Optis Cellular Technology LLC & Ors v Apple Retail UK Limited & Ors

CONTENTS

INTRODUCTION

Hand-down of the Judgment

On 10 May 2023, I handed down my Judgment in these proceedings under Neutral Citation Number [2023] EWHC 1095 (Ch) (the Unredacted Judgment). Although I handed down the Judgment on this date, the hand-down was (due to issues of confidentiality) confined to certain defined persons sitting in a confidentiality ring. On 7 June 2023, I handed down a significantly redacted version of the Unredacted Judgment (the Redacted Judgment). At my express direction, the parties redacted the Unredacted Judgment on an aggressive basis (i.e. erring on the side of over-redaction), so as to ensure that arguments about what was confidential should not be prejudiced. This judgment – the Redacted Judgment – was released to the public under cover of a note from me, dated 29 May 2023 (somewhat earlier than the date of hand-down), explaining the status of the Redacted Judgment.

All references to the Judgment are indifferent references to either of the Redacted or Unredacted Judgment. I will seek generally to refer to the Judgment, and will only differentiate between the Unredacted Judgment and the Redacted Judgment where the question of redaction is material.

Some concern has been expressed by interested third parties that the Redacted Judgment is not widely available. It appears neither in The National Archives nor on Bailii. That is not for want of effort on my part: The National Archives – for reasons that are obscure to me – were asked to and declined to publish the Redacted Judgment. Bailii were also asked to publish the Redacted Judgment, and were unable to do so because they are contractually obliged only to publish that which appears in The National Archives. HMCTS declined to publish the Redacted Judgment on the Courts and Tribunals Judiciary website, again for reasons that are obscure.

I share the concern expressed about this deficit in open access to judgments. I can only say that I have done my best to procure the wider circulation of the Redacted Judgment: but that those efforts proved less successful than I would have liked. The point is now academic, for the Redacted Judgment is available on Westlaw. I cannot say for how long that has been the case.

The Judgment

The Judgment is lengthy, and there is no point in seeking to summarise its reasoning. Whilst it will be necessary to consider, in some detail, aspects of the Judgment during the course of this Judgment on Consequential Matters, the Judgment is taken as read. The terms and abbreviations set out in Annex 1 to the Judgment are adopted.

The FRAND Question

Although the Judgment is long, it is concerned with a single – albeit multi-faceted – question. The Judgment defines this as the “FRAND Question” in the following terms: (Footnote: ¹)

“Although Optis say they are ready and willing to give a FRAND licence over the Portfolio, and Apple say they are ready and willing to take such a licence, it will come as no surprise to the reader that Optis and Apple have been unable to reach agreement as to the terms of the actual FRAND licence that would resolve the licensing issues arising out of Optis’ ownership of the Portfolio. It was common ground – at least before me – that the function of this trial was to state the terms of a FRAND licence in respect of the Portfolio. That issue is simply stated, but – as will be seen – gives rise to a multiplicity of subordinate questions. I shall refer to the fundamental issue of the terms of the FRAND licence to be imposed as the FRAND Question.”

The FRAND Question was resolved in the following way:

Consequential matters arising for determination

A number of consequential matters arise out of the Judgment. They are as follows:

These issues were thoroughly aired at a three-day consequentials hearing in July 2023. At the end of that hearing – given the scope of the issues under consideration – it was anticipated that a further hearing would be needed to “fine-tune” the above matters. It was anticipated that a draft Judgment on Consequential Matters would be circulated to facilitate this. This occurred on 7 August 2023. A further hearing was diarised – unfortunately, for as late as December 2023, due to unavoidable commitments. At this hearing, there was not so much a “fine-tuning” as a wholesale re-visiting of some of the issues that, for my part, I considered had been dealt with. As a result, some parts of this Judgment on Consequential Matters deal with what might appear to be the same point twice over: that is because I heard similar, but not exactly the same, arguments on similar, but not exactly the same, points.

FINAL SCOPE OF THE REDACTIONS TO THE REDACTED JUDGMENT

The issue of confidentiality stated

The comparables

As is clear from the Judgment, comparable licences formed an important element underlying the reasoning in the Judgment. It would not be overstating matters that the answer to the FRAND Question could not have been obtained without these comparables; and it is difficult to see what defensible (Footnote: ¹⁴) answer I could have reached without these materials.

The comparables put forward by the parties fell into two classes:

Given the fact that the royalties payable pursuant to the terms of the comparables before me were calculated on different bases, the parties and court were faced with the difficulty of rendering that which was not comparable, comparable. This is referred to in the Judgment as the “unpacking” of licences, whereby the experts on each side sought to “translate” a lump sum rate into an ad valorem rate and vice versa.

Whilst this is in no way a criticism of the experts undertaking this exercise (who did their best), the Judgment finds that “unpacking” was a subjective and highly unreliable process, which failed to render licences using different royalty calculation rates truly comparable. (Footnote: ²⁰)

The Judgment answers the FRAND Question by reference to the lump sum comparables – which essentially comprised the Apple Comparables plus the Google 2020 (Optis) licence (Footnote: ²¹) – and declines to use the remaining Optis Comparables (i.e. all of Optis’ Comparables apart from the Google 2020 (Optis) licence) for reasons stated in the Judgment. (Footnote: ²²) The Judgment approaches the question of ad valorem assessment and lump sum assessment of royalties in a FRAND licence as alternatives and (for the reasons given) does not use unpacked ad valorem licences in the lump sum process (nor would it have used lump sum licences in the ad valorem process, had that been the route to answering the FRAND Question). (Footnote: ²³)

The protection of confidentiality in the comparables

Although the comparable licences were provided on disclosure during Trial E by Optis and Apple respectively, many of the counterparties to the licences that were Apple Comparables had the benefit of contractual provisions protecting the confidentiality of the terms of the licences. It is fair to say that all of the counterparties to Apple in the Apple Comparables that made submissions to the Court, and to a lesser but nevertheless important degree the counterparties to Optis in the Optis Comparables, were concerned to ensure that their contractual (and any other) rights as to confidentiality were respected and that the terms of these licences were not deployed in public. Apple itself was in many cases bound to assert the confidentiality of the licences and, most conscientiously, did so.

It might have been possible to override the confidentiality provisions in the Apple Comparables and – in effect – force their publication without the co-operation of the Optis/Apple Counterparties at an early stage in the Trial E proceedings. That is a course none of the Judges involved in this litigation (myself included) countenanced, because it was considered better to procure voluntary compliance of the Optis/Apple Counterparties with the court’s disclosure regime. The price of that voluntary compliance was: (i) the introduction of the comparable licences into a confidentiality regime; (ii) the use of a procedure for referring to the counterparties to the licences by “code names”; and (iii) avoiding oral reference, where possible, to rates during court proceedings, with the parties instead inviting the court to read what was stated on paper, rather than saying the rate out loud. In this way, it was possible to conduct a trial in public, whilst protecting information that had been asserted to be (but not necessarily found to be) confidential. That process proved largely successful, thanks to the skill of counsel and the use of a 15 second delay in the transmission of the livestream of the proceedings, so that any (limited) slips were confined to within the court room itself.

