ZTE (UK) Ltd v Telefonaktiebolaget LM Ericsson (Publ)

This is an application by the claimant (“ZTE”) for an expedited trial of this claim for patent revocation and a contemplated counterclaim by the defendant (“Ericsson”) for infringement. Ericsson needs no introduction. It is a well-known player in the mobile telephone market, which holds a significant portfolio of patents for 2G, 2.5G, 3G and 4G mobile telephony. ZTE is slightly less well known. It is the UK arm of a Chinese company which claims to have become one of the top five vendors of mobile telephone equipment in the world. ZTE, it appears, already has a substantial and growing market share in mobile phone handsets, including smartphones, and it is seeking to enlarge its market share in Europe.

The present proceedings form part of a number of actions between the same parties. In the United Kingdom there are four related actions. The first two, which were both begun by Ericsson on 1 April 2011, are for infringement of five Ericsson European patents (UK) with counterclaims by ZTE for revocation. The first action, which concerns three patents referred to as 141, 927 and 825, is due to be tried in June 2012. The second action, which relates to patents referred to as 413 and 415, is due to be tried in November 2012.

It is important to note that ZTE applied for expedition of the first and second actions. That application came before Mann J on 11 July 2011. He refused it for the reasons he gave in his judgment of that date at [2011] EWHC 1907 (Pat). Briefly summarising, two reasons for urgency were advanced by ZTE before Mann J. The first was the commercial situation. The second concerned parallel proceedings in Germany, which I will come to. Mann J was unimpressed with the argument of commercial urgency. So far as the parallel proceedings in Germany were concerned, he considered that that was a factor favouring urgency, albeit, as I read his judgment, not a strong factor. He also took into account in reaching his decision the state of the list as it appeared before him and the technical complexity and weight of the disputes comprised in those actions. In the result, he was not persuaded that the case for urgency was sufficiently strong enough to justify expedition.

The third action, which is the present claim, is a claim by ZTE for revocation of an Ericsson European patent referred to as 494. It was commenced on 28 July 2011. Ericsson served its defence on 30 August 2011. At that stage it did not counterclaim for infringement, but it has since made it plain that it intends to do so shortly and a draft counterclaim was produced during the course of the hearing before me.

The fourth action is a further claim for revocation by ZTE of an Ericsson European patent referred to as 810. That was commenced on 23 September 2010. At present Ericsson's defence is due on 24 October 2011. At this stage Ericsson has not committed itself as to whether it intends to counterclaim for infringement. I propose to proceed on the assumption that it will do so.

At this point I need to describe the parallel proceedings between the parties in Germany. On 8 April 2011 Ericsson commenced infringement proceedings before the Landgericht in Mannheim for infringement of the German counterparts of the same seven European patents as are in issue in the four actions in this country. Those proceedings were served upon ZTE on 23 May 2011. Hearing dates have been set for all of those proceedings. The claims relating to 825 and 494 are to be heard on 17 January 2012, the claims relating to 141 and 927 are to be heard on 7 February 2012 and the claims relating to 413, 415 and 810 are to be heard on 27 March 2012.

The principles to be applied when considering an application of this nature were conveniently summarised by Lord Neuberger in WL Gore & Associates GMBH v Geox SPA [2008] EWCA Civ 622 at [25]:

In the present case ZTE's application for expedition is twofold. Its primary application is for a very considerable degree of expedition of the present action so as to be tried not before January 2012. Counsel for ZTE explained that, by that, ZTE seeks a trial as soon as possible in or after January 2012. He made it clear that ZTE would be prepared to contemplate a trial in February or March 2012 if necessary.

ZTE's secondary application is for the present action to be tried at the same time as the first action, that is to say, in June 2012. A particular factor that is relied upon in support of that course is that it is said that there is some degree of technical overlap between the 494 patent in issue in this action and the 825 patent in issue in the first action.

