Panasonic Holdings Corporation v Xiaomi Technology UK Limited & Ors

This is the CMC in the SEP litigation between Panasonic on the one hand and Xiaomi and Oppo on the other. There is a great deal to get through today so I am therefore going to make these reasons short. The first issue that I have to deal with is confidentiality as it relates to third parties in relation to which I have been assisted by oral representations from counterparties Red and Purple, who are anonymised by the use of those colours, although as I made clear at the start of the hearing, I have not gone into the question of whether the anonymisation is justified. That may be necessary at a future date, but I made a case management decision not to dig into that today for reasons of time.

There are also positions taken by a counterparty referred to as Green, who sent in a letter, and there is a Counterparty Blue, but I do not need to decide anything in relation to them today.

I have to decide first of all the position in relation to Xiaomi and Oppo's own employees and the questions I have to decide is whether there should be two or three-named individuals, whether there should be a narrow licensing bar, as that expression has been used in the authorities, for two or five years after the occurrence of certain specified events, but primarily either the termination of the licence agreements in question that they have seen or the point at which they cease to have possession of the confidential information, and also the question of whether they ought to be restricted from licensing negotiations, again in the narrow sense, after they leave the employment of either Xiaomi or Oppo, as the case may be.

I do not believe there is any difference between the parties as to the principles that ought to be applied. Everybody has referred to the decision of the Court of Appeal in Mitsubishi and I have also been referred to my own previous decision on the narrow licensing bar and to two decisions of Mellor J.

The principles are as set out in the Court of Appeal's decision and the specific duration of the licensing bars that either I or Mellor J decided previously is a fact-sensitive matter and not of assistance to me today, but I will say in general that one's understanding of what these bars actually mean and the circumstances in which they are relevant moves on as one gains greater knowledge of the commercial circumstances and the litigation landscape.

I consider that there ought to be two named individuals at Oppo and three at Xiaomi and the reason for that is that I have considered specifically the people put forward. There are two, Mr. Peng and Ms. Guo, at Oppo. They are both in the legal function and I reject the submission that the information that I am considering is so confidential that only one person at the receiving party should see the information. I accept the evidence that I have seen, that it is impractical to conduct litigation with only one client in the frame like this, to be able to provide instructions.

Whilst I respect the confidentiality of the information I am dealing with, I do not regard it as so extraordinarily confidential as to justify impinging on the efficient conduct of litigation by the receiving party. Furthermore, what one is dealing with here is the possibility of inadvertent disclosure, it not being alleged that there is any risk of deliberate misuse and balancing those factors up, I come to the conclusion that a limitation to one would be inappropriate

The position is slightly different for Xiaomi and that is because there is one particular individual who is actively conducting negotiations with Panasonic and whom, apparently, Panasonic insists on negotiating with, so she stands in a separate category and I recognise that her receipt of the information is justifiable and that means that there should still be two in the legal function for Xiaomi.

I do consider that other than the identity of the person who is negotiating specifically with Panasonic, in general, the recipients must be in the legal function and I also accept the submission that if it is desired to substitute somebody, an opportunity must be given to the disclosing party (or third party whose confidential information is disclosed) to object to their replacement and that sort of objection happens all the time. I make it clear that there has to be a reasoned objection and this is not a veto.

In relation to the duration of the licensing bar, what I am dealing with here is what has been referred to previously as a narrow licensing bar, i.e. a bar on the receiving party negotiating specifically against the counterparty whose licence agreement they have seen.

As I say, in previous decisions, sometimes it has been two years, sometimes it has been five years, but I consider that that is a fact-dependent matter. What bears in on me particularly here is that the agreements in question are already a few years old. I will not say how old, because of the confidentiality point itself, but although it is impossible to say exactly when two years would come to an end because one does not know what the triggering event will be, in broad terms the agreements will be five, six, seven, eight, nine years old by the time that any negotiation by one of the receiving individuals against either Purple or Red could take place. Since the information is essentially how much the disclosing party was willing to pay at the time of the making of the relevant agreement, it seems to me that the information is unlikely to be of direct relevance. Balancing that against the burden on the party receiving it, I think that two years is adequate and fair. I bear in mind again this is all about inadvertent use and that seems to me to be extremely unlikely to be of real practical significance.

