VRINGO v ZTE 05 JUNE 2013 PROCEEDINGS

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1 IN THE HIGH COURT OF JUSTICE Claim Nos. HC 12 D03895 1 Mannheim and Munich, dealing with infringement first in
CHANCERY DIVISION HC 12 B04711
2 PATENTS COURT 2 October -- the towels are already on the seats in relation to
3 The Rolls Building
7 Rolls Buildings 3 that -- and Munich in relation to the reverse nullity, almost
4 Fetter Lane 4 certainly will get there first.
London EC4A 1NL
5 5 Also relevant is the fact that the US courts have now
Wednesday, 5th June 2013
6 6 conducted a FRAND trial in Microsoft and Motorola, and they
Before:
7 7 have done so quickly and efficiently in Microsoft's backyard,
MR. JUSTICE BIRSS
8 ---------------
8 Seattle, Judge Robart delivering judgment in April. I will
BETWEEN: 9 take your Lordship to that in due course because it
9
VRINGO INFRASTRUCTURE, INC. 10 demonstrates how a FRAND trial can be conducted and how
10 (a company incorporated under the laws
of the state of Delaware) 11 efficient it could be.
11 Claimant
- and -
12 It also relevant that in the United States, the
12 13 defendants, ZTE Corporation and their US subsidiary, are
(1) ZTE (UK) Limited
13 First Defendant 14 arguing strongly that FRAND should be tried first, that there
(2) ZTE CORPORATION
14 (a company incorporated under the laws 15 is no point in trying validity or essentiality or infringement
of the People's Republic of China)
15 Proposed Second Defendant
16 of the InterDigital portfolio launched against them in the US
16 --------------- 17 proceedings. In particular, they say that it really does not
17 (Computer-aided transcript of the Stenograph Notes of
Marten Walsh Cherer Ltd., 1st Floor, Quality House, 18 matter whether or not the patents in suit are invalid,
18 6-9 Quality Court, Chancery Lane, London WC2A 1HP.
Telephone No: 020 7067 2900. Fax No: 020 7831 6864 19 non-infringed or non-essential, because there are all the
19 e-mail: info@martenwalshcherer.com)
20 ---------------
20 other patents in the portfolio which will need to be assessed.
21 MR. NICHOLAS GREEN QC, MR. THOMAS HINCHLIFFE and 21 We say that standing back from this there is great sense in
MR. TIM POWELL (instructed by Powell Gilbert LLP) appeared
22 for the Claimant. 22 getting to the heart of the issue between the parties, namely,
23 MR. DANIEL ALEXANDER QC and MS. ISABEL JAMAL (instructed by
Olswang LLP) appeared for the Defendant. 23 deciding FRAND, and courts across the world are beginning to
24
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24 do this. In the United States there is Microsoft and
25 PROCEEDINGS 25 Motorola. There is Samsung and Apple in Holland. There are
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1 MR. GREEN: My Lord, I appear today with Mr. Tom Hinchliffe and
2 Mr. Tim Powell for the claimant, Vringo. My learned friend,
3 Mr. Daniel Alexander QC and Ms. Isabel Jamal appear for ZTE,
4 the defendant.
5 As your Lordship knows, there are effectively three
6 applications. The first is for an early determination of a
7 FRAND. The second is for permission to amend the Particulars
8 of Claim and the third is to add ZTE Corporation as a second
9 defendant. What I propose to do is to deal with my
10 submissions in the following way: first of all, the core
11 facts; secondly, why FRAND should be tried first and then
12 permission to amend and joinder.
13 By way of introduction can I provide your Lordship with
14 a 30 second standing back nutshell. In relation to FRAND, ZTE
15 (UK) says that there should be two ten day trials of the six
16 patents in suit, three days reading of each, then a trial on
17 competition law issues and then probably a reference to the
18 Court of Justice. The issue between the parties appears to be
19 common ground. It is that there will be in due course a
20 global portfolio licence between ZTE Corporation and Vringo.
21 The defendants say that there should be a trial of the patents
22 in suit first because this will provide guidance and will
23 facilitate a settlement of that licence with their parent
24 company corporation. They say this even though the chances of
25 the High Court providing that facilitative guidance before
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1 indicia from certain judges in this jurisdiction that dealing
2 with FRAND first makes good sense. Indeed, it is, even on the
3 defendants' own case as set out in their witness statements, a
4 recognition that the core issues between the parties are the
5 terms of a global FRAND licence with Corp. So we would invite
6 your Lordship to cut to the chase. This, as ZTE itself argues
7 in the US, will cut through viral worldwide litigation.
8 MR. JUSTICE BIRSS: Why is it viral?
9 MR. GREEN: Proliferation.
10 MR. JUSTICE BIRSS: I see; "it has gone viral".
11 MR. GREEN: Which, as your Lordship knows infinitely better than
12 I, usually starts with intense sabre rattling and then fizzles
13 out into something of a lethargic game of conkers before there
14 is a settlement, and that is what happens.
15 Now to the core facts. My client, Vringo, owns 500
16 patents and applications covering telecoms infrastructure,
17 internet search and mobile technologies. Your Lordship will
18 be familiar with its ring tones, or your children will be.
19 MR. JUSTICE BIRSS: Not if I let them!
20 MR. GREEN: Crazy Frog is probably the one better known. Vringo
21 possesses 138 SEPs and 248 outstanding applications. The
22 portfolio includes patents both developed internally and
23 acquired from third parties. The details for your Lordship's
24 note are Mr. Laakkonen's witness statement, bundle C1, tab 4,
25 paragraph 22. Vringo's business includes operating a global