The two main factors that are relied upon by ZTE are the same two factors that it relied upon in support of its application before Mann J. That is to say, first, general commercial urgency, and secondly, the fact that it says a decision on validity by this court may be of assistance to it with regard to the proceedings in Mannheim.

So far as the first of those two factors are concerned, as I have indicated, Mann J was unimpressed with that factor. ZTE did not appeal against that decision and the evidence that is relied upon by ZTE before me appears to me to be essentially the same as the evidence that was relied upon by it before Mann J. Counsel for ZTE submitted that I was not bound by Mann J's decision and invited me to give the factor of commercial urgency more weight than he had done. While I accept that I am not bound by his decision, it seems to me that it would be undesirable for two different judges hearing very similar applications for expedition between the same parties, and upon the basis of essentially the same evidence, to reach different conclusions. Accordingly, I am not prepared to differ from Mann J's assessment, particularly in circumstances where it has not been challenged on appeal.

The matter does not end there, however, because it seems to me that, even if I had been willing to take a different view of the general question of commercial urgency, as matters stand before me, there is no sufficient justification to regard this particular action as being one which requires an urgent resolution. The reason for that is that, as I have already described, the present action concerns just one patent out of a total of seven that are in issue in both this country and in Mannheim. (I should add that there are also four other Ericsson patents in issue in separate proceedings between the parties in Dusseldorf, but for present purposes I think those can be disregarded.) There is nothing in the evidence to suggest that a decision on 494 is critical to ZTE's commercial position as distinct from the other six patents. No doubt it is true, as counsel for ZTE submitted to me, that a decision on the validity of 494 will be a factor which the parties take into account in their negotiations over an appropriate license in respect of Ericsson's portfolio. Nevertheless, there is nothing to suggest that 494 is of critical importance on its own.

Turning to the factor arising out of the parallel proceedings in Mannheim, I recently had occasion to consider a similar application for expedition in HTC Europe Co Limited v Apple Inc [2011] EWHC 2396 (Pat). Having reviewed the authorities my conclusion at [19] was as follows:

So far as I am aware, in no case has expedition been ordered on this ground alone. In the present case I do not regard the parallel proceedings in Mannheim as justifying urgency for the following reasons. First, as I have already explained, I do not regard the general commercial factors as justifying treating this action as being urgent.

Secondly, so far as the position in Mannheim is concerned, as I have indicated, the 494 case is due to be heard in January 2012. It follows that it is going to be impossible for this court to render a judgment on the validity of the 494 in time for that hearing. Furthermore, although ZTE contends that a decision on the validity of 494 will never the less be of assistance to it, in particular in the context of any appeal against the first instance decision of the Mannheim court, it seems to me that there is considerable force in the point made by counsel for Ericsson that ZTE also faces a hearing on infringement of the 825 patent in Mannheim in January 2012, and yet as a result of Mann J's decision the UK case on 825 has not been expedited. I can see no reason why the case for expedition of 494 arising out of the Mannheim proceedings should be regarded as stronger than that in respect of 825.

Thirdly, I consider that ZTE has delayed in making this application. As the chronology I set out earlier demonstrates, ZTE has known since 23 May 2011 that it was facing an infringement claim by Ericsson in Mannheim which included the 494 patent. It was not until over two months later that ZTE brought the present claim for revocation of 494. It was not until 6 October 2011 that it first indicated that it intended to apply for expedition of the trial of these proceedings. It was not until 14 October 2011 that ZTE actually issued the application. It seems to me that, if ZTE desired an expedited hearing of its claim for revocation of 494, it should have issued its proceedings earlier than it did and it should have made its application for expedition at the same time as its application for expedition of the first and second actions. It seems to me to be clear, however, that if ZTE had applied for expedition of a claim for revocation of 494 before Mann J on 11 July 2011, he would have refused that application. I cannot see any reason why ZTE should be in a better position as a result of having delayed in making its application until October 2011.