It is important to stress that this regime operated without any finding on the part of the Court as to whether the information protected as confidential was in fact confidential. Indeed, it became clear, during the course of the proceedings that the redactions were on any view) excessive, and that confidentiality had been asserted (not least by the Optis/Apple Counterparties) in an overly broad-brush manner.

These documents were admitted into the proceedings on this basis, pursuant to various orders of this Court, and nothing was said about the end-product of the process, the judgment itself. The point was never addressed and the assumption appears to have been (at least on the part of the parties and of the Court) that whilst the judgment would obviously respect the interests of the Optis/Apple Counterparties, at the end of the day the terms of the judgment, what was said openly and what would be redacted would be a matter for the Court. That assumption proved false, and a number of days have been spent litigating this (collateral) matter, and enormous out-of-court time and money have been expended.

I say this not to minimise the importance of confidentiality, including the interests of Optis/Apple Counterparties, but to indicate that for the future more efficient ways need to be identified to deal with issues of confidentiality.

The main (but not the only) driver of assertions of confidentiality was the lump sum rates contained in the comparable licences. The importance of the confidentiality of rates is explained in many witness statements from the Third Parties, that were deployed before me for the purposes of the confidentiality hearing. I will set out the explanation provided by one of those Third Parties, Ericsson, in a statement of a Mr Robert Earle dated 19 July 2023:

“13.

Ericsson is used to its licences being provided in disclosure or discovery proceedings, both those to which it is a party and those where it is not. Even in cases where Ericsson is not a party, it accepts the need in the interests of justice for such disclosure in jurisdictions whose procedures require it. In some jurisdictions, particularly the US, “EEO” (“external eyes only”) status is generally maintained. In England, where I understand limited disclosure of particularly relevant information to named individuals (say two) within a party to litigation can be required (in particular at a later stage of the proceedings), Ericsson is reassured that it will have the right to voice concerns and make such observations as are appropriate in the particular circumstances, before such wider disclosure is ordered. Such disclosure in England and Wales I understand is always subject to the obligation in Civil Procedure Rules (CPR) 31.22 that documents may only be used for the purpose of the proceedings and to the recipient giving a confidentiality undertaking to the Court, the terms of which typically include restrictions that prevent the recipient using the information for any purpose other than those proceedings and obligations not to be involved in licensing negotiations, either at all or with the parties to the relevant licence.

14.

Publication of details of a transaction to the world at large in a public judgment naturally has the potential to have a much greater impact on Ericsson’s business than disclosure on an EEO basis, or to a very limited number of representatives of a litigation party. If, at the time when the question arose as to the potential production of documents containing Ericsson information by one party to these proceedings to outside counsel of the other (on the “Restricted Confidential” basis), Ericsson had recognised that public dissemination of its confidential information beyond the levels of the Unwired Planet judgment might take place in due course, it would likely have strongly objected to the production at that stage.

…

34.

Amounts paid under a licence are the most sensitive part of the agreement and need to be understood in the context of the licence overall. Publication of this material would also lead to “information asymmetry” in future licence negotiations that Ericsson may conduct. The prospective licensee would know how much Ericsson had received from Apple as consideration for Apple’s licence. On the other hand, Ericsson would not know what the prospective licensee had paid other SEP holders.

35.

In short, publication of that information could only assist the prospective licensee, and weaken Ericsson’s negotiating position, in future negotiations.

…

36.

There are a number of ways of structuring consideration, and combinations of such structures; how this is done is often an important aspect of the transaction, Making public the terms on which Ericsson has transferred its patents in a prior transaction potentially alters the balance of negotiations in respect of future transfers to Ericsson’s detriment. For instance, a prospective transferee that is aware of the way in which consideration for the patent rights was structured in an earlier transaction to which it was not a party will have increased negotiating power to press for a similar structure.”

Classification of types of redaction in the Redacted Judgment and other changes proposed to the Judgment

For purposes of analysis, I propose initially to classify passages in the Redacted Judgment under the following general headings. I will then use those headings to analyse the issues of confidentiality (or, sometimes, just correction) that arise out of the Redacted Judgment. I propose to do so in general terms. The table at Annex 1 to this Judgment on Consequential Matters then describes in detail how I have dealt with the issues of confidentiality. Annex 1 itself refers to redactions that are marked on the Judgment. Redactions for confidentiality that have been accepted are marked . That which has been redacted cannot be seen by those not within the confidentiality ring for obvious reasons. Redactions for confidentiality that have not been accepted (including those areas where clarification was sought) are marked in transparent grey so that it is clear where confidentiality has been raised as an issue, but the text is still legible. I should make clear that the Optis/Apple Counterparties have yet to consider their position in regard to the redactions that I am determining should be lifted. It will, therefore, not be possible to circulate a further version of the Judgment at the same time as this Judgment on Consequential Matters. This Judgment on Consequential Matters has been drafted so that it raises no issues of confidentiality, and I am enormously grateful to the parties for enabling this. But there may be an appeal against my decision in regard to the redacting of the Judgment and – until that has been sorted out – it would wrong to cause to be published a version of the Judgment that would render such appeal pointless.

My scheme of classification in regard to the types of redaction is as follows:

I will consider these various classes below.

Directions regarding adjustments to the Redacted and Unredacted Judgments

Class 1: Immaterial objective errors in the Judgment to be corrected under the “slip” rule

Normally, Third Parties have no right to seek to engage in the drafting of a Judgment that has been handed down and is final. The only reason I am prepared to entertain these points at all is because they are somewhat incidental to the question of cutting back redactions from the Redacted Judgment. Ordinarily, the need to control costs and the need for some kind of finality must mean that such points (unless, for example, they involve imputations of dishonesty to a named third party or are similarly serious) cannot be entertained. (Footnote: ²⁶)

Accordingly, the general answer to such corrections ought to be a firm “No”. In this case, given the exceptional circumstances that I have described in the previous paragraph, I am prepared to make corrections under the “slip” rule provided:

Class 2: Subjective changes to the wording of the Judgment, because a Third Party dislikes the manner in which a point has been expressed and/or redactions that do not relate to Third Party confidential documents

I am in no doubt that changes of this sort should not be made; nor any redactions falling within this class maintained. The reasons are obvious, and I state them briefly:

The changes that Ericsson seek to make to the Judgment fall squarely within this category. As the Judgment makes clear, the licensing of the Ericsson Patent Families occupied the Court for some time. (Footnote: ²⁷) The Court’s approach to this question makes a very significant difference to the sums Apple must pay to Optis.

Apple have kept their options open as to the Ericsson Patent Families. Apple accepts that, as an Implementer, they must have a licence, but that such a licence could be obtained either from Optis or from Ericsson. In terms of emphasis, Apple’s preferred route varied. The route was confirmed at a very late stage, and required some late re-consideration of the Court’s approach to the FRAND Question, which is only now finally resolved later on in this Judgment on Consequential Matters. I have not revisited the transcripts, but I would be quite surprised if – despite the care of counsel – the details of Apple’s ability to license the Ericsson Patent Families had not been adverted to in open court. But in any event:

I am grateful to the parties for their careful over-redaction, which (as I have said) occurred at my direction. But no party should have sought to maintain confidentiality in these passages, whether generally or in specific regard to Ericsson. These redactions should be removed from the Redacted Judgment.

