compulsory licences and awarding ongoing royalties.

In the discussions regarding the Rules of Procedure for the Unified Patents Court, some commentators have suggested that when dealing with the power to grant injunctions there should be included so called ‘eBay’ provisions. By that is meant rules specifically providing that the court can only grant an injunction if the case satisfies the proportionality test. However, as this case graphically demonstrates, the European law on ‘proportionality’ in this area is significantly different from the test laid down by the US Supreme Court in eBay. To conflate the two approaches risks weakening the current protections enjoyed by patent owners in Europe and would be tantamount to enacting a change in the substantive law via the back door.

Euro-injunction mechanism in Community designs: Samsung Galaxy Tab European ban partially lifted

Author: Séverine Mas, avocate

Apple Inc. v Samsung Electronics GmbH and Samsung Electronics Co. Ltd, Düsseldorf Tribunal of first instance (Landgericht), Germany, Press Release No 013/2011 of 9 September 2011 concerning case No 14 c O 194/11

Journal of Intellectual Property Law & Practice (2011) doi: 10.1093/jiplp/jpr181, first published online: November 23, 2011

The 14th Civil Division of the Düsseldorf Tribunal of first instance confirmed an interim decision preventing the German firm Samsung Electronics GmbH from selling the Samsung Galaxy Tab 10.1 in the whole of the European Union, on account of a potential infringement of a Community design registered by Apple. The ban was, however, restricted to the German territory for sales by Samsung Electronics Co. Ltd, based in South Korea.

Legal context

The court examined its authority to grant a European injunction in the case of a Community design infringement, in application of Articles 82 and 83 of the Community Designs Regulation (EC Regulation 6/2002), following two interim decisions rendered on 9 and 16 August by the same court.

Facts

In a preliminary injunction (9 August 2011), the Düsseldorf court of first instance prohibited the sale, import, export, and interim storage of the Samsung Galaxy Tab 10.1 in the whole of the EU except in the Netherlands, on the grounds that it potentially infringes Apple's Community design rights (Community design 000181607 for the iPad product).

However, the President of the Düsseldorf court announced on 16 August that execution of that decision was suspended. The announcement stated that the court did not have jurisdiction to grant a European-wide injunction forbidding a company based outside the European Union to commercialize its products in the EU. The ground stated for the suspension was that the court was asked to examine an interim matter and thus did not have such far-reaching powers.

The decision for the appeal filed by Samsung against the 9 August injunction, following the court hearing of 25 August, was rendered on 9 September.

The Landgericht maintained the injunction against Samsung Electronics GmbH, a German company, confirming the prohibition of selling the Samsung Galaxy Tab 10.1 in the EU, and in particular, the prohibition of producing, offering for sale, commercializing, importing, exporting, or storing the product for these purposes.

With regard to Samsung Electronics Co. Ltd, based in South Korea, the court has, however, limited the ban to the German territory. The European-wide ban was lifted.

Analysis

Competition is fierce in the tablet PC market, and registrations of IP rights are some means of obtaining a competitive advantage. The current context is part of a legal strategy between Apple products and Android-based smartphones and tablet PCs (Android is an open-source operating system created by Google, used by several manufacturers including Samsung).

The mechanism of the European injunction in favour of Community design owners allows Community design courts to prohibit the sale of a product potentially infringing a Community design, in the whole European Union territory, without examining the grounds for the claims (ie the validity of the design registered). As the German decision has not yet been published, we assume that the injunction was based on Article 85 of the Community Designs Regulation. The Regulation on Community designs requires that in proceedings for an alleged infringement action, the courts treat the Community design as valid (Article 85 of the Regulation). Validity can only be challenged through a counterclaim for a declaration of invalidity, or by way of counterclaim in so far as the defendant claims that the Community design could be declared invalid on account of an earlier national design right belonging to the defendant.

The Düsseldorf Landgericht's summary judgment of 9 August is an exceptional decision, given its scope and potential consequences. We should, however, bear in mind that the tribunal had no choice but to consider the design as valid. Acting on an interim matter, the court could not examine the grounds of the claims. It could only examine the existence of IP rights on which the claims were based.

This leads on to the validity of the Community design. Apple's registered Community design may be seen as so basic that the ‘individual character’ condition of Article 6 may be absent. In addition, the shape of the design can be considered being dictated by the functionality of a tablet PC (Figure 1).

Apple's registered design for a handheld computer

Design law requires that the form of a design not be solely dictated by its technical function (Article 8 of the Regulation). It is therefore questionable that a simple rectangular, flat geometric shape be registered as a Community design for a tablet PC. The shape in itself could be seen as being dictated by the functionality of the apparatus, which is to provide a tactile screen for interaction with the user.

In conclusion, it is possible that the design may be declared invalid in the future. The legal issue at stake would then fall under the realms of unfair competition rather than of industrial property rights.

Practical significance

A similar provision relating to trade marks allows national courts to grant Euro-injunctions in favour of trade mark owners (Article 98 of the Community Trade Mark Regulation). The extent of jurisdiction on Community design infringement depends on the international jurisdiction criteria stated in Article 82 of the Community Designs Regulation. Article 82(1) states that infringement proceedings

shall be brought in the courts of the Member State in which the defendant is domiciled or, if he is not domiciled in any of the Member States, in any Member State in which he has an establishment.

Article 85(2) states that if

the defendant is neither domiciled nor has an establishment in any of the Member States, such proceedings shall be brought in the courts of the Member State in which the plaintiff is domiciled or, if he is not domiciled in any of the Member States, in any Member State in which he has an establishment.

If the claimant or the defendant is domiciled or has an establishment in the Member State, the Community Design Court will have authority to grant a Euro-injunction based upon the Community Design Regulation, Article 83(1). If, however, the court is acting only so as to stop potential infringement in the Member State in which the act of infringement has been committed or is going to be committed—the forum loci delicti (Article 82(5))—it will not have the authority to grant a Euro-injunction (Article 83(2)).

In the present case, the defendants were Samsung Electronics GmbH (based near Frankfurt) and Samsung Electronics Co. Ltd (headquartered in South Korea). The reasoning behind the suspension of the execution of the original 9 August decision is that the court only had jurisdiction to grant a Euro-injunction towards Samsung's German defendant. With regard to Samsung Korea, the company is not viewed as an ‘establishment’ in the sense of the Regulation. This may be due to a problem of translation of the European Regulation into German. In the German version of the text, the term ‘establishment’ is translated as ‘Niederlassung’. This can mean either an independent company or a subsidiary.

In order for Article 82(1) to apply, Samsung Electronics GmbH would need to be considered a subsidiary of Samsung Electronics Co. Ltd (South Korea). This seems not to be the case. Due to the plaintiff's headquarters being situated in California, Article 82(2) could not be applied either.

The appropriate form of action in order to obtain a Euro-injunction would have been for Apple Inc. to have applied to the courts of Alicante in Spain, where the OAMI is situated (Article 82(3)).

Industrial property offices have a great responsibility in maintaining a healthy market, by being cautious before granting industrial property rights. The combination of Articles 83 and 85 of the Community Design Regulation creates a powerful instrument for corporations. Aggressive registration of questionable designs followed by summary injunctions seeking a European ban is an effective technique for eliminating competition.

In the case of abusive procedures, there is little in the way of compensation for victims if the design is subsequently invalidated. This current state of affairs may limit healthy competition and place a brake on innovation in the European Community market.