Turning to the second and third factors identified by Lord Neuberger, so far as a trial in February or March 2012 is concerned, it seems to me that degree of expedition would interfere with the good administration of justice for the reason that it would involve bringing on the present action before the first and second actions. That seems to me to be undesirable when those actions have not been expedited and the present action was actually started later. Furthermore, there is no good reason for giving this action a greater degree of expedition than those two. In addition, putting this case into the list in February or March 2012 would inconvenience other court users and I am not satisfied that that is justified.

So far as prejudice to Ericsson is concerned, it seems to me that while a trial in February or March 2012 might be achievable, in particular if it was in March rather than February, that would put undue pressure on Ericsson in circumstances where the parties already have a timetable for preparing for two moderately heavy trials in June and November 2012.

On that point, I should mention at this juncture that counsel for ZTE pressed upon me the contention that the present action was a simple one. His submission was that the technical complexity rating of these proceedings is only 3 and that there are only three pieces of prior art, only limited passages of which need to be considered. I do not accept that submission.

In the first place, counsel for Ericsson contends that the technical complexity of the present case should be rated 4 and I am unable to say that he is wrong in that assessment. Furthermore, the fact that there are only three items of prior art relied upon does not strike me as persuasive. Quite a lot of time can be spent on three items of prior art. Counsel for ZTE particularly focused his submissions on an item of prior art allegedly published by Ericsson itself. I would only comment that, if ZTE really thinks that its case on the Ericsson prior art is so strong, it may be asked why it needs to rely upon the other two items of prior art. The matter does not stop there, however. In addition, there is an attack based on common general knowledge alone. Yet further, there is Ericsson's proposed counterclaim. Counsel for ZTE pointed out that in Germany the claim for infringement is based upon the proposition that the 494 patent is essential to the EDGE standard. Accordingly, he suggested that the infringement dispute would be a narrow one. Experience shows, however, that that does not necessarily follow.

As for the fourth factor identified by Lord Neuberger, I do not consider there are any special factors other than those I have identified.

I turn, therefore, to ZTE's secondary application, which is to have the present action tried at the same time as the first action in June 2012. On the face of it this is a more attractive application since it only involves a modest degree of expedition. It is not suggested that Ericsson could not be ready for a trial of this action in June 2012. Nevertheless, I have come to the conclusion that I am not prepared to order this action to be tried in June 2012 for the following reasons.

First, the reasons I have already given lead to the conclusion that even that modest degree of expedition is not justified.

Secondly, I consider that such an order would be contrary to the good administration of justice because it seems to me that putting this case in with the other three patents in June 2012 would overburden that trial. Mann J proceeded on the basis, for the reasons he explained in his judgment, that the first action in particular was one of considerable technical complexity and weight. Nothing I have heard this morning persuades me that he was wrong in that assessment.

Thirdly, counsel for ZTE submitted, as I indicated earlier, that there was a particular advantage in trying the 494 action in June 2012, namely the technical overlap with the 825 patent. Counsel for Ericsson disputed that there was a significant degree of technical overlap. I am in no position to reach any view as to who is right about that. It is sufficient to say that I am not persuaded that adding 494 to the June trial 2012 would only involve a modest extension of that trial. On the contrary, it seems to me that it would require the length of the trial to be materially extended and that it would undesirably add to the complexity and burden of that trial.

A yet further alternative which the circumstances of the various proceedings suggests would be to order that the present action be tried together with the second action in November 2012. So far as that is concerned, however, counsel for ZTE himself said that there was nothing to commend it and counsel for Ericsson positively resisted it. In those circumstances I will not order that the 494 action be tried together with the second action in November 2012. Instead, the order I will make is that the 494 action be listed for trial at the earliest available date convenient to the parties without any degree of expedition.

I should also mention, finally, the position regarding the fourth action. That is not presently before me, and as I have indicated Ericsson has not yet served its defence, let alone any counterclaim. Obviously the listing of that case will need to be considered soon after Ericsson has served its defence and any counterclaim. For the moment I will say nothing more about that.