Class 3: References to lump sum royalties payable in the Apple Comparables and in the Google 2020 (Optis) licence

The “old” test for protection of confidential information

The parties were agreed that what I shall (for reasons I will come to) refer to as the “old” test for the protection of confidential information was set out by Birss J in Unwired Planet International Ltd v. Huawei Technologies Ltd: (Footnote: ²⁸)

“22.

I derive the following principles applicable to a case like this:

23.

Unless the public can see and understand a judge’s reasons they cannot hold the courts to account. There is therefore a strong principle that all parts of a judgment should normally be publicly available. Nevertheless there are occasions on which judgments may be redacted. Redactions will require powerful reasons, supported by cogent evidence which addresses the details. Generalities will not do. Although redactions will be rare indeed when looking across the legal system in general, certain kinds of proceedings may regularly involve redactions due to the nature of the proceedings and the material involved. In any event however redactions must be kept to the bare minimum.

24.

Factors which will be relevant include: (i) the nature of the information itself: for example cases in which some redaction could include technical trade secrets and private information about family life. (ii) The effect of the publication of the information. This will be a critical factor. If publication would be truly against the public interest then no doubt the information should be redacted. If publication would destroy the subject matter of the proceedings – such as a technical trade secret – then redaction may be justified. The effect on competition and competitiveness could be a factor but will need to be examined critically. (iii) The nature of the proceedings: for example privacy injunctions and competition law claims may require some redaction while an intellectual property damages claim may not. The point is not that different kinds of case demand a different approach, it is that the balance of factors will change in different cases (e.g. the need to encourage leniency applications in competition law). (iv) The relationship between the information in issue and the judgment (as well as the proceedings as a whole). Obviously, judges do not deliberately insert irrelevant information into judgments but not every word of a judgment is as important as every other word. It may be that some sensitive information can be redacted without seriously undermining the public’s understanding of the reasons. (v) The relationship between the person seeking to restrain publication of the information and the proceedings themselves (including the judgment). For example, a patentee seeking damages for patent infringement on a lost profit basis knows that they will have to disclose their profit margin in the proceedings and that those proceedings are public. A third party whose only relationship with the case is that they are a party to a contract disclosed by one of the parties to the litigation is in a different position.”

Application of the “old” test in this case

Turning, then, to the facts of this case:

It therefore seems to me that there would have to be significantly more cogent evidence from the Third Parties (and Apple) addressing the manner in which SEP Owners and Implementers approach negotiations in a context where there is an obligation on the SEP Owner to grant a licence that is FRAND. It seems to me that a certain degree of frankness about rates is, in this context, called for, given the legal environment described in Part I of the Unredacted Judgment. No party has adduced evidence in relation to this point.

Finally:

My conclusion, therefore, is that under the “old” law regarding redactions, I would not be minded to make the Class 3 redactions permanent. It was urged upon me that this was inconsistent with the approach of Birss J in Unwired Planet (Footnote: ³⁶) and Mellor J in Interdigital Technology Corporation v. Lenovo Group Ltd, (Footnote: ³⁷) the two previous FRAND rate disputes in this jurisdiction. I do not accept this. I am applying the law as articulated and applied by Birss J in Unwired Planet, and as applied by Mellor J, following Birss J, in Interdigital. Both Judges concluded that some – but not all – rates should be redacted. Taking the same approach, I have concluded that, in this case and on the law that I have so far considered, the redactions sought cannot be maintained.

However, due to a recent development in the law arising out of a decision of the Court of Appeal handed down since the decisions of Birss J and Mellor J in Unwired Planet and Interdigital, I am obliged to reach a conclusion that results in rather greater redaction than either Birss J or Mellor J ordered, and which goes beyond what I have decided on the basis of the “old” law. It is to that decision, and its effect, that I now turn.

The “new” test and its application

The Trade Secrets (Enforcement, etc) Regulations 2018 (Footnote: ³⁸) are regulations made pursuant to section 2(2) of the European Communities Act 1972 (the Regulations). They implement, as the explanatory note at the end of the Regulations states, Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (the Directive).

The Regulations define a “trade secret” in the following terms:

““trade secret” means information which –

(a)

is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among, or readily accessible to, persons within the circles that normally deal with the kind of information in question,

(b)

has commercial value because it is secret, and

(c)

has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret”

The definition thus has three, cumulative, “limbs”.

Many of the provisions in the Directive and the Regulation do not, on their face, concern questions regarding the redaction of court judgments, but rather seek to prevent the unlawful access to trade secrets (as defined) and so protect them. However, Article 9 of the Directive (Footnote: ³⁹) concerns the protection of trade secrets in the course of legal proceedings, and there is an obvious link between the Directive, the Regulation and the redaction of judgments so as to protect “trade secrets” as defined in the Directive and in the Regulation. It was this link which informed the decision of the Court of Appeal in JC Bamford Excavators Ltd v. Manitou UK Ltd. (Footnote: ⁴⁰) As Arnold LJ observed (giving a judgment with which the President of the Family Division and Elisabeth Laing LJ concurred), “the issues raised by this case involve Manitou’s private interest in protecting its allegedly confidential information and the public interest in open justice”. (Footnote: ⁴¹) That is precisely the question which arises here.

It is unnecessary for me to consider further “this curious provision”, as Arnold LJ termed Article 9, for the Court of Appeal did so in its judgment in Bamford in a manner that is binding on me. At [57], Arnold LJ stated:

“It is not necessary for the purposes of these appeals to consider in detail the effect of this curious provision, but it appears to be primarily intended to ensure that, if and in so far as English law prior to the implementation of the Trade Secrets Directive was more favourable to the trade secret holder (as defined in regulation 2 and Article 2) than the minimum level of protection required by the Directive, then that greater level of protection shall continue to be available, but only in so far as it is consistent with the safeguards (i.e. for the defendant and third parties) required by the Directive. Regulation 3 does not appear to address the position if the Directive confers a greater protection than English law did previously; but presumably English law must, in accordance with well-established principles of EU law, be interpreted and applied, so far as possible, consistently with the Directive despite the failure of the UK to transpose Articles 3, 4 or 5. This is unaffected by Brexit, because the principle of supremacy of EU law continues to apply “so far as relevant to the interpretation, disapplication, or quashing of any enactment or rule of law passed or made before” 31 December 2020: see section 5(2) of the European Union (Withdrawal) Act 2018 and R (Open Rights Group) v. Secretary of State for the Home Department, [2021] EWCA Civ 800…”

Arnold LJ then considered the trade secrets exception to open justice:

“76.