[1] (Pages 0 to 3)
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VRINGO v ZTE
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1 platform for the distribution of mobile apps, social apps in
2 particular. Indeed, Vringo has already licensed some of these
3 to ZTE. As your Lordship may have seen from the witness
4 statements, Vringo is in partnership with Virginia State
5 University to develop and commercialise new products.
6 ZTE (UK), a subsidiary of ZTE Corp, according to its
7 annual accounts, had a turnover of 39 million in 2011 but an
8 operating loss of 2 million. Its parent company in China has
9 an operating revenue of 84 billion Yuan, approximately 8
10 billion sterling, 12 billion US$. It is the fourth largest
11 manufacturer of Smart Tone handsets according to its report,
12 measured by global shipments for the last quarter of 2012, so
13 it is a major world player. Those are the two protagonists,
14 and potential second protagonist.
15 The relationship between Nokia and Vringo, as your
16 Lordship will have seen, is that Vringo acquired patents which
17 include those in suit for 22 million plus a right to a share
18 of future licensing revenues from Nokia. The assignment is in
19 the papers. It was concluded in August 2012 and completed on
20 10th September 2012. Nokia does not own any shares in Vringo.
21 It does not exercise control over Vringo's litigation
22 strategy. Again, for your Lordship's note, the public version
23 of the assignment is referred to in Mr. Laakkonen's statement,
24 paragraph 27.
25 MR. JUSTICE BIRSS: So the only relationship now is that Nokia is
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1 entitled to a share of any royalties.
2 MR. GREEN: Yes. Again, standing back from it, the structure of
3 the deal is fairly obvious. We have paid a fairly significant
4 up-front sum. We get a percentage of the licensing revenues.
5 In so far as there is litigation risk, we bear it.
6 I would like to turn to the position of both ZTE
7 Corporation and ZTE (UK) Limited in these proceedings. I can
8 do this fairly briefly but the issues arising in
9 correspondence between the parties at least in some respects
10 are important in establishing where the parties stand and why
11 there is a real issue between them. Can I first start in
12 bundle C2 with the offer of a FRAND licence to ZTE Corporation
13 on 25th September of last year, C2, tab 1, pages 1 and 2.
14 This letter pointed out that ZTE had, in effect, been selling
15 standard compliant equipment since 2002 and, as it stated in
16 the second paragraph, ZTE has had a very long period of time
17 to evaluate and consider patents in the portfolio -- this is
18 the Nokia portfolio -- and has evidently decided not to take a
19 licence to them. It points out that ZTE is familiar with the
20 ETSI IPR regime and ZTE is listed as having declarations.
21 Then, on the second page, Vringo invites ZTE to consider
22 whether any licence to the patents is required. "If ZTE
23 determines that a license is required, we invite ZTE to make a
24 concrete request for such license, identifying the patents to
25 which ZTE would wish to take a license, and the consideration
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1 proposed by ZTE. Vringo is prepared to license all patents
2 which are Essential (as that term is defined in the ETSI IPR
3 Policy) to a standard provided that the consideration is
4 .... FRAND. If and for as long as ZTE does not make a
5 concrete, binding offer to take a licence capable of
6 acceptance by Vringo, which would include a FRAND payment for
7 all past infringement, and which would result in a licence to
8 Essential patents on FRAND terms, Vringo will pursue all legal
9 remedies available.
10 "A list of acquired patents as can be found" -- there is
11 a reference to where it can be found -- "We look forward to
12 your response. Please address all correspondence to the
13 undersigned", which is Mr. Berger in New York, the COO. There
14 was no response, total radio silence. Vringo commenced
15 proceedings on 5th October 2012 which included Particulars of
16 Infringement. Your Lordship will have seen that in bundle B,
17 tabs 1 and 3. They were against the UK subsidiary and further
18 proceedings were issued on 3rd December, bundle 3, tab 7.
19 Again, this did not engender the response, "How dare you! We
20 want a licence which will cover these patents in suit".
21 The position of ZTE Corporation and ZTE (UK) can be seen
22 from a relatively small number of other letters which deal
23 with the offer. Let me start with ZTE Corporation. Powell
24 Gilbert wrote to Olswang on 28th March 2013 vis-a-vis the
25 September 2012 offer. That is at page 16. This pointed out
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1 that ZTE (UK)'s response did not address the actual offer, and
2 that response is at page 14. If you turn back two pages you
3 will see that Olswang were referring to previous
4 correspondence in relation to the UK proceedings. On the next
5 page, Olswang, on behalf of (UK), say that if the patents are
6 found to be valid and infringed, they will then take what they
7 say is a FRAND licence, but that is only in relation to the UK
8 patents. So Vringo goes back and says, "Yes, but what about
9 the global licence?" This is therefore the letter of the 28th
10 March. So it pointed out that ZTE (UK)'s response did not
11 address the actual offer which was to Corporation and plainly
12 covered the UK. The letter enclosed a detailed term sheet
13 which your Lordship will find at tab 15, and I will come to
14 that shortly. It was confidential but it was available to be
15 shown to Corporation.
16 Just so that your Lordship is aware of why it was
17 confidential, my client in fact has no objection to it being
18 public. The fear was that if it was not simply limited to
19 these proceedings, Corp would rush off to the Chinese courts
20 and get a pre-emptive FRAND determination in its favour.
21 There is no objection to those terms being made public so far
22 as my client is concerned otherwise provided there is a
23 preliminary issue on the terms.
24 The letter asked whether ZTE Corporation was prepared
25 to ----
[2] (Pages 4 to 7)
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1 MR. JUSTICE BIRSS: Sorry, Mr. Green, just to make sure I have
2 understood that, in my simple minded way, if I write a
3 judgment in your favour, I can include the terms and if I
4 write a judgment against you, I cannot?
5 MR. GREEN: Yes. That is the confidentiality issue.
6 MR. JUSTICE BIRSS: That is all right. It was not a criticism at
7 all.
8 MR. GREEN: I understand. I am just confirming from behind.
9 Vringo asked whether or not ZTE Corporation was prepared to
10 take a licence, and the letter cross-referred to ZTE's request
11 that Vringo issue no further proceedings which is in the final
12 paragraph of that letter.
13 MR. JUSTICE BIRSS: I am sorry, Mr. Green. I am afraid that as a
14 result of me asking you questions I have now not picked up
15 what you were referring to.
16 MR. GREEN: I am sorry. Let me take you slightly more
17 systematically through this letter starting at page 16. The
18 letter in the second paragraph states: "Our client wrote to
19 your client's parent company - ZTE Corporation - on 25th
20 September 2012 stating that our client was prepared to license
21 all of its standards-essential patents .... This remains the
22 case. At no point until your letter of 14 March 2013 has your
23 client, ZTE UK, or its parent company indicated that it would
24 be willing to take any licence under pour client's patents, or
25 sought to negotiate a licence. Neither has your client stated
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1 in its Defences that it is entitled to a licence on FRAND
2 terms and that it undertakes to take such a licence, or put
3 forward any FRAND-related defence to liability or relief.
4 However, your client made a number of requests in your letter
5 of 17 January 2013 that are predicated on some or all of these
6 points being in issue in these proceedings. Also, from your
7 letter of 14 March 2013 and your second letter of 22 March it
8 is apparent that your client considers that it may refuse to
9 negotiate the offered FRAND licence to our client's portfolio,
10 compel our client to litigate its rights patent per patent and
11 (if your client is unsuccessful in its defence of the patent
12 actions) claim an entitlement to a licence to any patents
13 found valid and infringed. No basis for such an alleged
14 entitlement is explained or pleaded.
15 "Given the importance of this issue to the management of
16 these proceedings, we do not consider that it is appro pirate
17 or acceptable to run the case to the CMC without your client
18 clarifying its position.
19 "In order to make our client's position clear, we now
20 enclose our client's proposed terms for a licence under its
21 portfolio of standards-essential patents. As this is a global
22 licence it is between Vringo Infrastructure Inc. And ZTE Corp
23 but will be for the benefit of all ZTE Corp's subsidiary
24 companies include ZTE UK. This term sheet is confidential to
25 the parties to these proceedings and their respective parent
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1 companies (save that the term sheet may be shown to the Judge
2 in these UK proceedings or to the European Commission if
3 either party wishes to do so). As ZTE UK is no doubt in
4 communication with its parent about this dispute, our client
5 has no objection to the term sheet being transmitted to ZTE
6 Corp on ZTE Corp first confirming that it will treat the term
7 sheet on the above confidential basis. This is subject to
8 further agreement between the parties or court order.
9 "Our client considers that all of the patents in suit in
10 the UK and German proceedings as currently constituted, and
11 all the patents in issue in the French saisie proceedings,
12 would be licensed under the term sheet.
13 "In order to clarify the issues in dispute, we consider
14 that it is now incumbent on your client to confirm whether ZTE
15 Corp is willing to take a licence on these terms and, if not,
16 what its objections to these terms are. Therefore, please
17 inform us by 11 April whether: (a) the terms proposed are
18 satisfactory, in which case a licence agreement can be
19 negotiated immediately between the parties on the basis of the
20 term sheet; (b) the terms proposed are rejected; or (c) the
21 terms proposed are satisfactory in principle, save that your
22 client or its parent company would wish to negotiate certain
23 aspects of the terms (in which case, please indicate which
24 terms would be negotiated).
25 "If your client or its parent company is prepared to
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1 negotiate now on the basis of the term sheet, our client is
2 prepared to allow a reasonable period for such negotiations to
3 take place on appropriate terms as to confidentiality and will
4 work with your client and its parent company to establish a
5 procedure for the timely and efficient settling of licence
6 terms."
7 Then the next paragraph sets out the patents which have
8 been declared ETSI standards. This is in response to various
9 questions. "Our client is prepared to license its essential
10 patents on FRAND terms .... and is prepared to negotiate
11 ..." Then we have 3. It is not an unimportant point but one
12 which does not arise now. "Should your client refuse to
13 confirm that it is willing to license our client's
14 standards-essential patents on FRAND terms, our client will be
15 seeking an injunction, delivery up or destruction in relation
16 to any products which are found to infringe a valid claim of
17 any of the 6 patents in suit." The reason it is important
18 that that marker was put down is because it is at least
19 theoretically possibly that, at the end of the patent's suit
20 in which the claimant had been successful, it would say, when
21 it came to relief, "You were not a willing licensee. You
22 forced me to go through the mill on litigation. You have
23 therefore lost your ETSI rights and I am entitled to an
24 injunction, not just damages." But that is for the future.
25 Then there is the last paragraph: "Finally, you asked
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1 for confirmation in your letter of 1 March that our client
2 will not issue further proceedings on any other patents in its
3 portfolio. Our client wishes to resolve the real issue
4 between Vringo Infrastructure Inc. and ZTE Corp and its
5 subsidiaries (together, 'ZTE') (whether ZTE will take a
6 licence under our client's portfolio) without unnecessary
7 litigation. The prompt negotiation of a licence on the basis
8 of the enclosed term sheet will remove any desire by our
9 client to bring further patent actions in the UK and
10 elsewhere, based on its standards-essential patents." That
11 was the offer.
12 The response to that is on the next pages. On page 19
13 you have the response in relation to the UK, and on page 22
14 from Corporation. I will start with Corporation because this
15 does respond to the letter. You will see the inconsistent
16 positions adopted by ZTE Corp and UK. Corp starts by saying
17 -- this is Olswang -- "We have been instructed by ZTE
18 Corporation to respond to your letter of 28 March 2013, in
19 which you proposed a global licence between Vringo and ZTE
20 Corp under Vringo's worldwide portfolio of SEPs.
21 "As has been explained in correspondence in relation to
22 the existing UK patent infringement proceedings between Vringo
23 Infrastructure Inc and ZTE (UK) Limited, the licence you have
24 proposed extends considerably beyond the six UK patents in
25 issue in those proceedings. It is therefore appropriate to
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1 respond to your proposal separately from those proceedings.
2 We note that your proposal is on behalf of Vringo
3 Infrastructure Inc and the licence would be subject to and
4 interpreted in accordance with the laws of the United Kingdom,
5 by which we presume you mean the laws of England and Wales".
6 Then there is this: "ZTE Corp appreciates Vringo
7 finally providing a detailed licence proposal. ZTE Corp is
8 interested in seeking to agree with Vringo a licence under
9 Vringo's SEPs on FRAND terms. However, ZTE Corp would
10 appreciate further information and clarification ..." That is
11 a pretty unequivocal statement that they are interested.
12 Your Lordship might just wish to put by that "confirmed in
13 witness statement Burdon, paragraph 12" which I will come to
14 shortly. That is Mr. Burdon on from Olswang for the
15 defendant.
16 They are interested in negotiating a global licence but
17 they seek further information. It says at 1, "Please provide
18 a list of the patents". Paragraph 2 is not unimportant for
19 what it does not say. "The proposal appears to be structured
20 on the assumption that if a patent has been declared essential
21 to a standard it must be used/infringed in equipment which is
22 said to be standards-compliant. That assumption is not
23 necessarily correct. Please confirm that the royalty will
24 only be payable if the patent is actually used." There is no
25 reference to, "Please confirm that the royalty will be payable
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1 only after we have litigated the hell out of you and
2 established that some of the patents are not valid and are not
3 infringed". "Use" really goes to whether a standard-essential
4 patent is really essential. As we all know, there are
5 probably quite a large number of patents which are said to be
6 part of the standard but which can be worked around just in
7 very general terms.
8 At this stage can I just ask your Lordship, to put this
9 letter into context, to go to Mr. Burdon's witness statement
10 at C1. I will come back to the letter in a moment. This is
11 just so that your Lordship has the defendants' position well
12 in mind. It is C1, tab 7, paragraph 12, page 5 of the
13 internal numbering.
14 "ZTE UK's position on the CMC is that the two cases
15 should continue to proceed in the usual way of patent
16 infringement proceedings, as they have done to date. The
17 issues on remedies will only arise if any of the patents is
18 held to be valid and infringed. For the reasons I will
19 explain, I consider that the Court's judgment on the validity
20 and infringement of the two sets of three patents in these
21 proceedings will assist Vringo and ZTE Corp separately to
22 negotiate a worldwide licence." That is consistent with the
23 letter from Corp which is that they are interested in a global