In relation to the undertaking terminating on a change of employment, I covered that in my previous decision in Nokia and I do consider that the risk of even an inadvertent misuse will drop sharply on a change of employment and that the continuance of the restriction is a substantial imposition on such a person and, furthermore, it seems actually relatively unlikely that this event will come about.

For all those reasons, I adhere to a two-year narrow licensing bar after the relevant triggering event and with cessation on a change of employment.

The other significant issue that I have to deal with is disclosure of the confidential information to potential experts. This only applies to the disclosure of the relevant licence agreements to what is sometimes called licensing experts, as Purple and Red have indicated that they do not have a concern about valuation experts and although it may be difficult in some instances to draw a precise line between those two categories of experts, the parties before me do not appear to be particularly concerned about that.

The concern, however, is that, for example, the currently extant licence to which Purple is a party could be disclosed to a potential licensing expert, who might, in some other part of their professional work, be advising a party who is negotiating against Purple. It seems to me that when one is dealing with confidential information of this kind, it must be the case, at least, that a party such as Purple knows to whom its confidential information has been imparted. Otherwise, the ability to assert the duties of confidentiality that the receiving expert would have to such counterparty would be severely undermined or, perhaps, removed all together.

Neither Mr. Lykiardopoulos KC, who appears for Oppo, nor Mr. Segan KC, who appears for Xiaomi, really were in a position to object to that and it seems to me an inadequate protection for either Purple or Red or a party in their position, for a confidentiality undertaking to be signed by an expert, only for it to be held by Xiaomi or Oppo's solicitors and for Purple or Red never to know.

Therefore, it seems to me that it ought to be required that Xiaomi or Oppo must notify Purple or Red, as the case may be, of those to whom they intend to show the confidential information, including licensing experts.

The more difficult question is whether Purple or Red ought to have an opportunity to object. In my view, it will only be in the most extreme and unusual circumstances that it would be possible for a party in the position of Purple or Red to object to the instruction of an expert. It is quite a different thing for a party in the position of Purple or Red to seek to have a say about the identity of a disclosee in the employ of a party such as Xiaomi or Oppo and on the other hand to object to the instruction of an expert who Xiaomi or Oppo want to instruct, which would interfere with their ability to put before the court the evidence they want and for the court to receive that assistance.

However, I think it is not possible, at this stage, and in the current circumstances, to say that it is absolutely impossible that an appropriate objection might be made or, short of an objection to the actual instruction, it might be that either Purple or Red would want to comment on the confidentiality arrangements in relation to such an expert, or perhaps in relation to other people at their firm or the like.

I therefore will direct that Purple or Red ought to have a period of seven days to mount an objection to the instruction of any such expert and I will expect that an objection or comment will only be made in the most exceptional circumstances. I share the concerns of Xiaomi and Oppo that this could be a process that slows down the litigation unduly. I think it would be an unfair and disproportionate reaction to say in advance that there can be no circumstances in which an objection can be made and the way to deal with that is for me or whichever judge deals with it to look at any such objection very, very closely and as quickly as the court can accommodate. Those are my decisions on these points.

I think there is a reasonable case that some of the Category C agreements are relevant. There is also a convincing prima facie case put forward by Purple, through evidence from a witness whose identity is said to be confidential (lest, I assume, it betrays Purple’s identity) that large parts of the Category C agreements may not be relevant. I think there is every real prospect that disclosure to lawyers only at an initial stage will allow quite extensive redaction to be made which ought to allay Purple's concerns and is worth doing.

I appreciate the point about this being an expedited trial, but this is only one part of the picture and there is much other work that can be done. So proceeding in a stage-by-stage way, as one is encouraged to do by the Court of Appeal in this sort of situation, I will make that order for now and Purple and Panasonic are encouraged to move as quickly as possible to a realistic scheme of redaction that can allow this to be progressed and I hope some agreement can be reached about that.