In Scott v. Scott, the House of Lords recognised three limited exceptions to the open justice principle. As Viscount Haldane LC explained at 437-438: (Footnote: ⁴²)

“While the broad principle is that the Courts of this country must, as between parties, administer justice in public, this principle is subject to apparent exceptions, such as those to which I have referred. But the exceptions are themselves the outcome of a yet more fundamental principle that the chief object of Courts of justice must be to secure that justice is done. In the two cases of wards of Court and of lunatics the Court is really sitting primarily to guard the interests of the ward or the lunatic. Its jurisdiction is in this respect parental and administrative, and the disposal of controverted questions is an incident only in the jurisdiction. It may often be necessary, in order to attain its primary object, that the Court should exclude the public. The broad principle which ordinarily governs it therefore yields to the paramount duty, which is the care of the ward or the lunatic. The other case referred to, that of litigation as to a secret process, where the effect of publicity would be to destroy the subject-matter, illustrates a class which stands on a different footing. There it may well be that justice could not be done at all if it had to be done in public. As the paramount object must always be to do justice, the general rule as to publicity, after all only the means to an end, must accordingly yield. But the burden lies on those seeking to displace its application in the particular case to make out that the ordinary rule must as of necessity be superseded by this paramount consideration. The question is by no means one which, consistently with the spirit of our jurisprudence, can be dealt with by the judge as resting in his mere discretion as to what is expedient. The latter must treat it as one of principle, and as turning, not on convenience, but on necessity.”

77.

While Viscount Haldane referred to a “secret process” in this passage, as did Lord Atkinson (at 450), the Earl of Halsbury (at 443), Earl Loreburn (at 448) and Lord Shaw (at 482) all referred more generally to “trade secrets”. None of their lordships elaborated upon what would constitute a trade secret for this purpose, but it is evident that they contemplated information that was not merely confidential, but also of significant value. As indicated above, subsequent jurisprudence distinguishes between trade secrets and lower grade confidential information in the employment context. In my judgment the same distinction applies in this context.

78.

In claims for misuse of trade secrets, it is common for a series of steps to be taken to protect the confidentiality of the claimant’s information. First, the trade secrets are typically set out and particularised in a confidential annex to the particulars of claim which is only disclosed to members of a confidentiality club, some of whom may be required to give confidentiality undertakings. Secondly, disclosure documents, witness statements and experts’ reports are typically disclosed in full to members of the confidentiality club and in redacted form to others. Thirdly, at trial steps will be taken to enable as much of the hearing as possible to take place in open court, by making an interim order under rule 31.22(2) and referring to rather than reading out the confidential information, but where necessary the court will sit in private. Fourthly, the judgment of the court will typically be given first in a confidential version and subsequently in a public version from which the confidential information has been redacted. Newey J’s judgment in Kerry v. Bakkavor is an example of this: the public version from which I have cited is redacted so as not to reveal the details of the claimant’s production method. Fifthly, a permanent order under rule 31.22(2) will typically be made after judgment. I shall discuss some of these steps in more detail below. The result is that English civil procedure has long complied with what is now required by Article 9 of the Trade Secrets Directive and Regulation 10 of the Regulations.

79.

Although the third exception contemplated by the House of Lords in Scott v. Scott concerned claims by claimants to protect their trade secrets from misuse, it has long been recognised that the same principle can apply to proceedings in which the party seeking to protect its trade secret is the defendant.

80.

This can arise in the context of claims for misuse of trade secrets. In such claims, it is not infrequently the case that the defendant contends that its own information is equally confidential. In such circumstances the confidentiality arrangements adopted are typically bilateral. Vestergaard v. Bestnet is an example of this, as I explained in my trial judgment [2009] EWHC 657 (Ch) at [5]-[6].

81.

It can also arise in the context of claims for patent infringement in which the defendant contends that the allegedly infringing product or process embodies or implements some trade secret. In such a case the claimant may well need disclosure of documents that reveal the trade secret in order to prove its case. But the defendant, which is a volunteer to the proceedings, should not have its trade secret published, and thus destroyed, as a result of exercising its right to defend itself. That would be just as much of an injustice as requiring a claimant in a claim for misuse of trade secrets to submit to having its trade secrets published, and thus destroyed, when seeking to enforce its rights.

82.

Thus in Smith & Nephew plc v. Convatec Technologies Inc,[2014] EWHC 146 (Pat) Birss J (as he then was) made a final order under rule 31.22(2), after the trial of a claim to determine whether Smith & Nephew’s product infringed Convatec’s patent, in order to protect the confidentiality of documents disclosed by Smith & Nephew setting out details of their manufacturing process which Birss J accepted could properly be characterised as a trade secret of Smith & Nephew. In that case Smith & Nephew had brought a claim for a declaration of non-infringement, but there was a counterclaim by Convatec for infringement, and there can be no doubt that the result would have been the same if Smith & Nephew had not brought their claim.”

What Arnold LJ said about this regime applying equivalently as between claimants and defendants (Footnote: ⁴³) must also be true as regards third parties (like the Third Parties here) whose information is deployed in litigation that otherwise has nothing to do with them, and into which they are involuntarily drawn.

The process described by Arnold LJ at [77] of his judgment would be very familiar to anyone who participated in the trial that resulted in the Redacted Judgment. I am concerned, as I have stated, with the question of how far these redactions should permanently be maintained. In this regard, Arnold LJ said this: (Footnote: ⁴⁴)

“103.

It is common ground that the judge’s decision involved an evaluation which this Court should not interfere with unless the judge erred in law or in principle. Although Manitou appeal on five grounds, the essence of all five is that the judge erred in principle because he wrongly treated the need for the public to understand his reasoning on the issue of infringement as trumping Manitou’s right to protect their confidential information.

104.

Having regard to the way in which this issue was argued before the judge, I think that his decision is entirely understandable. I have come to the conclusion, however, that the approach which both parties adopted in argument before him was erroneous. My reasons are as follows.

105.

The starting point, as the judge correctly identified, is the open justice principle. As discussed above, and as the judge was plainly acutely conscious, this applies with particular force to the judgment of the court explaining the reasons for its decision.

106.

…

107.

Nor do I consider that it is significant that Manitou are the defendants in this litigation. As discussed above, the applicability of the trade secrets exception to the open justice principle does not depend on whether the party wanting to protect its trade secrets is the claimant or the defendant. I do accept that parties should not be deterred from litigating in this jurisdiction by the prospect of having their trade secrets revealed by the court, but that is true whether they happen to be claimants or defendants.

108.

The crucial point in my judgment is the correct characterisation of Manitou’s claim. As indicated above, I consider that the information which Manitou seek to protect is properly characterised as technical trade secrets. It is technical information devised by a skilled engineer which on the evidence (i) is not public knowledge, (ii) complies with relevant standards and (iii) has been devised to avoid infringement of EP 382, and for those reasons (iv) is reasonably considered by Manitou to give them a competitive advantage against third parties. Counsel for Manitou acknowledged that he had not presented Manitou’s application to the judge as involving a claim for the protection of trade secrets, but it can be seen from Mr Bevan’s evidence that in substance that was precisely the nature of Manitou’s claim even though Mr Bevan did not use the expression “trade secrets” either.

109.

Furthermore, although it is not necessary to rest my decision upon this point, I consider that it is an error to dissect the package of information which Manitou seek to protect into its component parts for this purpose. Although, as I have observed, the relative confidentiality of documents revealing criterion X is not high, criterion X does not stand alone. Manitou are in my view entitled to be concerned at the prospect of competitors to whom criterion X has been revealed by the court being encouraged to try to work out the remaining details of configuration C.

110.

