HomeInsightsHigh Court declines to order stay of proceedings on the basis of proceedings issued by the defendants in France in relation to the same telecoms standard essential patents

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Facts

Koninklijke Philips NV owns a portfolio of standard essential patents (SEPs), i.e., patents said to be essential to ETSI standards, in relation to 3G and 4G mobile telecoms. In 2016, negotiations started between Philips and the Xiaomi group of companies for a FRAND licence to the Philips portfolio but had expired in June 2020 without agreement.

On 21 October 2020, Philips issued proceedings against Xiaomi Inc and others in the Xiaomi group of companies for infringement of four European Patents (UK) in its portfolio. The English court directed that there would be two technical trials dealing with two patents each, followed by a third FRAND trial.

Philips obtained the court’s permission to serve the non-UK Xiaomi companies outside the jurisdiction on 26 October 2020. The court also made an order declaring that the Xiaomi UK companies had been deemed served on 2 November 2020.

Xiaomi UK filed an acknowledgment of service on 16 November 2020, but no defence had yet been filed.

On 30 November 2020, the UK Xiaomi defendants filed an application challenging jurisdiction under CPR 11(1)(b) and, in the alternative, for a case management stay.

Also on 30 November, several companies in the Xiaomi group, including all the Xiaomi defendants in this action, commenced proceedings in France against Philips and ETSI in relation to an alleged breach of Philips’ commitment to ETSI to license all of its SEPs which have been declared essential to the ETSI standards on FRAND terms.

The non-UK Xiaomi defendants then also applied to the English court challenging jurisdiction under CPR 11(1)(a) and, in the alternative, for a case management stay on the same grounds as the UK Xiaomi defendants.

Decision

Jurisdiction

Mr Justice Mellor found that the court had jurisdiction for the claim against the UK Xiaomi defendants on the basis that they are domiciled in the UK (Article 4(1) of the Brussels I Recast Regulation and Article 67(1) of the Withdrawal Agreement). Further, the court had no power to decline jurisdiction over the UK Xiaomi defendants on forum conveniens grounds as they had been served in the jurisdiction as of right.

As for the non-UK Xiaomi defendants, Mellor J found that there was a serious issue to be tried involving each of the defendants and there were no “killer points” for any of them. As for appropriate forum, Mellor J held that the correct characterisation of the action as a whole was that it was an action for infringement of EP (UK) patents and was not, as Xiaomi argued, a dispute over FRAND negotiations. Further, it would have been risky for Philips to have brought a claim in France in view of: (i) the very uncertain prospects; and (ii) because proceedings there would have resulted in it getting embroiled in jurisdictional disputes. The evidence suggested that those disputes and all possible appeals from them might well have delayed any ruling on the substantive issues for many years, likely to be after the expiry of all four patents. Accordingly, France was not a realistic alternative forum for Philips, and England was the only forum for the claim.

Case management stay

Mellor J held that no case management stay was appropriate because:

  1. a stay sought would be inconsistent with: (a) Article 4(1) of the Regulation, under which the court has jurisdiction over the UK Xiaomi defendants, which could not be declined on forum conveniens grounds; and/or (b) Articles 29 and 30 of the Regulation, pursuant to which the English court had priority over the French Court, it being for the French Court, having been subsequently seised, to determine whether to decline jurisdiction or stay its proceedings on account of the prior proceedings in the English court, the English court having no such power under the Regulation;
  2. a case management stay should only be granted in “rare and compelling circumstances” (MAD Atelier, referring to Reichhold Norway ASA v Goldman Sachs International [2000] 1 WLR 173 (CA)); none of the factors raised by Xiaomi amounted to such a circumstance: (a) insofar as Xiaomi relied on forum conveniens considerations, these were irrelevant in the context of an application for a case management stay where, as here, the Regulation was engaged; (b) in any event, it was England, not France, that was the proper forum; and (c) there was no case management benefit (let alone a “compelling” one) in staying these proceedings (for potentially over a decade) pending the uncertain progress and outcome of the French Proceedings; and
  3. the circumstances of the case strongly militated against a case management stay: (a) the outcome of the French proceedings was highly uncertain, might not resolve matters, and might therefore simply cause considerable delay; (b) it was clear that the English court could determine FRAND licence terms, will do so if at least one patent is upheld as valid and infringed, and will do it more quickly than in France; (c) the UK patents in issue were time-limited rights that would almost certainly expire before the French proceedings were resolved; (d) a stay would cause Philips further prejudice; and (e) no such prejudice would be suffered by Xiaomi in the absence of a stay.

(Koninklijke Philips NV v Xiaomi Inc [2021] EWHC 2170 (Pat) (30 July 2021 – made available on Baiili in December 2021) — to read the judgment in full, click here).

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