It seems to me that whilst they have a good position, Purple have a long way to go yet to establish from the outside looking in that the Category C documents are completely irrelevant. Equally, for Panasonic, to resist substantial redaction seems to me to be very unlikely to be justified.

So that is my order for now and I encourage Panasonic and Purple to move as swiftly as possible to find a middle ground, if they can.

I now have to decide when to list what is called the “interim licence hearing”, which is a matter between Xiaomi and Panasonic. The circumstances in which this arises are largely described in my two previous judgments.

It has now come to pass that Xiaomi applies for declarations about the FRAND obligations of Panasonic in the period from now until the FRAND final determination in the trial to take place this autumn. It is agreed that the estimate is three or four days and Panasonic accepts that such a hearing ought to take place, although its parameters are presently not entirely clear for reasons I will come to in a moment.

The primary contention of Xiaomi is that the interim licence hearing should happen from 18th March onwards, in the second half of March, and Panasonic's position going in was that it should not be until early summer. Matters have moved on during the course of this hearing, as I will describe.

In my previous judgments, I dealt with the fact that Panasonic is not prepared to forego the opportunity to get an injunction in proceedings in Germany or in the UPC and I deprecated in those judgments the failure of Panasonic to give a satisfying reason for that and concluded that Panasonic's desire is to leave open the opportunity to get an injunction in Germany, even despite the forthcoming FRAND trial here.

The primary reason for the difference between Xiaomi and Panasonic as to the listing of the interim licence hearing arises from the same strategic dynamic in the litigation which is, in the current context, a concern on its part that Panasonic might obtain a hearing in Germany, the most likely forum, or less likely in the UPC, before the interim licence hearing can take place or, alternatively, if the interim licence hearing does take place, there will not be a decision from it before a hearing takes place in Germany.

The most likely early hearing in any of the other 13 proceedings brought by Panasonic is in Mannheim where it is possible, although the parties are stringently disputing it, but at least possible, that a hearing could take place in May next year. It is for that reason that Xiaomi seeks a listing of the interim licence hearing in March.

On the evidence of the German lawyers that has been put before me, I conclude that it is not impossible that a hearing could take place in Mannheim in May next year and the possibility, although relatively modest, is such that Xiaomi's concerns are something I must take seriously. A trial of the interim licence hearing in March would require a very tight timetable on any view, but Xiaomi contends that it is necessary because of the possibility of a May hearing in Mannheim.

The rational solution to all of this would be for Panasonic to make a much more modest limitation to the pace of its seeking relief than was at play in the previous hearing before me and simply agree to have the proceedings in Germany and the UPC take place a bit more slowly, to leave breathing space for the interim licence hearing.

Panasonic is reluctant even to do that, but under some questioning – not to say pressure – from me, Mr. Moody-Stuart KC, who appears for Panasonic today, does agree that Panasonic will write to the court in Germany asking that no hearing take place before at least the end of June. Although the evidence does not focus on this with the greatest of specificity, my own experience and common sense indicate to me that that is likely to be met with success, not least because it seems quite likely that the Mannheim Court would not intend to have the hearing any earlier than that anyway.

I would add that I indicate through this short judgment that I, myself, would be grateful to the Mannheim Court if it could accommodate such a request from Panasonic because it would ease the task of this court and the litigants.

The scope of the interim licence hearing is not entirely clear. Xiaomi indicates that it is willing to amend its pleadings to plead the declaratory relief which it seeks by its application. It contends, through Mr. Segan KC, that it may not be necessary for it to do so because it could seek interim relief under CPR Part 25. I have previously, in other cases, expressed some doubt about that and Xiaomi, without, as I say, conceding the position, is willing to make such an amendment. But, the scope and importance of that amendment should not be overstated because it is to bring the pleadings in line with what Xiaomi have expressed through correspondence and in the evidence.