24 portfolio.
25 Perhaps I should just read the rest of that paragraph to
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1 save coming back to it. "I also consider that it is an
2 efficient and effective way to proceed. Further, Vringo's
3 position regarding ZTE UK's lack of entitlement to damages in
4 lieu of an injunction raises possible competition law issues
5 which might need to be referred to the CJEU. It seems to me
6 that this Court could not make such a reference unless and
7 until it had decided that one of Vringo's patents was valid
8 and infringed and was considering whether to grant an
9 injunction or damages in lieu of an injunction."
10 So the position of Corp is quite clearly that it wants a
11 licence and that, at best, the UK suits will assist it in
12 bringing forth a commercial resolution between Corp and Vringo
13 Infrastructure.
14 Going back to the letter, the remaining responses are
15 essentially questions about a licence. There is no objection,
16 of course, to a potential licensee asking questions. It is
17 what one would expect and one would expect it as a precursor
18 to the parties sitting down and having a serious negotiation
19 about the portfolio. Unless my learned friend wishes me to
20 read any paragraph I was not going to go through the remainder
21 of those.
22 The offer itself is worth bringing to your Lordship's
23 attention. It is at tab 15. This is the term sheet. It is
24 explained that it is, as it were, the guts of the agreement.
25 There would need to be a lot of ordinary template language
[4] (Pages 12 to 15)
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1 around it which would be subject to negotiation but it
2 essentially, at base, offers licences of essential patents
3 related to GSM, UMTS or LTE. It is offered that they are the
4 essential patents which are to be the subject of a portfolio.
5 It is said to be a global licence, but the licence does offer
6 a negotiation as to some parts of the portfolio by genus or
7 type. There is a past release in the event that the licence
8 is entered into so that what might have, ex hypothesi, been
9 ten years' worth of infringement is swept aside. That is
10 clause 2(b). Royalty rates are set out in 2(c) and (d), but
11 it is said they are for negotiation. As I have said, my
12 client has absolutely no objection to its position being put
13 in the public domain. This is its opening offer to anybody
14 who wants a licence.
15 There is then, as it were, no nullity proceedings in
16 clause 3(c). It is a form of no challenge but that almost
17 suggests it is pejorative. It makes perfect sense that if
18 there is a licence, the parties then dismiss nullity
19 proceedings for claims of invalidity around the world.
20 This is Vringo's offer. It is an invitation to
21 negotiate. It is an attempt to settle the real dispute
22 between the parties. It is cards face up on the table. We
23 suggest that it is not suggested by the defendants that it is
24 not a FRAND-compliant offer put forward in good faith. If
25 they have objections they simply come and tell us when they
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1 sit down and negotiate.
2 I dealt with ZTE Corporation. ZTE (UK), the defendant,
3 responded on exactly the same day, 18th April. This is back
4 in tab 1 at page 19. ZTE (UK) comes back with an inconsistent
5 offer, an offer inconsistent with its parent's offer. Two
6 letters come out from Olswang on behalf of D1 and putative D2.
7 I will just take you through the salient parts. This refers
8 to the letter of 28th March and the enclosed confidential
9 proposal for a licence. It describes the offer as a proposal
10 for a licence under the entire portfolio of SEPs and extends
11 to all countries. It is a global licence between Vringo
12 Infrastructure Inc and Corp, but for the benefit of UK, and
13 would include, as they recognise, all the patents in suit in
14 the UK as well as Germany and France and, indeed, the other
15 litigation which is ongoing or about to commence around the
16 world. They then say they do not consider it necessary or
17 appropriate to address Vringo's more general proposal, and it
18 is more appropriate to discuss that separately. Your Lordship
19 has seen that.
20 Then they say: "The proposal provides for a single,
21 indivisible royalty rate for all Vringo's SEPs (save that
22 there is an option to take separate licences under the GSM,
23 UMTS and LTE SEPs) including patents that are not in issue in
24 these proceedings which may neither be claimed to be valid nor
25 said to be infringed. The proposal does not appear to enable
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1 ZTE UK to take a licence under each, or all, of the three UK
2 patents which Vringo has asserted in each of the two sets of
3 proceedings which it has commenced in the UK. Neither is it
4 possible to sub-divide, apportion or otherwise discern a
5 royalty rate for each of the 6 UK patents in issue. Indeed,
6 the global royalty rate you propose would remain the same if
7 any, or all, of these six patents in issue were held invalid
8 and/or not infringed." I will come back to that later because
9 it is not strictly true.
10 "Your proposal does not, therefore, provide particulars
11 of the relief sought in these proceedings as requested on page
12 3 of our letter .... It is important that the defendant is in
13 a position to consider and assess the claims which are made
14 against it. In light of your client's acceptance that the
15 patents in suit have been declared essential, and in light of
16 the fact that our client has agreed to take a FRAND licence on
17 any of those patents declared essential and held to be valid
18 and infringed ...", in other words, a UK patent only if valid
19 and infringed and essential, what I would describe as a
20 contingent acceptance, highly contingent.
21 Then the next sentence states: "We, therefore,
22 reiterate our request that you provide full particulars of the
23 relief sought including the terms of a draft licence
24 identifying FRAND terms, the royalty rate which Vringo
25 proposes ZTE UK should agree in relation to each of the
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1 patents in suit in these proceedings and the damage alleged to
2 have been suffered. We wish to avoid a position where costly
3 proceedings are pursued in the UK which could easily have been
4 resolved. Your client's stance of refusing to say what it was
5 is unhelpful." That is, if I may say so, a bit rich given
6 that the letter of the same date, sent by Corporation, was
7 agreeing that they would be quite happy with a global licence
8 which would cover the UK, and Mr. Burdon's acceptance that in
9 fact this piece of litigation is merely one small step on the
10 way to a global licence.
11 "You appear to be of the view that the point we have
12 been discussing in correspondence about the defendant's
13 entitlement to, and the determination of the terms of, a FRAND
14 licence under the patents in suit in these proceedings needs
15 to be specifically pleaded. We do not agree. It is
16 self-evident that this case is only about money since your
17 client is a licensing undertaking asserting patents which have
18 been declared to be standards essential and has no legitimate
19 claim to an injunction."
20 In one sense, that is absolutely correct. We are a
21 licensor. We are prepared to grant a licence on FRAND terms
22 and it is a money dispute. The parties both agree that it
23 needs, in all commonsense, be a global licence, but it would
24 be wrong to say that if they prove themselves to be an
25 unwilling licensee that my client would not reserve the right
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1 to argue at a later stage that it is entitled to an
2 injunction.
3 "However, to avoid unnecessary correspondence and to
4 ensure that our client's position is clearly stated and in
5 issue, we propose to amend our client's Defence in each of the
6 two actions by addition to paragraph 10 of the following
7 text." Then they summarise the gist of their amendment. Your
8 Lordship will have seen that. They are effectively saying
9 that if everything goes against them, then they will have a
10 FRAND licence, please. "Please let us know [if you] consent
11 to this amendment".
12 That position set out on 18th April was more or less
13 confirmed in a letter of 3rd May, a few pages on, in which
14 they effectively confirm that they are only prepared to take a
15 licence in relation to UK patents held valid and infringed and
16 essential. They will only take a licence with UK as
17 effectively licensee. But it is interesting, and I can do it
18 at this stage to avoid me coming back to it later, to look at
19 the 3rd May letter which is at 27. They attach their proposed
20 amendments to the defence. I will make some submissions now
21 about the lis between the parties, what is the essential
22 dispute between the parties, because there is really no
23 disagreement between the parties on this aspect of the case.
24 They are proposing amendments to the defence in which they say
25 that they are entitled to a FRAND licence, and the basis upon
[Page 21]
1 which they do that -- this is what their proposal is and it is
2 translated into the amended defence -- I will summarise as
3 follows. First of all, they say that declarations were made
4 by Nokia to the Standard Setting Organisation, the SSO. They
5 say that we have committed in the patent purchase agreement
6 with Nokia that we will be bound by their prior declarations,
7 and they rely upon what they say are our obligations under UK
8 and EU competition law, in particular, the law relating to
9 dominance and abusive dominance. They say you have a duty to
10 grant licences on FRAND terms.
11 We agree that those are the disputes in law between the
12 parties. The first two might be described loosely as
13 contractual. That is certainly how the US courts look at it.
14 Those would be relevant when I come back to explaining why the
15 court has jurisdiction to grant a declaration.
16 The position, therefore, as between the parties now may
17 be summarised as follows. ZTE Corporation has, since coming
18 off the fence on 18th April, more or less gone to ground but
19 it is the lynchpin. ZTE's case is that it wants a UK patent
20 suit to be resolved because that will facilitate a global
21 settlement with Corp. Elsewhere in the world, ZTE is busy
22 entering into global portfolio licences. We have put in
23 evidence of the very recent licence with Microsoft, and
24 arguing rigorously against the position it takes in these
25 proceedings. That is the correspondence. That is how the
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1 issue now stands between the parties.
2 Can I now make my submissions on why we say FRAND should
3 be determined first. I will lump my submissions under five
4 headings. The five headings are basically as follows. One is
5 that there is a strong and, if I can use the word, "ripe", lis
6 between the parties which cries out for resolution. Secondly,
7 a FRAND determination will enable ZTE to make all the
8 arguments that it would wish to make about the strength of the
9 portfolio. This can be seen very clearly from the approach of
10 the US courts in Microsoft and Motorola. Thirdly, and in some
11 respects related to the second point, FRAND trials can be seen
12 to be quick and effective in terms of both case management and
13 speed of resolution. Fourthly, in comparative and relative
14 terms, a FRAND trial will save considerable time and cost and
15 will avoid the risk of wasted court proceedings. Fifthly,
16 determining FRAND licence rates is not only consistent with
17 the philosophy behind SSO, the Standard Setting Organisations,
18 but it is beginning to become a much more widely acceptable
19 course for courts to take.
20 Turning to the first of those, that a strong and ripe
21 lis exists, as I have said, it is essentially common ground
22 that the case will ultimately be resolved in a global licence
23 with Corporation and not (UK), and that we have made an offer
24 which is face up on the table and subject to negotiation. The
25 key terms are therein set out. There is, in those
[Page 23]
1 circumstances, a very clear and indisputable lis between the
2 parties. ZTE's own pleading, its amended defence, raises the
3 same legal issues as do Vringo, namely, our commitment to act
4 in accordance with FRAND terms. It does not matter whether
5 one puts that in the context of declarations by our successor
6 in title, our own willingness to act in accordance with FRAND
7 or competition law. There is a clear, legal issue between the
8 parties as to whether those terms are or are not FRAND and,
9 indeed, would go so far as to include the question whether our
10 offer is not FRAND because it is per patent and does not break
11 it down into state by state. So there is a clear lis.
12 ZTE itself has pleaded an undertaking to accept a FRAND
13 licence under the relevant patent in the UK proceedings. For
14 your Lordship's note, it is the amended defence and
15 counterclaim, paragraph 14. That is bundle B, tab 10. That
16 is only in relation to (UK) of course but, none the less, they
17 were prepared to give a FRAND undertaking. Although it might
18 not be true to say that this is purely contractual, none the
19 less for declaration purposes there is a contractual lis
20 between the parties and there is a clear competition law lis
21 between the parties.
22 Why do I say the lis is ripe? The question might be
23 asked, is it premature? Let me take you to ZTE's own
24 submissions in the US litigation with InterDigital which
25 addresses when litigation is ripe for a FRAND determination.
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1 This is bundle C4 at tab 12. The context of this case can be
2 summarised very briefly. It is set out on page 1 of the
3 pleadings, page 7 of the file number. InterDigital, IDC, had
4 filed a second raft of patents in suit against the two
5 defendants, ZTE and Huawei. Both defendants then filed a
6 counterclaim which they described as compulsory for a request
7 that the court set a FRAND royalty for all of IDC's portfolio.
8 This was the US portfolio, the important point being that it
9 was much wider than the patents in suit. These were
10 described, your Lordship will see at the bottom of page 7, as
11 counts IV, V and VI. Those were the counterclaims for
12 declarations of the FRAND royalty.
13 One can pick up ZTE's own submissions on page 13 of this
14 bundle. What I will do, if I may, is that I will deal with
15 this document comprehensively now and then I will make
16 submissions about it. Page 13: "Jurisdiction Exists over the
17 Declaratory Judgment Counterclaims (Counts IV, V and VI), and
18 the Court Can and Should Exercise Jurisdiction over Them. A.
19 The Declaratory Judgment Counterclaims Are Ripe for
20 Adjudication. Counts IV, V and VI are ripe for adjudication.
21 If the parties had not disagreed over what a FRAND rate is,
22 they would have entered into licenses and the present lawsuits
23 would not have been filed." So ZTE's position is, "We want to
24 enter into a licence. There is a disagreement, on this
25 occasion, over rate, but we would have entered a licence
1 reason, or the philosophical reason or legal reason why they
2 say contingency should not arise is at the bottom of page 17
3 under the heading, about seven lines down. "Moreover,
4 Defendants seek a FRAND rate determination as to IDC's entire
5 US 3G and 4G declared essential portfolio. Even if there were
6 a finding of non-essentiality, non-infringement or invalidity
7 as to one or more of the individual patents-in-suit, it would
8 not negate Defendants' commitment to license IDC's 3G and 4G
9 portfolio ..." In other words, an argument about individual
10 patents in suit, even the crown jewels of InterDigital's
11 portfolio, is irrelevant, so they say.
12 Coming back to page 14 ----
13 MR. JUSTICE BIRSS: I litigated some of InterDigital's crown
14 jewels once, you know.
15 MR. GREEN: I understand so. Your Lordship may have a view as to
16 what was a crown jewel or not.
17 MR. JUSTICE BIRSS: Quite!
18 MR. GREEN: Turning back to page 14, dealing with IDC's assertion
19 that it is all highly contingent, they go on to strongly
20 refute that. They say that it rests on a misreading of the
21 counterclaims. This is about line 5. "In fact, the
22 counterclaims state that each of the Defendants 'has been and
23 is willing to license each of the Combined Asserted Patents on
24 FRAND terms and conditions' ... Defendants repeatedly have
25 made clear their unqualified commitment to pay the FRAND rate