As Viscount Haldane explained in Scott v. Scott, open justice must only give way to the protection of trade secrets when, and to the extent that, this is necessary. Where it is necessary to protect trade secrets, however, open justice must give way to a still greater principle, which is justice itself. The court is not engaged in an exercise of trying to balance incommensurables. The effect of this can be seen in the trade secrets cases like Vestergaard v Bestnet and Kerry v Bakkavor: not only must the court sit in private to some extent, but also part of the court’s judgment must be redacted (or kept confidential in some other way). This may make it impossible for the public to understand the details of the court’s reasoning, but that is the price that must be paid for proper protection of trade secrets. This approach is well established in English law, but it receives support from recitals (24) and (25) and Article 9 of the Trade Secrets Directive, and in particular the requirement in Article 9(2)(c) for the court to have the power to publish non-confidential versions of judicial decisions from which the passages containing trade secrets have been removed or redacted (implemented by regulation 10 (5)(c)).”

The case before the Court of Appeal clearly concerned “trade secrets” in the sense of processes or information where (as Birss J noted in Unwired Planet) “publication would destroy the subject matter of the proceedings”, which is clearly not the case here. (Footnote: ⁴⁵) But the Court of Appeal’s judgment in Bamford ties into the evaluative process that I must undertake the definition of “trade secret” contained in the Directive and in the Regulations, which is far wider than the definition used by Birss J in Unwired Planet or (for that matter) that used by Lord Atkin in Scott v. Scott. The distinction, drawn by Arnold LJ at [77] of Bamford between “trade secrets” and “lower grade information” does not feature in the definition of “trade secret” in the Regulations (or in the Directive), and it is that definition that Bamford follows and adopts. (Footnote: ⁴⁶) As the Third Parties (supported by Apple) submitted, the Class 3 material identified by me clearly falls within the definition of “trade secret” as defined in the Directive and the Regulations. More specifically, and referring to limbs (a), (b) and (c) of the definition of “trade secret” set out at paragraph 34 above:

Applying the test articulated by Birss J in Unwired Planet, a balancing approach is appropriate between “trade secrets” (as defined in the Regulations: but what is there defined as “trade secrets” is really confidential information) and open justice. It is quite clear from what Arnold LJ said in Bamford as regards the Regulations that such a balancing exercise is not permissible now. Where a “trade secret” (as defined in the Regulations) is in play, open justice takes second place. I do not consider that such a balancing approach is open to me given the manner in which [110] of the Court of Appeal’s judgment is framed (by specific reference to the Directive and so the Regulation). Furthermore, to define “trade secret” by reference to a definition other than that contained in the Regulations (in other words, to narrow that definition to bring it more into line with what Birss J and the House of Lords in Scott v. Scott regarded as a “trade secret”) would be impermissibly to re-write judicially that which the legislature has enacted and the Court of Appeal has stated as the law.

Class 4: Other redactions in the “lump sum” licences

The “lump sum” licences contain other provisions that have – conservatively – been redacted in the Redacted Judgment and which it is necessary now to consider, having determined the confidentiality of the lump sum rates themselves.

The matters which have been redacted and are here under consideration are best identified by reference to Annex 3 in the Unredacted Judgment, although there are similar references throughout the Unredacted Judgment. (Footnote: ⁴⁷) The material so redacted concerns:

I do not consider that this material can be regarded as confidential under the “old” law considered and applied in paragraphs 27ff above. The parties and the Third Parties were concerned by the extent to which the lump sum rates (i.e. Class 3 material) could be inferred from this material. It follows that – given my conclusion that the Class 3 material is not protected under the “old” law, the same outcome must pertain in relation to this (Class 4) material. I should say that I have considered this material separately from and independently of the Class 3 material, and reached this conclusion independently (but for the reasons given above).

However, I have also concluded that the Class 3 material is to be protected under the “new” law. (Footnote: ⁵³) I must therefore consider:

Considering these points in turn, I turn first to the question of whether the Class 4 material is entitled to protection in its own right. I conclude that it is not. I do not consider that the Class 4 material can of itself fall within the definition of “trade secret” contained in the Regulations. Referring to the same, three, limbs of the definition (limb (a), limb (b) and limb (c)):

Turning, then, to the importance of not undermining the protection that it is appropriate to confer on the Class 3 material, I conclude as follows:

I should add that I have not considered the importance of the Class 4 material to the comprehensibility of the Judgment. A balancing exercise as between the protection of “trade secrets” and open justice does not arise on the Bamford test, and so I have not considered the matter. I should, however, say that this material is – as is self-evident from a comparison between the Redacted and the Unredacted Judgments – important in terms of the Judgment’s overall comprehensibility.

Class 5: Workings using lump sum rates

Various Optis/Apple Counterparties and Apple voiced the concern that workings in the Judgment using lump sum rates might, if published openly, enable the taking “back-bearings” or the conduct of a process of reverse engineering from those published materials so as to enable the agreed lump-sum rates in the “lump sum” licences to be indirectly derived. To the extent that this is the case, I accept that the redactions to Class 3 materials (which I am directing) would be undermined, and that this cannot be permitted. To do so would be to undermine the effectiveness of an order I am minded to make, and that (clearly) is undesirable.

In some cases, the need for redactions to continue is obvious. In others, the position is that the redactions can, safely, be lifted. In all cases, however, the test is whether there is a serious concern that the benefit of the redactions I am ordering would be undermined if further redactions are not made. As to this:

Class 6: Redactions relating to “ad valorem” licences

To the extent that Annex 3 contains references to “lump sums” in the Optis Comparables, (Footnote: ⁵⁵) I consider (consistent with Class 3 material) that this material should be redacted.

As regards other aspects of the licences:

Liberty to apply

I consider it appropriate to give persons not presently before the Court liberty to apply to have the redactions in the Judgment lifted. Normally, redactions would be final, but in this case, I have only heard submissions from those advocating for confidentiality, including those (Apple) contractually obliged to make such contentions. As the Judgment makes clear, I have concerns that concerted endeavours by significant market participants in regard to keeping rates secret (which is certainly one characterisation of what has been going on before me, although not necessarily the right one) constitutes a potential infringement of the Chapter I prohibition, given the fact that rates in the market are generally supposed to be FRAND. Non-discriminatory, as it seems to me, implies a degree of transparency.

I heard no argument on this point: no-one before me was willing to argue it, and that is understandable given the parties. I express no view upon it, save to repeat the concern I expressed at the end of the Judgment. But it does seem to me that, in these circumstances, a general liberty to apply should be afforded. I am very grateful to Mr Nicholson, KC, whose suggestion this in part was, and I adopt it.

A LICENCE FROM OPTIS TO APPLE IN RELATION TO THE ERICSSON PATENT FAMILIES

The Judgment proceeds on the basis that if Apple has rights to the Ericsson Patent Families directly from Ericsson, then they do not need a licence from Optis; but that if Apple does not have rights to the Ericsson Patent Families directly from Ericsson, they must obtain a licence from Optis as regards those patents. (Footnote: ⁵⁷) The Judgment thus saw this as a binary question: if Apple needed a licence from Optis as regards the Ericsson Patent Families, then Optis’ Stack share was 0.61%; if Apple did not need a licence from Optis as regards the Ericsson Patent Families, then Optis’ Stack share fell (so far as Apple were concerned) to 0.38%. (Footnote: ⁵⁸) The FRAND royalty rates would be computed accordingly. In the event, a Stack share of 0.38% was used. (Footnote: ⁵⁹)

It now appears – post-hand-down of the Judgment – that the position is not binary at all. The position is explained in paragraphs 64 and 65 of Apple’s position paper for the consequentials hearing, not reproduced here for reasons of alleged confidentiality.