More significantly, Xiaomi has not yet put forward the draft form of the interim licence which will be contended for and, most specifically of all, has not said what amount of money ought to be payable under such interim licence. Both of those will give rise to the need for some evidence. How much evidence, I think, depends very much on what is put forward and particularly what is put forward in relation to the amount of money to be paid.

In addition, there will need to be expert evidence of French law in relation to ETSI and German law related to the question of whether the German court would, in due course, pay heed to a declaratory decision made by the court here. Similar evidence is adumbrated in relation to the UPC.

None of that foreign law evidence seems to me likely to require very much time to put together. The relevant principles of French law have been traversed on a number of occasions by this court and while I appreciate that there has not been in the context of an interim regime, I very much doubt if that will make a fundamental difference.

Valuation evidence and evidence about the amount of money seems to me something that could require a respectable amount of evidence, although Mr. Segan submits, and in broad terms I accept, that a determination at such an interim level cannot possibly be a full FRAND investigation. There is the possibility of some fact evidence, although I suspect modest and probably directed mainly to relatively recent conduct on the part of the parties, since it seems to me that evidence about the negotiating history going back a number of years, or many years, is unlikely to be relevant and had it been Panasonic's intention, really, to go into that sort of thing, I think it would have been possible to indicate such an intention today, which it has not done.

I will not go into the blow-by-blow details of the directions put forward by Xiaomi because they are going to need tweaking anyway, but I will say that overall they present an exceptionally tight timetable to a hearing of the interim licence hearing in March. For that reason, and another reason I will come on to in a moment, I will list the interim licence hearing in April on the basis of Panasonic writing to the German court as I have indicated.

The other reason for doing that is that there is another hearing in the Patents Court which is conceptually similar, in the sense that it relates to the interim ETSI regime if it exists and that is in the litigation between Lenovo v InterDigital, which I am told is to be heard in two days at the end of February. I consider that a hearing in April will promote the possibility, I do not say likelihood, that a decision in that case will be available either for the trial or so that it can be the subject of post-judgment submissions following the interim licence hearing in April.

That is my decision.

I propose to make directions broadly following those put forward by Xiaomi, as adjusted to take up the extra period between March and April, and I will leave it to the parties to see where that amount of slack is best deployed within the timetable.

I also note that Xiaomi's amended pleading is to come in on 29th December and that date will not change. Furthermore, Xiaomi's draft interim licence is to be provided on 5th January and that also is not to change. I direct that Xiaomi's contentions as to the interim amount to be paid under the interim licence and as to the basis for it are to be provided on 5th January and need not be provided in the pleading of 29th December, which should cover all other matters.

I also observe that I am taking this course because of the litigation dynamic between Xiaomi and Panasonic and in the context of some, although I think not insurmountable uncertainty, about the scope of the interim licence hearing.

The area of my greatest caution relates, indeed, to the amount payable under the interim licence. If that becomes unduly complex, then it will have to be reviewed, whether the April date can be maintained. I expect that it can and these comments are really directed to Xiaomi because it is in Xiaomi's gift to make what it puts forward as simple and if I can loosely, perhaps not entirely accurately, say generous as possible. Because if Xiaomi offers an amount that matches or exceeds what could possibly be demanded by Panasonic, albeit no doubt subject to what was described by Mr. Segan in his submissions as a “trueing-up provision”, so that it can be adjusted following the FRAND trial, then that may simplify the interim licence hearing significantly.

That is an indication intended to streamline what has to be done between now and the interim licence hearing and not an indication, let alone a decision, as to where I think the merits lie or what the appropriate principles to be applied to the interim obligations of a SEP-holder. Indeed, of course, I note that Panasonic may well be disputing that there are any such obligations applicable to the current situation and I repeat my observation from my previous judgment that listing the interim licence hearing at the request of Xiaomi is not an indication one way or the other about the rights or wrongs of what it seeks.