[Page 25] [Page 27]

1 otherwise, and that makes it ripe".
2 "A declaratory judgment that IDC has waived the right to
3 obtain injunctions for its declared essential patents and that
4 it failed to comply with its obligation to offer FRAND
5 licenses would dispose of IDC's claims for injunctive relief
6 in both this court and in the ITC." So would the
7 determination assist in disposing of outstanding claims.
8 "The Court's setting of a FRAND rate, which Defendants
9 have unequivocally undertaken to pay" -- that is ZTE and
10 Huawei -- "together with the companion orders of specific
11 performance that Defendants have requested as remedies, would
12 resolve these lawsuits entirely" -- that, of course, is the
13 US patents in suit -- "These declaratory relief claims are
14 ripe, and jurisdiction exists, under all three prongs of the
15 inquiry of Armstrong World Indus ..."
16 Then they go on to say: "IDC's assertions that (1)
17 Defendants' 'willingness to agree to FRAND licence terms
18 applies only to patents that are valid, infringed and
19 essential' ..." So IDC were saying, "But you have only agreed
20 to contingency and therefore there is no point in having a
21 FRAND determination", which is the opposite here. Here, in
22 the US case, ZTE was unashamedly, unequivocally and vigorously
23 asserting that it was not going to make a contingent claim.
24 It goes on to explain the reason for that on page 17, which is
25 that there is really no point. Just flipping to page 17, the
1 set by the Court. There are no qualifications or reservations
2 in this commitment then or now.
3 "IDC argues that Defendants could 'change their
4 positions' and that they might 'at the end of the process deny
5 the applicability of any judgment unless and until each patent
6 is found valid and infringed' .... Both cases are inapposite.
7 "In Apple v. Motorola, Apple expressly made acceptance
8 of the judicially determined FRAND rate contingent upon the
9 rate falling below a specific value ... Apple's failure to
10 commit to paying the court-determined rate was the sole basis
11 for the decision of the Apple v. Motorola court to refuse to
12 declare a FRAND rate. There is no such failure here.
13 Defendants have not hedged their commitment to pay the
14 judicially determined FRAND rate.
15 "Rembrandt was also very different from the situation
16 here. Like Apple, the defendant in that case equivocated on
17 its commitment to pay the rate set by the court, reserving the
18 right to argue that 'no payments are due under the license',
19 if the single asserted patent was found not infringed or
20 invalid. Defendants, in stark contrast, have unequivocally
21 committed to license IDC's entire US declared-essential 3G and
22 4G portfolio on the FRAND terms set by the Court regardless of
23 whether any asserted patent is found to be infringed or
24 valid."
25 Then they go on to set out some case law about