At the consequentials hearing it was clear that the term of Apple’s Draft Licence referred to at paragraph 65 of Apple’s position paper for the consequentials hearing was indeed controversial, with Optis expressing the view that it was not right for Apple to extract without payment a licence on terms which the court had not determined to be FRAND. Optis also expressed a concern that the gaps between the limits to the arrangement with Ericsson and the licence including the Ericsson Patent Families that Optis could grant to Apple had not fully been articulated by Apple – and could not be explored further either by Optis or by the court, because these arrangements were confidential.

My initial view was that it ought to be possible for Apple and Optis to reach an agreement whereby an enhanced rate could be agreed between Apple and Optis in return for a licence to cover these issues. That would involve a rate calculated by reference to a Stack share going beyond the 0.38% Stack share used in the Judgment, but not as far as the 0.61% Stack share that disregards the Apple/Ericsson arrangements altogether. Whilst I am in no doubt that such an agreement could lawfully be reached as between Optis and Apple, as the outcome of a voluntary negotiation, I am equally in no doubt that it would be wrong in principle for this court to impose such a rate. It seems to me that unless Optis and Apple can reach a voluntary settlement on the point, the position is that Apple must choose between (i) a FRAND licence from Optis that includes the Ericsson Patent Families or (ii) a FRAND licence from Optis that excludes the Ericsson Patent Families.

In short, the choice (absent voluntary agreement) is precisely the binary one set out in the Judgment, and for good reason:

Accordingly, Apple must elect – and elect now – as between the binary options described above. Once that election has been made, the consequences that flow from it are (essentially) arithmetical.

INTEREST PAYABLE BY APPLE ON THE RELEASE FOR PAST INFRINGEMENT

One of the recurrent themes of Optis’ submissions during the course of Trial E was that the Supreme Court had, in Unwired Planet (SC), solved the problem of Hold Up, (Footnote: ⁶¹) but failed to solve (indeed, had exacerbated) the problem of Hold Out. (Footnote: ⁶²) The Judgment is a substantial rejection of that argument:

THE COSTS OF TRIAL E

The costs of Trial E will, on any view, be substantial. Apple took a conventional view on the questions of costs, which was to ask “Who was the winner?”. That is in ordinary civil litigation the first question that any court asks, and it is what underlies the rule that costs follow the event. (Footnote: ⁶⁸)

The problem with this approach is that both sides lost, it is simply that (taking the most extreme articulations of each party’s case) Optis arguably lost by more. (Footnote: ⁶⁹) As Apple put it in their position paper: (Footnote: ⁷⁰)

“Thus, while it is true that Apple will be writing a cheque for a sum that is c. 60% higher than it offered in the parties’ negotiations, Optis will (or rather would, if it were willing to sign the court-determined licence) be accepting a cheque for less than 1% of the amount that it demanded from Apple on the eve of issuing proceedings.”

Moreover, according to the procedure that I initiated on being docketed to the case, (Footnote: ⁷¹) the case was not about level of recovery (albeit that that would be the ultimate answer to the FRAND Question) but about the methodology or methodologies that should be used in order properly to derive an answer to the FRAND Question. (Footnote: ⁷²) On this basis, both parties were largely unsuccessful, and the fact that the court’s methodology resulted in an outcome more to Apple’s liking than Optis’ does not render this a case where the costs follow the event rule should blindly be followed.

The matter can be tested in another way. I was very conscious, when applying the methodology set out in Part V of the Judgment, that the outcome was above the highest Apple had been prepared to offer for a licence and below the lowest Optis had been prepared to accept.

Optis contended that this was a case much more in the mould of AEI Rediffusion Music Ltd v. Phonographic Performance Ltd. (Footnote: ⁷³) This case concerned an application to the Copyright Tribunal to settle the terms of a licence to broadcast sound recordings. The Copyright Tribunal did so, and then had to determine the question of costs. After some hesitation, (Footnote: ⁷⁴) the Copyright Tribunal decided the matter in a binary “Who was the winner?” way. On a second appeal, Mummery LJ said this: (Footnote: ⁷⁵)

“4.

The chairman of the Tribunal took the wrong approach. He proceeded on the basis of a self-imposed fetter on the discretion. He was influenced by the perceived need to find a winner and a loser in a case where the final determination of the tribunal was somewhere between the respective positions adopted by the parties. It is true that there will be some applications to the tribunal where it is possible to say that the licensing body is the winner. The tribunal may hold that the terms of payment and other conditions initially proposed by it were reasonable and that the terms of payment and conditions proposed by the user were unreasonable. Equally, there will be some applications where it is possible to say that the user is the winner of the application, because the terms initially proposed by the licensing body were unreasonable and the terms proposed by the user were reasonable. But where, as in this case, the tribunal determines that both the licensing body and the user proposed terms ultimately held to be unreasonable, it is not correct to proceed on the basis that the outcome must produce a winner and a loser. That is what the chairman did in this case. In the mistaken belief that “as a matter of policy”, he had to find an event for the costs to follow and identify a winner and a loser, he wrongly characterised PPL as the loser because its terms had been held to be unreasonable. He did not regard AEI as the loser, even though its terms were also held to be unreasonable. He did not think that that altered “the overall position that [AEI’s] actions in refusing the licence offered and asking the tribunal to substitute a different licence were justified”: [1998] EMLR 459, 461.

…

6.

The true position on the section 135D application is this. On the one hand, there was material before the tribunal on which an order for costs could be made against PPL because it had proposed unreasonably high terms of payment. On the other hand, there was also material, which the tribunal wrongly excluded from consideration as it regarded AEI as the winner, on which an order for costs could be made against AEI, because it had adopted an unreasonable position in its proposals for payment to PPL. It is incorrect to regard PPL as the loser simply because the terms proposed by it were unreasonable. Looking at all the relevant matters in the round there was a dispute between PPL and AEI on the amount to be paid under the statutory licence. AEI was entitled to broadcast the sound recordings under the statutory licence, provided that it followed the statutory procedure. It had to apply to the tribunal to settle the terms of payment. But on the matter of payment both parties took up positions which the tribunal ultimately determined to be unreasonable: PPL was asking for too much, AEI was prepared to pay too little. The outcome of the section 135D application, as determined on the basis of what was “reasonable in the circumstances”, was somewhere between those competing proposals. No order as to costs is the appropriate order in the case of the section 135D application…”

In my judgment, this approach articulates extremely well the position I find myself in, and I consider that the appropriate order as to costs in relation to the costs of Trial is no order as to costs. My reasoning is that of Mummery LJ, but it is appropriate that I say a little more:

In my judgment, this is clearly a case where the appropriate order is to make no order as to costs. There is one further consideration that weighs upon me: I have described the concern that exists in relation to Hold Out on the part of Implementers. If the costs regime consequent upon the resolution of a FRAND Question is that a SEP Owner might, too easily, be liable in costs, then an incentive to fight on the part of the Implementer may be built into the process. That would be undesirable.