I am going to order this disclosure, but limited to the entity identified in the third bullet point in Confidential Annex 2 in 3. The reason is that it seems to me necessary for transparency and a proper understanding of matters that appear to be important, possibly central to the litigation because of the contents of paragraph 16 of Panasonic's FRAND pleading, the other assignments with the other two entities in the first two bullet points in Confidential Annex 2 seem to me to be of minimal, if any, importance and the fact that they could be drawn together and disclosed easily is not the relevant test, as is for further reasons explained in Panasonic's skeleton argument.

I think this dispute over paragraph 6 of the Draft Order has surfaced an important case management topic. I am not going to make the order in paragraph 6, but nor, I make it clear, am I shutting out Panasonic in any way in relation to its pleaded case.

Mr. Moody-Stuart says, “well, the fact that Mellor J deprecated this in InterDigital does not mean that that is going to stand because that case might be overturned on appeal.” I can see that is a possibility, but what I think is definitely true from InterDigital in the concluding paragraphs in the judgment is that this sort of thing needs case management and Confidential Annex 2 has not received the attention that it needs.

So this, I think, must be considered at the next CMC in February and, by that time, Panasonic must identify what it relies on in terms of its own thinking, what it relies on as objective matters which did not cross the line, and what it relies on as objective matters which did cross the line. It must identify, in general terms, the nature of the factual evidence that it intends to lead on those matters so that the court can make case management decisions then.

There are some matters in here that I think, plainly, are proper, in the sense that they are purely objective assertions, for example in relation to a cross-licence from Purple. Other ones seem to be at the other end of the spectrum in relation to Panasonic's own thinking, but that is what Panasonic needs to do in good time for the next CMC. The parties need to have a disclosure-type discussion about what documents are proportionately appropriate to be disclosed in relation to Confidential Annex 2 and I stress “proportionately”.

I would, in any event, have rejected paragraph 6 of the Draft Order to the extent that it allowed Panasonic to cherry-pick. That is obviously not appropriate. The confidential Schedule 2 (I might have called it “Annex”) needs reasoned analysis so that matters potentially adverse to Panasonic can come out as well. That is for a later date, but I think it was well worth having the discussion.

I am now asked to consider whether Xiaomi and Oppo should provide actual data about their activities both as to the past and their forecasts for the future. By “actual” I mean historical in the sense of previous sales and their own forecasts as opposed to third party forecasts for the future. To some extent, this is conditional, because what Panasonic seeks depends on whether the defendants argue for a lump sum licence or not.

This is opposed across the board by Xiaomi and Oppo on the basis that publicly available data is better used for unpacking because of its advantages in terms of independence and because it can be used on a like-for-like basis for all licence agreements that require unpacking. They refer to various references in the authorities, including, in particular, Mellor J's decision in InterDigital v Lenovo about the advantages of doing this. They say that it would be unusual and contrary to that run of cases for actual data to be required of them.

I agree with the observations in the authorities about the advantages of public data as it applies to unpacking, but I suspect the point I am dealing with now is a rather different one, which is ultimately the court, when it decides this FRAND trial at the trial in the autumn of next year, will have to decide how much money ought to be paid to Panasonic in the case of Xiaomi, because it has undertaken to take the licence and in the case of Oppo, in the event that it decides to take the licence, in the circumstances that prevail following technical trials.

But in any event, the character of the FRAND determination at the FRAND trial will determine the actual amount of money payable in certain scenarios. I think that is a different question from what Mellor J was considering in InterDigital v Lenovo, which was the case management ramifications of using consistent and reliable data and the experts operating on the same basis. I suspect, also, that in previous cases the question of whether the defendant has to give its own data in addition to public data for the purposes of determining how much money is actually payable may not have come up or at least not so as acutely as now.

Panasonic seeks actual sales data going right back to 2011, broken down by year and mode, i.e. by standard, by territories and by product categories. It is obvious, I think, just in saying that what a colossal task it would be to put that data together. I consider that would be completely disproportionate and inappropriate and burdensome, especially when what might happen at the end of the day is simply that it is concluded the data is not reliable and/or is consistent with the public data. But I do think it is fair to Panasonic to have some assurance that the public data reasonably matches the real sales made by Xiaomi and by Oppo.