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1 contingency. I think it is worth just reciting because it
2 gives you a flavour. Of course, I accept this is ZTE's. It
3 is a one-sided submission but, none the less, it is a flavour
4 of the US court's position.
5 "IDC is also wrong as a purely legal matter in arguing
6 that its FRAND commitment is contingent on a finding of
7 essentiality. Every court that has considered the issue
8 agrees that 'claims based on fair, reasonable and
9 non-discriminatory licensing obligations are not contingent
10 upon the results of patent infringement suits regarding the
11 same patents' and that such claims are therefore ripe when
12 declared essential patents have been sued on: The policies of
13 the standards setting organizations become far less useful or
14 effective if a company who has declared its patents as
15 essential, thereby encouraging the organization to adopt the
16 standard, can then refuse a fair, reasonable and
17 non-discriminatory license until essentiality is proven,
18 either through patent infringement litigation or otherwise."
19 They then cite Apple v. Motorola which was a case about ETSI.
20 "Thus, for adjudication of the FRAND obligation, it is
21 not necessary 'to determine whether the patents at issue are
22 in fact "essential" because [Motorola] has already voluntarily
23 declared them essential'" -- then they cite Ericsson v.
24 Samsung -- "(FRAND claims can be adjudicated separately from
25 patent infringement claims)" -- they cite Rembrandt --
[Page 29]
1 "(denying motion to compel defendant to either admit
2 infringement or concede in the alternative that it was not
3 entitled to a license because the patent was not essential).
4 The court in Apple v. Motorola (June 2011) was aware of 'no
5 cases in which the court concluded that contractual or
6 antitrust claims related to licensing obligations cannot be
7 resolved before resolution of related patent infringement
8 suits.'
9 "IDC's claims of 'contingency' as to its licensing
10 obligations are therefore misplaced. A live dispute over
11 those obligations now exists." What they are saying here is
12 that whatever the position of a party, the courts take the
13 view that, in law, the moment the patent is asserted, a live
14 dispute which is ripe for a FRAND determination arises.
15 Then at page 17 it says: "IDC's argument on
16 'conclusivity', with its citations to the Rembrandt and Apple
17 cases, is basically a repetition of its argument, addressed
18 above, that Defendants can change their minds about paying the
19 FRAND rate that they have asked this Court to set, and that
20 this Court's judgment would therefore not be 'conclusive'. As
21 described above, however, Defendants have committed to pay the
22 rate set by the Court, unlike the parties in Apple and
23 Rembrandt. IDC also agrees that it will be bound by the
24 Court's judgment. The mutual obligation would not be
25 'voluntary,' 'one-way', merely 'suggestive' or
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1 'hypothetical'."
2 Then they make the point, which I have already
3 highlighted, that even if you get three findings absolutely in
4 their favour as they plead in this country, it still does not
5 undermine the utility of a FRAND determination.
6 Finally, I have just a couple of other points to pick up
7 on the next two pages under, first of all, the heading, "The
8 Third Prong", at page 18, which is about utility. They make
9 the point that the court is the only forum in which FRAND
10 rates can sensibly be set, and they then cite Microsoft v.
11 Motorola at the bottom. "As the court found in Microsoft v.
12 Motorola, it is an 'inescapable conclusion that a forum must
13 exist to resolve honest disputes between patent holder and
14 implementer as to what in fact constitutes a RAND license
15 agreement', and that 'the courthouse may be the only such
16 forum.'"
17 Finally, in terms of why the court should exercise its
18 jurisdiction under B, it says: "For the reasons described
19 above, the Court's judgment on the FRAND counterclaims in the
20 present cases will resolve the parties' overall dispute, not
21 only over the particular patents in dispute currently, but
22 over other patents in the same US declared essential
23 portfolio, thereby preventing future litigation from
24 emerging."
25 Of course, ZTE could say, "We are different here. We
[Page 31]
1 are now asserting contingency." The point which flows from
2 this document is that in parallel and important proceedings
3 they have taken the same view as we do, namely, that FRAND is
4 important. It facilitates the resolution of global
5 litigation. The courts are appropriate places for the
6 resolution, indeed, possibly the only place, where such
7 matters can be resolved, and you do not need contingency.
8 Contingency is neither a bar, nor should be, to a FRAND
9 determination.
10 That is why I submit that the issue here is ripe. We
11 have made a full and frank offer, cards face up on the table.
12 We have also stated they are free to negotiate. We have,
13 because we did not get a response, started litigation but we
14 are prepared to negotiate in good faith. Vringo has indicated
15 that as to the absence of an agreement, it is content for an
16 independent Tribunal to set the terms, namely the court. ZTE,
17 for its part, has stated that it is prepared to enter into a
18 global licence to resolve, amongst other things, this dispute,
19 and we know that it has entered into global licences with
20 other patentees. The key issue, and I am emphasize "the" as
21 the definitive article, is the global licence with Corp.
22 The point which ZTE makes, which I will come to, is that
23 they want to use the UK as a forum to measure the strength of
24 the portfolio. That raises quite an interesting issue which I
25 will come to which is really my second point which is that
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1 the FRAND determination will enable ZTE to gauge effectively
2 the strength of the Vringo portfolio. There is no need to
3 conduct a sliver analysis combining two ten day trials, times
4 two three-day reading periods, 26 days, prior to a competition
5 analysis and a reference, in order to get a handle on the
6 strength of the portfolio. One has to remember that in the
7 United States Judge Robart assessed the strength of the entire
8 Microsoft and Motorola portfolio in seven days.
9 I will come now to the Motorola v. Microsoft case. It
10 is a very lengthy judgment. In order to speed matters up, I
11 have produced a brief aide-memoire which sets out the relevant
12 paragraphs and points which I hope will speed me up in going
13 through it. May I hand up a copy to your Lordship, please.
14 (Same handed) The judgment is at C2, tab 11. I have produced
15 what I hope is a reasonably concise aide-memoire. The
16 principal points or the forensic points that we draw from it
17 we have summarised under the heading "Main points arising from
18 judgment". I should just add a correction to footnote 1. In
19 the second line it uses the word "hornet" which should be
20 "honest". No one has ever paid me for my typing skills!
21 Although perhaps "hornet" is appropriate.
22 The main points we say flow from this which are relevant
23 are as follows, but before just summarising them I think it is
24 right to say that this is an extremely articulate and
25 impressive judgment. Whether or not the High Court would
[Page 33]
1 agree with it or not is really another matter. What it
2 demonstrates is the modus operandi of an effectively run
3 FRAND trial in which the judge has set out ----
4 MR. JUSTICE BIRSS: This is the judgment of the FRAND trial.
5 MR. GREEN: This is the judgment of the FRAND trial, conducted as
6 a bench trial, in other words, without a jury, by the judge,
7 over the period of 13th to 20th November of last year, seven
8 days. I do not know if weekends were included but let us call
9 it a seven-day trial in which the judge heard 18 witnesses,
10 including the normal run of economists that one would probably
11 expect to find instructed in the United Kingdom.
12 We say it proves the following. It shows that a FRAND
13 trial can be conducted swiftly and efficiently. I will come
14 back to case management in a moment. We say it proves that
15 FRAND issues are eminently justiciable and practicable. It
16 identifies a methodology which would guide the High Court and
17 provides a useful, articulate and well-structured logic for
18 any future court trying FRAND issues. It sets out many of the
19 economic arguments that have been discussed in the FRAND
20 literature which it is likely that experts in the High Court
21 would agree upon and which the court here would also agree
22 upon, what is known as hold-up, stacking and ex ante analysis.
23 There is a strong indicator that the actual scope of conflict
24 between witnesses of fact and experts is likely to be
25 relatively small and such issues that remain are readily
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1 amenable to legal and logical analysis.
2 It shows that the issue of valuation can be broken down
3 into manageable and practicable steps, which fall under three
4 headings: (i) the contribution of the portfolio to the
5 standard; (ii) the contribution of the portfolio to the
6 product of the licensee; and (iii) the impact of comparables.
7 "It shows that it is not necessary or relevant for a
8 court to determine issues of validity and infringement prior
9 to a FRAND assessment, in that (i) the assessment is made upon
10 a hypothetical ex ante basis by assuming that the parties
11 negotiate a licence before the point in time at which an
12 infringement occurs." We point out in footnote 2 that the
13 assumption set out in this judgment is not as described in my
14 learned friend's skeleton, namely, that the patents were valid
15 and infringed. "(iii) The strength" -- frankly, anything to
16 do with strength, including economic importance, utilisation,
17 whether the standards, or part of them, are optional or not,
18 are the subject of expert evidence, and those matters -- I
19 mean, this seems to be particularly important -- questions of
20 validity, use, infringement are an integral part of
21 comparables. If one puts in front of the court a comparable
22 which says that the royalty rate for, let us say, Ericsson's
23 or InterDigital's portfolio is 1 percent, nobody assumes that
24 2,000 patents are all valid and infringed. There is a very
25 high discount rate applied, because everybody knows that
[Page 35]
1 manifestly to be true.
2 MR. JUSTICE BIRSS: I mean, I have to say, Mr. Green, I do not
3 have any problem with that. I have not read this Motorola
4 judgment, but nothing you have said here sounds any different
5 from anything I am familiar with in a copyright tribunal. One
6 can do exactly this in a copyright tribunal. It is not news
7 that it is possible to come to this kind of conclusion.
8 MR. GREEN: That is a point we have made here, that whether it is
9 a licence of right or a copyright tribunal case, it is really
10 not that difficult.
11 Under the heading "The Proceedings", we have simply
12 given a bit of background about the proceedings: mutual
13 offers, Microsoft v. Motorola. Microsoft sought a
14 determination of the RAND royalty. They call it sometimes
15 RAND, sometimes FRAND. They sometimes do not know whether
16 they want to be fair or not. But it was of the worldwide
17 portfolio.
18 MR. JUSTICE BIRSS: Not the first time I have heard that one.
19 MR. GREEN: There is an interesting analysis on page 5 as to how
20 this matter, at least, has a contractual context to it. It
21 was a bench trial, 18 witnesses, over 13th to 20th November.
22 Then at page 6: "The court observed that 'more often than
23 not' there was no dispute about evidence and that residual
24 disputes could be resolved using 'law, reason and logic'."
25 As to methodology: "The issue is ripe for determination
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1 by a court when the patentee makes clear that it is prepared
2 to license on FRAND terms and for instance makes an offer.
3 However, the initial offer need not be equivalent to that
4 found ultimately to be FRAND..." It just needs to be in good
5 faith, because it is the opening salvo in a negotiation. We
6 pointed out that the same position has been taken by the
7 District Court in the Hague, in Samsung v. Apple. "The test
8 is based upon what a willing licensor and willing licensee
9 would agree in a bilateral negotiation at the point in time
10 prior to an infringement." It seems to be a hypothetical
11 observation, because the evidence which is then relied upon is
12 not measured as of an artificial date; it is up-to-date
13 evidence. So, you do not say: "The last time there was no
14 infringement was 2001; let us only look at 2001 comparables."
15 It is a way of really articulating the underlying principle.
16 "The test is practicable and seeks to simulate a real
17 world bilateral negotiation.
18 "The negotiation will take account of strength of the
19 portfolio in terms of validity, usage and utility. This means
20 that evidence will be adduced on the contribution or relevance
21 of the patent portfolio in question to the standards in issue
22 and the end products and also to comparables" -- strength
23 always relevant.
24 Of two economic issues which were said to be taken
25 account of in negotiation, one is "hold-up", and that simply
1 it was based upon which evidence which turned out to be very
2 largely undisputed -- for example, this portfolio goes to the
3 core of something really important in the standard. It is
4 hardly disputable. That will give a slightly higher value
5 that is peripheral, and it is obviously a higher value if it
6 is optional. They identify some diminishing factors and some
7 interesting factors.
8 Then, comparables. An interesting point which the court
9 ruled upon -- and an English court might take a slightly
10 different view on this -- is whether settlements which are not
11 freely negotiated, because of litigation, were irrelevant.
12 The court gave four examples of licences as comparables that
13 it did not take into account. I suspect that an English court
14 might take the view that it rather depends on the
15 circumstances, but there you are; it is a comparable, it is
16 for the court to measure. We do not think there is any magic
17 in the Motorola case. We think it is common sense. That
18 brings me to my third point, which is that a FRAND trial would
19 be effective, concise and efficient. It does seem to me,
20 perhaps coming from a more competition background, that this
21 case ----
22 MR. JUSTICE BIRSS: I am sorry. The only bit of this I do not get
23 at the moment -- I just have not understood it, and I want
24 to -- is whose patents were they and who was wanting this to
25 happen.

