In a recent decision in the long-running dispute between IPCom and HTC, the UK High Court struck out a claim for damages for infringement of a UK patent calculated on the basis of lost sales under a licence covering global sales of a product. In doing so, Mr Justice Birss has clarified the way in which damages will be calculated for infringement of a UK standard essential patent (SEP).
Background of the dispute
IPCom is seeking damages for infringement of its UK patent, which was found to be valid and infringed by the Court of Appeal in 2017. The patent, which expired in February 2020, was declared essential to the 3G telecommunications standards and was infringed by certain HTC devices that comply with the relevant standard. Pursuant to its obligations under the ETSI framework, the patent was subject to a FRAND undertaking by IPCom.
The arguments
Unsurprisingly, the parties' assessment of the total damages payable by HTC differ significantly. IPCom argued that it is entitled to recover revenue which it would have earned had HTC entered into a FRAND licence to its entire patent portfolio. In light of the recent Supreme Court decision in Unwired Planet v Huawei, IPCom claimed that notional licence for assessing damages would be global in scope and as a result, IPCom sought damages calculated on the basis of the total number of mobile phones sold by HTC globally (including phones sold outside the UK and those that did not otherwise infringe the patent).
HTC applied to strike out part of IPCom's damages case, on the basis that IPCom is only entitled to receive damages for infringement of the UK patent in suit. That is, damages can only be awarded for sales of phones that actually infringed the patent that were sold in the UK, not for phones sold outside the UK.
The decision
Mr Justice Birss held that IPCom’s claim for damages should be struck out insofar as it is based on anything other than a claim for royalties attributable to sales of mobile phones in the UK. IPCom is not entitled to claim for losses caused by a failure to pay royalties on a global licence (and therefore royalties on foreign sales) because those sales were not caused by an act of infringement in the UK.
Mr Justice Birss considered this approach to be consistent with the position following Unwired Planet v Huawei, noting that the Supreme Court made clear that the Court's determination of an award of damages is not to be equated with the royalties that are paid under a contractual licence voluntarily entered into.
Takeaways
The decision provides some much-needed guidance as to how damages for past infringement of SEPs are to be determined by the English Court, by clarifying that:
- the terms of a global FRAND licence as determined by the Court do not necessarily determine the calculation of damages for infringement of a UK SEP
- global sales can only be included in the calculation for damages where the sales are in fact caused by an act of infringement of a UK patent.
The decision also shows that, while the impact of the Supreme Court decision in Unwired Planet v Huawei may appear to allow the English court to determine licence arrangements that are extra-territorial in effect, the English Court has a limited appetite for adopting an extra territorial approach to damages calculations.
