11/04/2014
On 31 March 2014, the IP High Court in Tokyo heard an appeal from the parties, Apple and Samsung, in the matter of Japanese Patent JP4642898. A week earlier, 24 March 2014, marked the closing of the deadline for third parties to file Amicus Briefs for consideration by the court. This is reported to be the first time Amicus Briefs have been considered in Japanese litigation.
This is the latest high profile patent infringement case in the so-called “SmartPhone Wars” involving the global manufacturers of the consumer electronics and computer technology that now underpin our lives. Due to the importance of the case, it is being heard by the IP High Court’s Grand Panel. The Grand Panel includes a line-up of five judges, two more than the usual three, and is set up when a case contains important issues and it is appropriate to provide unified opinions of the Court on them without delay. The court’s decision is expected to be released in May this year.
Comment
The Japanese court case is significant for at least two reasons. First, it throws into contrast the rights and responsibilities of patent holders, especially those who are considered to be in a dominant market position. While on the one hand, a patent holder has an enforceable monopoly right and is entitled to due compensation, on the other, they are increasingly expected to exercise good judgment in discharging their corporate responsibilities to the wider community. This is equally true for patent rights relating to medicinal products, as well as for standards essential patents relating to the communication systems that form the foundation of our modern world. For standards essential patents (or SEPs), good judgment is, to some extent, required of patent holders by the regulations of the relevant standard bodies to whom they declare their patent to be essential.
Second, by requesting the filing of Amicus Briefs from third parties, the Japanese court has recognised the wider community’s stake in the issues raised by the parties to the case. The outcome of the Japanese court action, and indeed those of corresponding patent litigation around the world, will affect the consumer, in other words all of us. According to the Nihon Keizai Shimbun (Japan’s Financial Times), 58 Amicus Briefs from 8 countries were received by the court. The Chief Judge, Justice Iimura, stated that more opinions were received than anticipated, but that the court would fully take them into account in its analysis.
Background
JP4642898 is a Japanese Patent owned by Samsung Electronics Co Ltd, relating to the transmission of data packets in mobile telephone system (corresponding to EP1720322 in Europe and US7675941 in the United States). Samsung has declared the patent as an essential patent for the 3G mobile telephone standard, and under the regulations of the relevant standard body is obliged to make the patented technology available (in other words under licence) on fair, reasonable and non-discriminatory (FRAND) terms. In infringement proceedings for an SEP, this means that a party may generally request a FRAND licence as an alternative to an award of damages (a so-called FRAND defence). However, things are not always that simple.
In jostling for a dominant position in the market place, Samsung and Apple have initiated numerous court proceedings based on their intellectual property rights in different jurisdictions. Thus, despite the requirement that Samsung behaves in accordance with its obligations as a standards essential patent holder, it is in its interest to use its patent (essential or otherwise) aggressively as a tool to wrestle with its main competitor. In this case, Apple has also aggressively pursued Samsung in other jurisdictions, most notably the US. Samsung’s stance in the Japanese litigation is therefore to be expected – all is apparently fair in love and (the smartphone) wars.
In the first instance litigation, the Tokyo District Court found on 28 February 2013 that Apple’s iPhone 4 and Ipad2 WiFi 3G (imported by Apple Japan Godo Gaisha into Japan) infringed claims 1 and 8 of Samsung’s patent, but that Apple’s iPhone 3GS and the Ipad WiFi 3G model did not. However, as Samsung had declared to the European Telecommunications Standards Institute (ETSI) that the patent was essential to V6.9.0 of the UMTS standard, and that they would accordingly be prepared to grant a licence under FRAND terms (in accordance with ETSI’s IPR Policy), the court found that Apple was entitled to a FRAND defence against Samsung’s claim for damages, and refused Samsung’s request for an injunction and damages.
The issues raised at the first instance litigation were whether Apple was entitled to the FRAND defence, and how Samsung as a SEP holder should be expected to conduct itself. Samsung had argued that because Apple had reserved the right to seek invalidity of the patent, its request for a licence did not constrain Samsung to fulfil its FRAND obligations. The court found however that Apple’s request for a licence had been clear and specific and that when Apple had written to Samsung to propose a licence Samsung was subsequently obliged to negotiate in good faith and disclose all important information. Samsung in pursuing the litigation had not however done this. Although Samsung had alleged that Apple’s proposed royalty rate (0.275%) was too low, it had not provided basis for how its proposed royalty rate of 5% was calculated, nor had disclosed royalty rates offered to third parties.
Both parties appealed the decisions to the IP High Court in Tokyo, and in seeking to provide clarity for such cases in future, the IP High Court requested views on the following question: “Should there be any restriction on the right to seek an injunction and damages based on a standard essential patent (SEP) in respect of which a FRAND declaration is made?”. We are presently waiting to hear the IP High Court’s decision, which is expected to be released on 16 May 2014, according to the Nihon Keizai Shimbun.
Despite Samsung’s general FRAND obligations, the Japanese litigation has turned on the circumstances in which the FRAND defence is available and for SEPs in general what is to be expected of the patent holder. Put another way, once the wrestling match has begun, what rules should the combatants should follow. While asking any party in litigation to “play nice” is unlikely to have much effect, by establishing clearer guidelines for FRAND based litigation, at least the rules of the match might be clearer.
What Now?
In Europe similar clarification is being sought. Samsung’s actions to seek injunctions against Apple on the basis of its SEPs have resulted in it being served with a statement of objection by the European Commission and an investigation is ongoing. In the context of the Samsung investigation, the referral to the Court of Justice of the EU (CJEU) in the Huawei v ZTE SEP case, which seeks clarification on the conditions for when a FRAND defence is available, will be of major interest. The match is clearly not over yet.
This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking before any action in reliance on it.