[Page 37] [Page 39]

1 reflects the fact that once you have been declared as part of 1 MR. GREEN: I think both parties wanted it to happen, and it was
2 a standard, you get a sort of surge in value, incremental 2 both parties' patents.
3 value, because what might otherwise have been a fairly routine 3 MR. JUSTICE BIRSS: Oh, really?
4 patent now becomes, as it were, accredited, and the valuation 4 MR. GREEN: Motorola's patents were in suit.
5 is designed to strip out that increment but, nonetheless, 5 MR. JUSTICE BIRSS: Right. So, Motorola was the patentee.
6 measure the patent against the standard. So, there was quite 6 MR. GREEN: What perhaps we will do is just ----
7 a lot of evidence as to whether a portfolio was core or 7 MR. JUSTICE BIRSS: Microsoft was the one wanting the court to
8 peripheral or in part optional, could be worked around. 8 settle a FRAND licence.
9 Stacking -- when you enter a negotiation, you obviously take 9 MR. GREEN: Yes. But it turned out to be a mutual assessment of
10 account of the fact you are in one patentee with one licensee. 10 both ----
11 So, it is blindingly obvious that if there was 50 licensors 11 MR. JUSTICE BIRSS: Oh, sure. Well, in the end they did it. Oh,
12 and 3.5 percent, the ---- 12 really? Okay. Well, whatever.
13 MR. JUSTICE BIRSS: There was a Micky Rooney film about that very 13 MR. GREEN: Can we just check that? We will come back with
14 thing, Mr. Green -- Mr. Ten Percent. 14 chapter and verse in a moment.
15 MR. GREEN: I did not put it in, because I knew your Lordship 15 The third heading is, really, to counter a point made by
16 would know it. 16 my learned friend that this would be a mammoth exercise. We
17 MR. JUSTICE BIRSS: He gave eleven ten percents! 17 think this would be case managed not quite out of existence,
18 MR. GREEN: There may or may not be principles which an economist 18 but certainly into shape; and frankly, if the US courts can do
19 would accept or argue for in this court but, nonetheless, they 19 the exercise between 13th and 20th November, whether that is
20 are cogent, they are principled, and they demonstrate how a 20 seven days or whatever, it rather demonstrates the point. If
21 court could examine the issues. At 19, we have simply given 21 one thinks about it in practical terms, there is likely to be
22 some examples of the court's assessment of different aspects 22 some economists. The economists which were cited here ----
23 of the mutual portfolio strength, and we have picked up a few 23 MR. JUSTICE BIRSS: Did they have depositions?
24 points -- and I am not going to read them now -- but the 24 MR. GREEN: That, I do not know. I would imagine so.
25 exercise the court engaged in was relatively high level, and 25 MR. JUSTICE BIRSS: All it is, Mr. Green, the "if the Americans

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1 can do it, we can do it too" argument is all very nice, but to
2 say, well, it takes seven days of US trial time does not mean
3 that it takes the same amount of court time and party time,
4 and everything else. The Supreme Court does speeches in half
5 an hour, if I understand that correctly -- the US Supreme
6 Court.
7 MR. GREEN: The European Court does 20 minutes.
8 MR. JUSTICE BIRSS: Quite.
9 MR. GREEN: My point is that it is manageable. Whether it is
10 seven or ten is somewhat irrelevant; it is a manageable
11 exercise. If one thinks about it, when you have this as a
12 template, whether you agree with it or not, one can very
13 simply say to the economists, "Do you agree with stacking; do
14 you agree that is a relevant consideration? Do you agree with
15 hold-up?" Almost certainly, they will say "yes", which would
16 limit the scope for expert evidence to be given. So far as
17 experts are concerned, again, given the very strong indication
18 by the judge a lot of it was undisputed, at an appropriate
19 case management point you could break it down into bite-size
20 chunks and order the experts to sit down and agree on various
21 propositions, which would whittle down the scope for
22 disagreement. We have a template. You look at the importance
23 of the portfolio to standard, to the end product, and you look
24 at the comparables. There really is not that much upon which
25 experts would necessarily disagree, which is why it can be
1 Cost. So far as the patents are concerned, we estimate,
2 that is Powell Gilbert estimate, a total for all the trials of
3 circa 6 million; Olswang's just south of 4 million, 3.8; so,
4 call it between 9 and 10 million.
5 MR. JUSTICE BIRSS: I see. So, Powell Gilbert's 6 million ----
6 MR. GREEN: For its own ----
7 MR. JUSTICE BIRSS: I see.
8 MR. GREEN: For two trials. So, roughly, both sides say circa --
9 and of course this is best guesstimate -- 10 million. FRAND,
10 2 to 2.5 million, 1 to 1.2 million per party.
11 Utility, which is, if you like, risk of this actually
12 being helpful if we go ahead with the patent suit.
13 Your Lordship may have seen that in Germany, there is for
14 November, I believe it is, the infringement trial in the 919
15 and 119 -- October, sorry -- for the 919 and 119 Patents, and
16 ZTE have brought a nullity claim, which is certainly far
17 further advanced than we are, which would be heard some time
18 next year; and that covers a portion of the patents which
19 would be in suit here. If what they want is a feel, as it
20 were, that certainly would suffice, and there is a real risk
21 that the UK proceedings would therefore grind into the sand
22 and time would be wasted.
23 ZTE's real agenda, I think, is evident from the
24 suggestion that, over and above patents in suit, if we are
25 really to get to a result as to what our obligations are, we

[Page 41] [Page 43]

1 controlled. Your Lordship understands the case management
2 issues. I am not going to belabour them.
3 Point 4, time, cost and utility. Time. In relation to
4 a patent suit, there are six patents at the moment. It is
5 suggested by the defendant they be tried in two tranches of
6 three. Ten days each, three days reading; so, that is 26 days
7 of court time. In terms of timing, we might be looking at at
8 least two years to resolve those, if they are taken
9 sequentially. Then there are appeals. Then there is
10 Mr. Burdon's point that if any of them are found to be valid,
11 you need to have a competition or trial to determine whether
12 or not Vringo was obliged at that stage to grant a FRAND
13 licence, which could result in a reference to the Court of
14 Justice. Your Lordship may have in mind -- and it has been
15 referred to by my learned friend -- that the IPCom proceedings
16 started in 2008. Five years on, no FRAND determination, and
17 counting.
18 So far as FRAND is concerned, so far as time, well,
19 whether it is five or seven or ten or twelve, it is still
20 likely to be shorter than two 20-day trials with six days
21 reading. It would be one trial which could, quite
22 realistically, be got ready within 12 months, with careful and
23 rigorous case management. It is already accepted by ZTE
24 Corporation that they want a global licence. It would go to
25 the heart of the dispute.
1 need a reference to the European Court. If one postulates
2 what they are really saying, we have the patents in suit, plus
3 appeals, presumably, then we have a competition case as to
4 whether we are dominant, and then interesting questions go off
5 to Luxembourg. It is only one's guess as to how long that
6 timescale would be -- possibly, five, six, seven years. This
7 is what ZTE is suggesting will facilitate a global settlement
8 with its parent company.
9 Fifth issue, changes in judicial approach; and I will
10 try and take this relatively quickly.
11 MR. JUSTICE BIRSS: Just before you get to that, on utility, let
12 us say we do the same thing that the judge in Seattle did and
13 do what, I am afraid, in my mind I think of as a copyright
14 tribunal hearing -- this looks exactly the same as the sort of
15 copyright tribunal hearings I have done and am familiar with.
16 So, you do that, you settle a licence. You say, "Here is a
17 licence, there are the terms, 2s 6d per smartphone," or
18 whatever. Then the action continues, presumably, in
19 principle. It does not force the action to stop, coming to
20 that conclusion. Let us say all six of your patents are found
21 invalid, and assume that is not held on appeal. What happens
22 then?
23 MR. GREEN: So far as we ----
24 MR. JUSTICE BIRSS: The royalty rate cannot be the right royalty
25 rate, if you have got no patents.

