This article was first published on EPLAW Blog, October 2017

Koninkijke Philips v ASUS Computer Inc, HTC Corp and others, Court of Appeal, London, UK, 11 October 2017, Neutral Citation Number: [2017] EWCA Civ 1526

This appeal was brought by HTC against the judgment of Arnold J of 9 September 2016. Arnold J had held that a covenant not to assert certain patents against third parties, which was contained in a patent cross-licence between Philips and Qualcomm, did not extend to HTC’s alleged acts of patent infringement (see here in relation to the first instance case).

HTC had sought to rely on the provisions of the agreement as part of their defence to an action brought by Philips for infringement of three patents said by Philips to relate to High Speed Packet Access (HSPA) technology used in 3.5G mobile telephone systems. Arnold J had heard this part of their defence as a preliminary issue. Whilst Philips accepted that HTC are licensees of Qualcomm and are, in principle, entitled to the benefit of the covenant even though they are not parties to the relevant agreement, it disputed that the covenant extended to the acts of infringement complained of as it argued that HSPA technology fell outside the scope of the covenant.

The main focus of the appeal was on the construction of the covenant not to assert and in particular the definition of “CDMA Wireless Industry Standard”. (CDMA stands for Code Division Multiple Access). Notably, the covenant not to assert included an exclusion for TDMA (Time Division Multiple Access) equipment or systems. Arnold J had held that “CDMA Wireless Industry Standard” was to be construed as being restricted to pure CDMA systems and that, as HSPA is not a pure CDMA system, the patents in suit were not covered by the covenant not to assert. Arnold J also held that the exclusion for TDMA systems covered HSPA.

Floyd LJ gave the leading judgment and dismissed the appeal. Whilst he did not consider that the extrinsic evidence used to try and resolve the construction of the definitions was as clear to him as it had been to Arnold J, he did not consider that it gave him justification to reach a different conclusion. Floyd LJ held that the term “CDMA Wireless Industry Standard” should be construed as limited to “pure” CDMA systems. In addition, given that HSPA is a hybrid CDMA/TDMA system it falls under the exclusion for TDMA equipment in the covenant. He therefore held that the covenant not to assert does not provide HTC with a defence to the alleged acts of infringement.

HTC had also argued that the covenant not to assert extended to chipsets purchased, not only from Qualcomm, but also from other third party vendors. Floyd LJ agreed with Arnold J’s dismissal of this argument on the basis that it would have be contrary to both Philips’ and Qualcomm’s commercial interests.

The judgment can be found here.