THE SCOPE OF THE FRAND LICENCE: WHETHER CERTAIN PATENTS IN THE OPTIS PORTFOLIO CAN BE EXCLUDED FROM SCOPE

The EDTX Proceedings

Although I was aware of the existence of parallel – or, to be more accurate, partially duplicative – proceedings in the United States, namely the EDTX Proceedings, neither party addressed me as to the implications of this partial duplication during the course of Trial E. As will become apparent, this is a matter that ought to have been drawn to the court’s attention, and the relationship clarified, well before Trial E; and not after it. Be that as it may, the problem which has now arisen is that Optis wishes to take inconsistent positions in the two sets of proceedings. That question must now be resolved.

The position in the EDTX Proceedings, as those proceedings relate to these, is as follows:

Analysis

The nature of this jurisdiction

The nature of the FRAND jurisdiction was set out – doing no more than summarising the outcome of the decision of the Supreme Court in Unwired Planet (SC) – in Part I of the Judgment. The following points need to be emphasised for they are of fundamental importance to the question here under consideration: (Footnote: ⁸⁶)

This is not a case of competing jurisdictions

Optis contended that it would be wrong for this court to interfere with the EDTX proceedings. Optis stressed that the judgments obtained by them in the United States were res judicata, and that questions of comity between courts precluded this court from interfering with a court (such as the US District Court for the Eastern District of Texas) with territorial jurisdiction over patents infringed or alleged to have been infringed in that jurisdiction. (Footnote: ⁸⁸)

In general terms, I accept the point made by Optis as regards res judicata and the importance of comity between jurisdictions. But I regard these points as irrelevant to the question at hand. There is no doubt that Optis and Apple, acting in concert, can dispose of the EDTX Proceedings in any way they wish. Indeed, even if those proceedings had concluded, with Apple actually paying US$300 million to Optis in damages, (Footnote: ⁸⁹) there would be nothing to prevent Optis (solvency allowing) from repaying that amount to Apple, if it chose to do so. The point is that the EDTX proceedings – as is the case with civil proceedings generally – can be disposed of by the parties according to their will, and courts across this jurisdiction and in the United States will give effect to the will of the parties. Questions of comity, res judicata, competing judgments and rival jurisdictions treading on each other’s toes in violation of international comity between courts and jurisdictions simply do not arise.

There can be more than one set of true FRAND terms

As I have described, the outcome of Trial E is – at the minimum – a declaration by the court that certain terms as between a SEP Owner and an Implementer are “FRAND”. This, essentially, is the FRAND Question, and the Judgment goes a long way to answering it. But certain aspects of the FRAND Question remain unresolved: it was the purpose of the consequentials hearing, and of this Judgment on Consequential Matters, to resolve those questions.

It is clear law that there can be more than one set of FRAND terms for any given set of circumstances. That was not the conclusion of Birss J in Unwired Planet (First Instance), but that was the conclusion of the Court of Appeal, and that conclusion was not challenged in nor criticised by the Supreme Court in Unwired Planet (SC). The Court of Appeal stated: (Footnote: ⁹⁰)

“We have come to a different conclusion from that of the judge on the question whether there can be only one set of FRAND terms for any given set of circumstances. Patent licences are complex and, having regard to the commercial priorities of the participating undertakings and the experience and preferences of the individuals involved, may be structured in different ways in terms of, for example, the particular contracting parties, the rights to be included in the licence, the geographical scope of the licence, the products to be licensed, royalty rates and how they are to be assessed, and payment terms. Further, concepts such as fairness and reasonableness do not sit easily with such a rigid approach. In our judgment it is unreal to suggest that two parties, acting fairly and reasonably, will necessarily arrive at precisely the same set of licence terms as two other parties, also acting fairly and reasonably and faced with the same set of circumstances. To the contrary, the reality is that a number of sets of terms may all be fair and reasonable in a given set of circumstances.”

Of course, a Court-Determined Licence cannot avoid stating the terms of a FRAND licence in unequivocal terms where the parties to a FRAND dispute are in disagreement. But that does not undermine the essential correctness of what the Court of Appeal stated in Unwired Planet, but rather affirms it. As to this:

Trial E has determined the rate for a worldwide licence to the Optis Portfolio

The problem that Optis face is that they wish, post-Judgment, to resile from their pleaded case, and to contend that a FRAND licence is one that is worldwide except for the patents which are subject to the EDTX Proceedings.

In my judgment, that is a course that is not open to Optis:

I therefore conclude that the terms of the FRAND licence that I will declare as the outcome of these proceedings will be a worldwide licence including in particular the patents being asserted in the EDTX Proceedings.

I should briefly deal with the contention advanced by Optis that Apple should have done more to resist Optis’ claims in the EDTX Proceedings by – for instance – seeking a stay in favour of these proceedings. (Footnote: ⁹⁴) That is a fundamentally bad point, because it assumes that which is not the case, namely that this is a question of competing proceedings. For the reasons I have given, it is not. This is a case where the outcome is not a judgment that competes with or is inconsistent with the EDTX Proceedings, but rather a Court-Determined Licence that will oblige Optis, as a matter of contract, to behave in a certain manner in relation to the EDTX Proceedings and any fruits of those proceedings (should any be paid by Apple to Optis). I have little doubt that if – prior to this point in time – Apple had applied to the US courts for a stay on forum grounds, the response would have been a negative one (and rightly so). The effects on the EDTX Proceedings arise as a matter of contract, not competing jurisdictions, and the contract in question is the Court-Determined Licence.

An alternative case

From this, it would appear to follow that the consequences outlined in Judgment/[489(iv)] and [503] to [505] hold good: they simply reflect the consequences of the claim that has consistently been asserted by Optis throughout these proceedings.

However, Optis contended that even if the conclusion expressed in paragraph 82 above was right – and that the outcome of these proceedings was the declaration of a worldwide licence, with no “carve out” for the patents being asserted in the EDTX Proceedings – the suggestion that this Court should go any further than simply making the declaration was wrong. Rather, this Court should declare a licence in FRAND terms, and leave it to the courts of the United States to work out the implications. This court should be very slow to tell the courts of another jurisdiction how to conduct their business whether directly or indirectly (i.e. by exercising a personal jurisdiction over the parties as to how they conducted themselves abroad).

The essence of Optis’ point was that this court should exercise a self-denying ordinance in terms of how it intruded itself in the affairs of other (foreign) jurisdictions. Let me say at once that I accept the general force of Optis’ point, but that I do not consider that point to have any force in the present case. That is substantially for the reasons given above, but (without repetition) the following additional points can be made:

Going beyond a Court-Determined Licence?

Until the consequentials hearing, it had been assumed (both by Apple and by me) that Optis would enter into any licence that the court determined to be FRAND. Indeed, Optis had said as much on many occasions during the course of these proceedings. During the course of the oral hearing, it appeared that Optis’ position was that they would decline to execute the Court-Determined Licence unless the patents that are the subject of the EDTX Proceedings were “carved-out”.