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1 MR. GREEN: Well, if it is a FRAND determination, it will have
2 taken account of overall strength.
3 MR. JUSTICE BIRSS: I understand. But it still cannot be the
4 right royalty rate if you have not got any patents.
5 MR. GREEN: That is why a FRAND negotiation takes account of
6 strength. It is not a perfect solution, and no one suggests
7 you are going to litigate each and every one.
8 MR. JUSTICE BIRSS: I understand. If you agree, if you compromise
9 with someone and you compromise the claim and take into
10 account the strength and you do exactly what you have just
11 described, if you do that, that is because you are stopping
12 the action. But that is not what this does.
13 MR. GREEN: Your Lordship's point is that you cannot compel
14 someone to accept unless there was some context in which it
15 could arise.
16 MR. JUSTICE BIRSS: Another way of putting it -- because this
17 seems to me to be an important point; I do not want to mislead
18 you into thinking I do not think it is important, so that is
19 why I am asking you these questions -- is, I can tell you what
20 the FRAND royalty is for any given patent if it is invalid.
21 The answer is nil. You have no right to a royalty on an
22 invalid patent. You never do. You can negotiate a royalty
23 which is different from that, but you do not have a right to
24 it. Is that not right?
25 MR. GREEN: Yes. There are two answers. First of all, the
[Page 45]
1 a priori step takes account of strength. You are absolutely
2 right. That is where strength comes in. You look at the
3 strength of the portfolio, which is what Mr. Burdon says, that
4 you want to have a chance to look at the strength of the
5 portfolio, in which case you would have taken account of and
6 provided a discount on the assumption that a percentage of the
7 patents is invalid. That is part of the headlocking, the
8 banging of heads together, where both parties -- your Lordship
9 understands that.
10 MR. JUSTICE BIRSS: I understand that.
11 MR. GREEN: Secondly, these are six out of 500. So, my client
12 would say, you know, "If you are not prepared to accept that,
13 we will just simply continue to engage in litigation."
14 MR. JUSTICE BIRSS: I understand. But let us say we get to a
15 point where you have no valid UK patents.
16 MR. GREEN: Then of course ----
17 MR. JUSTICE BIRSS: You are not entitled to any money for the UK,
18 Mr. Green, if you have no valid UK patents.
19 MR. GREEN: That must be right. But the point is that the law
20 does not work that way. When we are dealing with
21 declarations, we are dealing with something which has utility,
22 and you are not actually asking whether or not a FRAND
23 determination will lead to an inevitably inexorable definitive
24 result. One is saying that it will have utility in resolving
25 the dispute between the parties. InterDigital v. Nokia, lots
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1 and lots of UK cases ----
2 MR. JUSTICE BIRSS: Yes, I understand.
3 MR. GREEN: So, you are absolutely right. There is no theoretical
4 inevitability that it will lead to a result. It cannot do.
5 But that is not what FRAND is about. FRAND is about real
6 world practicalities and the courts taking that on the chin
7 and saying that the real dispute between the parties is the
8 terms of the licence.
9 MR. JUSTICE BIRSS: Is that what was the case in the
10 Microsoft v. Motorola case?
11 MR. GREEN: I think both parties were ----
12 MR. JUSTICE BIRSS: The reason I am pressing on this is, as I
13 understand what is being said in the InterDigital case, the
14 defendant (if I can call them that), i.e. the not patentee, is
15 saying, "I wish to be bound by this decision." I can
16 understand that if a defendant says he wishes to be bound by
17 the decision, then the court is perfectly capable to do the
18 same thing as a copyright tribunal and do an ex ante exercise
19 and say, "I am going to take into account the strength of the
20 portfolio, and the answer will be 2s 6d" -- because that will
21 be the end of it.
22 MR. GREEN: Let us assume that we have some valid patents, so
23 there is then a question of something to be paid or something
24 to be granted, at which point we have said, "Our licence, our
25 offer, is absolute total satisfaction of our obligations
[Page 47]
1 either under ETSI or under Article 102, and you are not
2 entitled to a UK per patent licence only." At that point, in
3 these proceedings, the court would have to rule on any remedy
4 we were entitled to, or rule on the defendant's submission
5 that they were entitled to a UK licence. So, it would be an
6 integral part of that litigation after the validity action.
7 So, that issue is integral.
8 MR. JUSTICE BIRSS: I understand. I mean, if you do have a
9 standard -- you keep talking about your patents as Standard
10 Essential Patents, but they are not. They are patents you say
11 are Standard Essential Patents. There is a difference between
12 those two things. If you have a Standard Essential Patent
13 which is valid, I understand that; everything you have said is
14 entirely right. But that is what this case is about, is it
15 not? They say you do not. You say you do and they say you do
16 not.
17 MR. GREEN: The logic of that is that you would never ever have a
18 FRAND determination, save in those circumstances where it was
19 utterly definitive. You will see that the European
20 Commission, for example, and the FTC ----
21 MR. JUSTICE BIRSS: I am sorry to interrupt you, Mr. Green. What
22 I do want to understand -- because at the moment I am not
23 clear -- is whether the examples you are giving me are
24 examples of a -- it is not quite right to call it advisory, I
25 understand that -- as far as I can see, the InterDigital
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1 example is not a good example of what you are trying to get me
2 to do, because in the InterDigital example, ZTE, the
3 defendant, is saying they wish to be bound by the finding the
4 court is going to make. I think you have told me, actually,
5 that that was also true with Microsoft v. Motorola, but you
6 have got a rain check on it.
7 MR. GREEN: That is right.
8 MR. JUSTICE BIRSS: So, you can quite see why a court in that
9 case, it is not just a -- I have forgotten the word you used,
10 but it was a good one anyway -- it is not just something which
11 has utility, which may or may not resolve the dispute. It is
12 actually resolving the dispute. The party, the defendant, is
13 saying, "I wish to be bound by a licence like this. You have
14 said you will give me one. The court will tell me what it
15 is," and it will be the end of the case. But what you are
16 asking me to do is something different. I understand that it
17 has utility. If the court can say, "Well, actually, the way
18 to globally settle this case is for you to pay X," then the
19 parties might say, "Okay, fine, that is all right. We will
20 settle"; and that is the InterDigital declaratory relief type
21 of situation in the case law.
22 MR. GREEN: I mean, any dispute between a court in England and
23 Wales can be based upon a declaration. A declaration does not
24 have to be simply (and certainly here would not be) predicated
25 purely and simply on the patents in suit. The declaration
[Page 49]
1 goes broader. It is, effectively, a contractual dispute
2 between my client and putative D2, Corporation. That is a
3 perfectly justiciable issue in the courts and does not depend
4 upon the validity or invalidity of the suits.
5 MR. JUSTICE BIRSS: I agree.
6 MR. GREEN: Secondly, even in relation to UK only, since it is
7 their position that this litigation is simply one step on the
8 way to a broader global licence with Corp, again, that goes
9 directly to the utility of the lis between the parties, which
10 is over-arching the patents in suit -- it is broader than that
11 -- and the court has jurisdiction to resolve that. So, one
12 should not become fixated with the patents in suit in
13 circumstances where a real issue between us -- in fact, the
14 real reason we are here is to get a declaration, because the
15 jurisdiction is much broader than that. It is, as
16 your Lordship knows from Nokia v. InterDigital in the Court of
17 Appeal, is it commercially sensitive to facilitate the
18 negotiation?
19 MR. JUSTICE BIRSS: But what you are talking about, as I perceive
20 it, is not the same as the examples you are comparing it to,
21 because what you are talking about is the court determining
22 what a global FRAND -- there is a point about whether that is
23 possible; I understand that; they say it is not and you say it
24 is, fair enough, but let us assume you are right about that --
25 coming to a global FRAND royalty rate, and it has utility,
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1 because if the global FRAND royalty rate which the court
2 decides upon is low enough, then no doubt ZTE will say, "Thank
3 you very much, we will have it," and if it is very high, then
4 you and ZTE will know that ZTE are never going to agree to pay
5 it and you will fighting every patent in every jurisdiction in
6 the world.
7 MR. GREEN: Again, the practical reality is, if we get to that
8 stage, I do not think any court will say that the licensee was
9 a willing licensee. You take a choice: you make an election
10 between going down a FRAND negotiation and litigating the hell
11 out of each other. If you get to the end of the day and you
12 then say, "All right, I have knocked out these six patents
13 but, frankly, I know you have got another 500 and I am going
14 to litigate you all over the world," when you lose, the court
15 is going to say that that approach -- and this is certainly
16 the way the Dutch courts and the Commission is looking at
17 it -- "You are no longer entitled to a licence; you are just
18 going to be injuncted." Again, there is no absolute certainty
19 about this. It does not definitively lead you to a result,
20 but it does lead you to the situation that the determination
21 of FRAND is highly likely to lead to a resolution. That is
22 all I need to establish. I do not need to establish that the
23 patents are valid or invalid. I simply need to establish that
24 for my claim for a declaration, for the court to determine
25 that, there is utility, and I am entitled to say that the
[Page 51]
1 defendants themselves have put before this court evidence
2 which says precisely the same thing, that this is nothing more
3 than a pawn in a larger game of chess called global
4 negotiations with Corp. That is their position. I accept
5 that we have not had that many cases which really thrash
6 through all of the issues either on the other side of the
7 Atlantic or here, and there are many permutations.
8 Microsoft v. Motorola I have cited in order to demonstrate
9 that it is practical and workable and can be done;
10 InterDigital, to show that ZTE itself accepts the philosophy
11 that we are advancing. But they are different situations.
12 MR. JUSTICE BIRSS: They are. But the bit I am still worried
13 about is, in Microsoft v. Motorola the court is deciding what
14 the terms of the licence will be. That is it. It does not
15 matter now what the validity of those patents would be. But
16 it is not clear to me that the outcome, even if I find it "in
17 your favour" -- and what I mean is the judge, whoever, finds
18 in your favour that you can have a global portfolio FRAND
19 licence, assume that is right for now -- and come to a royalty
20 figure, it cannot be a binding finding that they are required
21 to pay you that money, because if your patents are all invalid
22 they are not required to pay you that money. What worries me
23 is that if you go down the route of deciding that on that
24 basis, it is not binding that they are required to pay you.
25 They then establish, for the sake of argument, that every
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1 single one of your patents is invalid. I know you would say
2 that is unrealistic in the real world that you would go across
3 the whole world and do that, but it is equally unrealistic
4 that you are going to win everything everywhere. If they
5 establish that your patents are all invalid, then you just do
6 not have the right to that money; and that is what I am
7 bothered about, because you have created something that looks
8 like a binding decision, but it cannot be. You would have to
9 have another trial to decide what the royalty rate would
10 actually be, based on half the patents that are left, or
11 whatever it happens to be.
12 MR. GREEN: I think the point that you are identifying is a point
13 that Kitchin J addressed in the Philips v. Alba and Amino
14 case, which is C4, tab 19. In drawing your Lordship's
15 attention to this, I am not saying that the point
16 your Lordship makes is wrong. It is a question of what
17 relevance does it have in the overall determination.
18 MR. JUSTICE BIRSS: Okay.
19 MR. GREEN: Just so your Lordship will see the context to this,
20 there was a lengthy patent dispute involving a very large
21 number of patents.
22 MR. JUSTICE BIRSS: Yes, I know. I heard a claim by the defendant
23 who settled it against ----
24 MR. GREEN: Your Lordship will know there were competition issues,
25 threats issues, FRAND issues, exhaustive issues. One of the
1 court considered to be a relevant consideration. It was an
2 alternative to being anything determinative. That does go to
3 the heart of the jurisdiction to provide a declaration: will
4 it be utilitarian, if nothing else, to provide a platform for
5 settlement? What we have in this present case are the
6 defendants actually saying that this is not a stand alone
7 piece of litigation; it is simply part and parcel of a global
8 negotiation with a different company. That is what is very
9 unusual about the present case. That is its context; that is
10 the guts and heart of the issue.
11 I see your Lordship's point -- I am not quibbling with
12 it -- that there are some cases where a determination may be
13 utterly definitive by court order and there are other cases
14 where it might not be, but it may nonetheless have an
15 important part to play.
16 MR. JUSTICE BIRSS: What I am worried about -- I am sorry, I know
17 I am a bit of a dog with a bone -- what I am worried about,
18 Mr. Green, is the legal status of the declaration you are
19 asking the court to make. I do not understand, frankly,
20 bearing in mind what is bothering me, exactly what it is that
21 Kitchin J (as he then was) there is thinking, because what
22 I am worried about is, to take a simple example, you have your
23 FRAND trial, the outcome is, assume in your favour, that a
24 FRAND licence is a global portfolio for the whole thing and
25 the royalty rate is X, and that is the outcome. That is a

[Page 53] [Page 55]