As it happens, Oppo's evidence identifies that it does have some data which happens to have been generated in a dispute with Nokia, covering a period from the first quarter of 2020 to the second quarter of 2023, broken down by 4G and 5G and by regions. That, to my mind, opens up the possibility of looking at a proportionate amount of data already available to Oppo to test the proposition that the public data reasonably matches actual sales. It is also stated in the same evidence that Ms. Guo of Oppo said that the task of preparing the data for that litigation was time-consuming, which does not surprise me.

An obstacle in the way of taking an approach which focuses just on some of the readily available data from Oppo for that period is that for the purposes of this hearing, Xiaomi has not addressed itself to the same question, for reasons which I think are entirely understandable and of which I make no criticism.

So in relation to data for the past, I direct that the parties must discuss an appropriate amount of data to be provided by Xiaomi for some subset of the period of data which Oppo already has, to enable some reasonable comparison to be made in a proportionate way with the publicly available data.

It is obvious that one possibility resulting from this exercise is that it will turn out that the public data is, within a reasonable margin of error, a good match for the data that either exists in the case of Oppo or is generated in the case of Xiaomi. If so, the expense of going through the exercise will have been wasted and I acknowledge that, but in such circumstances then, the court can do some degree of justice by making Panasonic pay all the costs, which is what it can expect to have to do, whatever the result of the litigation, if it turns out that this is a fruitless exercise. Obviously, I am not tying the hands of whichever judge comes to deal with costs at the end of the day, but that is a means of doing justice, if it comes to it.

The exercise needs to take place in a reasonable timescale so that if it runs into difficulties or presents further questions, it can be addressed at the further CMC in February. But it need not, to my mind, hinder other progress on the case, because the publicly available data can be used for all of the purposes that it normally is. I am simply concerned with putting Panasonic as the licensing party as the patentee in a position to have some reasonable understanding that the amount of money that it is awarded is correct within the parameters of what is possible and understanding that the final amount awarded by the court is always going to be imprecise.

In relation to forecasts, Mr. Moody-Stuart makes clear that all that is sought is forecasts that already exist and for the period 2023-2028. Mr. Lykiardopoulos, for Oppo, tells me that Oppo only forecasts one year ahead and then adjusts that forecast, so Oppo only really has one year forecast, but I think that is a modest amount of information to be provided and it may provide some means of assessing the accuracy of public data. It may also turn out that the basis of the forecast is different from the public data and that the exercise is not a useful one and, in that regard, I repeat what I said a short while ago about costs.

Similar comments are made in the evidence of Mr. Baldwin on behalf of Xiaomi and I make the same order in respect of Xiaomi, which is limited to currently existing forecasts going forwards for the period starting 2023. I do not have quite the same understanding of exactly how long that would be, but I suspect it would only be for a relatively short period.

I am not going to make any order as to when the mediation has to take place. I indicate that I expect that the mediator will need a significant amount of time, at least a couple of weeks from his or her appointment, to master the material so as to have a useful mediation. At the same time, I encourage the mediator, through giving these reasons, to do to swiftly, with an eye to the trial timetable, the busy-ness of the parties and when costs will be incurred. I think it would be antithetical to the idea of a mediation for me to make an order which ties the mediator's hands as to what material the parties do or do not have at the time of the mediation, so I applaud the fact that the parties have agreed a mediation, but I think once the mediator is appointed, it is in his or her hands about how to conduct it.

I will gently indicate that I think it is a mistake on the part of Panasonic to treat its own expert report as data. I suspect, without in any way casting aspersions on the expert who gives it, it will contain Panasonic's position as much as anything else, no doubt through the medium of honestly held professional views, but still a position.

The real data in the sense of something that is important and might move the dial is the comparables, I suspect, but I think this should be left to the mediator. I would also encourage the parties to consider, but again this is really for the mediator, the degree of closeness of contact with the mediation which the entire legal team need to have. Obviously, all three sides will want input about where they stand in relation to the merits, but a mediation is not a dummy run for the trial, it is an attempt to reach terms and so I hope the parties will approach it in that spirit.