Because Optis has now given an undertaking to enter into a Court-Determined Licence – whatever its terms may be – after the exhaustion of the appeals process in relation to Trial E, the question of whether the court could have compelled execution does not arise. The undertaking, contained in my order dated 3 August 2023, is in the following terms:

“AND UPON Optis undertaking to enter into a licence in the form that is determined to be FRAND pursuant to the Trial E Judgment (“the Court Determined Licence”) or, to the extent that there are any appeals of the Trial E Judgment and / or the Court Determined Licence, a licence that is finally determined to be FRAND on appeal”

I should be clear that this order has been made and I regard this undertaking recorded above as one that (i) has formally been given by Optis to the court which (ii) Optis cannot resile from without the court’s express consent.

Because the debating of the question of whether Optis could be ordered to enter into the Court-Determined Licence took up a great deal of time during the consequentials hearing (with Optis contending that the court had no jurisdiction to make such an order) it is appropriate that I say something about my thinking, even if I do not express any final view:

I say no more; and am certainly not determining the question. However, given the amount of time that was spent on the point, and given its possible importance in other cases, the approach I would have been minded to take (but for the undertaking now given by Optis) ought at least to be stated. For the future, it will be imperative to ensure that a claimant’s attitude to the terms of any licence that the court may order is locked down well in advance of trial. The problem with the undertaking offered by Optis and accepted by the Court is that it leaves a gap between (i) this Judgment on Consequential Matters and (ii) the point in time at which Optis accepts the FRAND licence unpoliced, in the sense that (without protection from this Court) both parties are at liberty to act in a manner that is inconsistent with the terms of the licence that I have declared to be FRAND. Optis are not entitled, absent strong grounds (which have not been articulated) to an automatic stay, and Apple most certainly are entitled to some protection from the otherwise uninhibited ability in Optis to pursue the EDTX Proceedings (to take the most potent example). The solution that I have adopted – instead of obliging Optis to sign up to the FRAND licence now (which is a point that has not been argued) – is to incorporate sufficient protection for Apple in the order consequential on the Judgment and the Judgment on Consequential Matters. I return to this below.

WHETHER THE FRAND LICENCE SHOULD EMBRACE 5G STANDARDS

As was noted above, the FRAND Question concerned the appropriate rate for a licence in the following terms, to quote again from Optis’ Position Statement in Trial E: (Footnote: ⁹⁵)

“Optis contends that the scope of a FRAND licence in this case is (i) for the [Optis Portfolio] as a whole and not just the Asserted Patents, (ii) worldwide, and (iii) enables Apple to inter alia manufacture and sell devices which operate using 2G, 3G and/or 4G (whether or not those devices are also capable of operating on 5G)…”

As a matter of pleading, it is clear that 5G standards were not in issue before me. However, in my judgment the Court-Determined Licence ought to extend to these standards, for the following reasons:

For these reasons, therefore, the Court-Determined Licence should extend to 5G.

PERMISSION TO APPEAL

Introduction

Apple did not seek permission to appeal the Judgment – or, more accurately, the order consequential on the Judgment. Apple reserved its position as regards the order consequential on this Judgment on Consequential Matters. Since the same order is likely to be consequent on both the Judgment and the Judgment on Consequential Matters, and given the interrelationship between the two judgments, I am not going to shut out either party from articulating grounds of appeal that are based upon an interaction between the two judgments, and will extend time accordingly.

This Section deals with Optis’ application for permission to appeal on grounds that arise out of the Judgment alone.

Permission to appeal should be given only where the court considers that the appeal would have a real prospect of success or where there is some other compelling reason for the appeal to be heard. (Footnote: ⁹⁸) Optis seek a general permission to appeal (i.e. without reference to any particular grounds of appeal) and permission to appeal by reference to draft grounds of appeal containing 12 grounds, although when they are considered, it is clear that these 12 grounds are substantially inter-related.

Permission to appeal on general grounds

I refuse a general permission to appeal. The Judgment is the outcome of a long, essentially evidence-based, trial. As Part I of the Judgment makes clear, the relevant principles have been authoritatively stated by the Supreme Court in Unwired Planet (SC). The Judgment seeks to answer the FRAND Question that arises by reference to those principles (which were not controversial) using the factual evidence adduced by both Optis and Apple. As the Judgment describes, (Footnote: ⁹⁹) the parties exchanged methodologies setting out each side’s case regarding the FRAND Question and then replied to those methodologies. A full “cards on table” approach was adopted, whereby the methodologies were set out in “position statements” supported by (i) disclosure, (ii) factual evidence and (iii) expert evidence. (Footnote: ¹⁰⁰)

Considering the parties’ respective methodologies was evidence-heavy, as the content of Part IV of the Judgment (which runs to over 300 paragraphs) demonstrates. Moreover, the factual assessment was by no means straightforward, and involved the careful consideration of contentious factual and expert evidence, (Footnote: ¹⁰¹) which was heard by me over a period of weeks.

It was only after a detailed consideration of the factual evidence (Part IV of the Judgment), and a determination of various subsidiary areas of controversy, that the court found itself in a position to consider the parties’ methodologies at all. These contentions were specifically considered in Part V:

Permission to appeal on specific grounds

The very factual nature of the Judgment means that as regards each, individual, ground of appeal, Optis must show a real prospect of success that the court misdirected itself on a question of fact, where it is the judge at first instance that is the primary evaluator of fact. None of the grounds of appeal pass this threshold. Although Optis addressed me at length, I shall endeavour to give my reasons for refusing permission to appeal briefly. Thus:

I have considered Ground 12 separately, and have refused permission to appeal on this ground. Bearing in mind that permission to appeal should be given “only” where the court considers that the appeal would have a real prospect of success or where there is some other compelling reason for the appeal to be heard, I do not consider that permission to appeal should be granted in respect of any of the other grounds of appeal, and Optis’ application will have to be renewed before the Court of Appeal.

THE ORDER CONSEQUENTIAL ON JUDGMENT AND THE TERMS OF THE FRAND LICENCE

The order and the terms of the FRAND licence that I should determine as “FRAND” have each been before the court on a number of occasions. It would not be right to say that the differences between the parties have narrowed with each iteration. Rather, as I have sought to work my way through the areas of disagreement, further points of dispute, Hydra-like, emerge.

The order I anticipated making was published to the parties at the same time as the final draft of this Judgment on Consequential Matters, and that order appends the FRAND licence I propose to declare FRAND. I invited comment, and those comments have been taken into account in the order made. It is unnecessary for me to re-state in this Judgment on Consequential Matters what is clear from the terms of my order, and I do not do so.

I should deal, briefly, with a number of matters that have been superseded by Optis’ undertaking, given and accepted in the circumstances that I have described. First, in light of this undertaking, an executed licence is not, in my judgement, necessary at this stage. Apple’s position is protected, on an interim basis, by my order, and I do not consider that Apple requires an executed licence to give it further protection. Should that position change, then Apple has a liberty to apply to seek an executed licence in advance of any appeal (if any). Any such application should be made to me. Secondly, and relatedly, it is unnecessary for the terms of the draft licence to anticipate any overturn of my Judgment or this Judgment on Consequential Matters: the licence will not be executed, and any necessary changes can be reflected in the unexecuted draft.