1 issues was whether the FRAND trial should come before the
2 validity issues. It was common ground they should deal with
3 exhaustion first of all, because that was short and snappy and
4 would resolve the issues. The judge, in deciding that he
5 would order FRAND pleadings to be served and adjourn the
6 validity trial, took account of a number of considerations,
7 which I think are essentially important. In particular, if I
8 start reading at page 5 of the numbering of the bundle,
9 page 182 of the transcript: "All the parties accept that the
10 outstanding patent and FRAND issues cannot be tried together.
11 The question is how they should be best structured and
12 ordered. I have indicated during the course of this hearing
13 that I can see, based upon the materials before me at present,
14 considerable merit in deciding the FRAND issues before the
15 conventional patent issues for these reasons. The dispute
16 between the parties has at its heart the issue of money. The
17 claimants say they are willing to offer licences on FRAND
18 terms. Alba and Amino say they are willing to accept licences
19 on FRAND terms but they are unable to agree as to what those
20 FRAND terms are. If the court decides the FRAND issues, it
21 may well be determinative of a large part of the case or at
22 least provide a platform on which the parties can attempt
23 constructively to settle their differences."
24 So, the mere fact that a determination will create a
25 platform for a constructive settlement was something which the
1 declaration, so it is binding on both sides. But it does not
2 stop, as a matter of law -- and I understand that you say, and
3 I totally sympathise, "Come on, get real, in the real world
4 the case would settle after that." I follow that. But it
5 does not determine the parties' legal rights. The parties
6 have the right -- they have the right in this case -- to
7 fight, to say, "No, your patents are invalid." You cannot
8 stop them from that, as a matter of law.
9 MR. GREEN: I disagree. It determines the right as to what FRAND
10 it. It does not necessarily determine a separate question as
11 to what the validity of individual components are. So, you do
12 have an equal determination of an issue, FRAND, which even my
13 learned friends plead is a lis proceedings between the
14 parties. I accept that it does not necessarily, unless there
15 is an abuse of process argument, prevent a validity challenge
16 arising.
17 MR. JUSTICE BIRSS: That is what worries me, because I do not
18 understand what this determination is. The determination that
19 there is a royalty rate to be paid of X per handset, that is
20 binding on the parties. But what happens if the patents are
21 all invalid?
22 MR. GREEN: What, all 500 of them?
23 MR. JUSTICE BIRSS: Yes, all 500 of them.
24 MR. GREEN: That is the practical reality; it could never occur.
25 MR. JUSTICE BIRSS: I do not agree.

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1 MR. GREEN: That the court across Europe, across the world, is 1 MR. JUSTICE BIRSS: I follow that. I follow that there are
2 going to allow 500 pieces of patent litigation? 2 actually -- I know your declarations, there a number of
3 MR. JUSTICE BIRSS: That is a different point. The question is 3 declarations, but you can break it down into sub-parts, and
4 whether 500 patents are invalid, and the answer is, plainly, 4 there is a dispute, which is a dispute between you, which is
5 they could be. There is a whole case management question 5 the kind of principal issue about whether a global portfolio
6 about whether you would get that. But it does not matter. 6 licence is possible to be a FRAND licence. You say it is;
7 What I am worried about is the legal standing of the 7 I think they say it is not. Inherently, the point they are
8 declaration. 8 taking on, "Only if they are valid, we will take a FRAND
9 MR. GREEN: A declaration is legally binding as to the matters 9 licence", that sounds like a disagreement with that position.
10 declared, and that is as to the FRAND rate. That is a part of 10 That is not like a copyright tribunal hearing or a
11 the proceedings. 11 Motorola v. Microsoft hearing. That is a very specific
12 MR. JUSTICE BIRSS: But even if your patents are in fact all 12 question of law, I guess, or whatever it is -- a question of
13 invalid, the FRAND rate that I have decided is still the FRAND 13 principle -- that could be decided, just that question. That
14 rate. 14 does not bind anybody to royalty rates.
15 MR. GREEN: Then all we are talking about is juxtaposing remedy 15 MR. GREEN: My Lord, I think it would go further than that. Let
16 with validity, because of course, if you are right, if they 16 us just work it through. Let us assume that two out of the
17 are all invalid, then even on the UK patents we do not get 17 six are valid, so that there was, therefore, a remedies
18 round to a determination of what a FRAND royalty is. 18 hearing, and they say they want a licence only on those two
19 MR. JUSTICE BIRSS: Well, you do, because you have just done it 19 and they reject our terms, but they say they are entitled to a
20 first. 20 licence, and they would ask the court to fix the licence,
21 MR. GREEN: Well ---- 21 because otherwise there has got to be a remedy. We say, "We
22 MR. JUSTICE BIRSS: That is the point. That is exactly the 22 are not offering a licence on two patents. This is it. We
23 trouble. 23 will strip out the four, because that is where we are, but we
24 MR. GREEN: Our position is that even if all six were invalid, as 24 are now offering the global licence, and that is what we say
25 ZTE itself argued in the States, even if everything is decided 25 is lawful." Now, if the court says that the practical reality

[Page 57] [Page 59]

1 in our favour, there is still utility.
2 MR. JUSTICE BIRSS: Yes, but that is because that is what they
3 were saying. This lot are not saying that.
4 MR. GREEN: I understand that.
5 MR. JUSTICE BIRSS: They could do. I have to say, Mr. Green,
6 I can understand if what ZTE were saying in this jurisdiction
7 was, "We wish to enter into this with you, this process" --
8 effectively, it is almost like a mediation, but it is not, it
9 is a court deciding as a question of fact what the outcome of
10 a negotiation will be; that is all it is -- "and we wish to be
11 bound by that outcome, irrespective of the validity of these
12 individual patents," then everything I am saying to you would
13 not apply. That is what they are saying in the InterDigital
14 case.
15 MR. GREEN: It is not simply because we seek permission to amend
16 our Particulars of Claims. It is because they have raised it
17 by way of defence. Even if we do not get permission to amend
18 the Particulars of Claim, they have raised as a defence that
19 if any one of the six patents is valid, then there will have
20 to be a FRAND determination.
21 MR. JUSTICE BIRSS: I understand.
22 MR. GREEN: So, even if you set aside what we are claiming, which
23 is that we want a broader declaration, we are still saying, in
24 law, the answer to anything to do with remedies is global
25 licence with Corp, not per patent with UK.
1 is, under Article 102, a dominant undertaking (assuming
2 ex hypothesi we are) -- is only obliged to a worldwide
3 licensee, such as ZTE, obliged to offer a global licence,
4 because it is not a domestic company or a localised company,
5 it is not an abuse, then we would be entitled to say to the
6 court that those terms are the only terms that form the basis
7 of a FRAND remedy. The court would then have to determine
8 whether our global FRAND terms were, in fact, FRAND. One of
9 the questions in that exercise would be per patent or global,
10 but there may be other questions which the court would have to
11 decide in fixing the remedy. We may say, "We do not want
12 FRAND any more." The court might say, "No, it is still FRAND,
13 it is only money, and we will fix the terms of a global
14 licence, because that is a non-abusive, FRAND consistent
15 offer." So, it would be live, even on the defendant's case.
16 MR. JUSTICE BIRSS: I agree. But that is not all you are asking
17 me to do. I understand that. That is what I was putting to
18 you.
19 MR. GREEN: If that is your Lordship's problem, then it really
20 just simply goes to -- we want that issue determined first. I
21 mean, even if you just simply look at the defendant's
22 pleadings, setting aside our Particulars of Claim, the
23 amendments to it, it broadens it out, we would simply say that
24 is the crux of the issue between the parties; and that would
25 be determinative in relation to that issue, and that would

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1 mean that you simply determine that first. So, strip out,
2 forget our Particulars of Claim, just look at their defence,
3 and work out the consequences of that. It is live, it is
4 binding, it is determinative of the litigation; and because
5 the court would be forced, if we are right, ex hypothesi, it
6 would resolve the matter between the parties, and if Corp was
7 included, which we say it plainly would have to because the
8 licence is offered to it, it would need to make its
9 submissions -- it is not a company that is, on its accounts, a
10 busted flush -- and then that would be determinative between
11 us and Corp. Then there would be a judgment, and we would
12 force it abroad, get it recognised in Europe under the
13 Regulation.
14 MR. JUSTICE BIRSS: I do not want to be at cross purposes. All
15 I am talking about is a judgment on one very specific point of
16 principle, which is whether or not a global portfolio licence
17 can be FRAND. I can see that, because that is something which
18 does not get falsified in future, necessarily, by a finding
19 that the patents are invalid. But I do not understand how a
20 royalty determination can avoid being falsified by a finding
21 that your patents are all invalid.
22 MR. GREEN: In the situation that I have identified, which is that
23 you ignore our Particulars of Claim, you simply take the
24 defendant's case as pleaded, when you set the worldwide order
25 you will take into account that those patents are invalid,
[Page 61]
1 which have been found to be invalid. They would simply be
2 stripped out of the FRAND assessment. If they have agreed to
3 take a FRAND licence -- they have pleaded they will take a
4 FRAND licence in the context of UK proceedings -- if the court
5 finds in our favour that the proper remedy is a global
6 licence, not a per patent state by state, because that is
7 consistent with our legal obligations under competition law,
8 which is all we are obliged to do, or obligations to ETSI,
9 that is what the court decides is lawful, then they have
10 accepted that, because that is their case, they will accept a
11 FRAND licence. They cannot pick and choose and say, "We will
12 plead competition law, we will plead ETSI, but if it turns out
13 that we are wrong on those we will not accept the remedy the
14 court imposes upon us, because we have been found to be
15 infringers," that is not ----
16 MR. JUSTICE BIRSS: I understand that. But that is not the only
17 contingency they put forward.
18 MR. GREEN: But it is one which, you know, stripping everything
19 else aside, it does mean that the court would be required to
20 make a binding declaration on FRAND terms, and the court could
21 not just say, "I will deal with half the exercise per patent
22 or global," because it has got to fix a remedy, which may be
23 damages; it may be damages wrapped up into a licence; it may
24 be lump sum plus a future licence, because it is determining a
25 FRAND position. So, the court would have to decide that.
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1 I do not think there is any way out of it.
2 MR. JUSTICE BIRSS: I understand that, Mr. Green. That is what
3 worries me. I do not think the point of principle that I am
4 putting to you can be decided without doing what you want me
5 to do, which is decide the royalty rate, which I do not think
6 I can without knowing what whether the patents are valid or
7 not.
8 MR. GREEN: With respect, I do not think that can be right. Just
9 think of Motorola v. Microsoft.
10 MR. JUSTICE BIRSS: Sorry -- unless the putative licensee is
11 prepared to be bound by the outcome.
12 MR. GREEN: They are. They cannot be anything else, because when
13 it comes to remedy, if we are looking for a FRAND remedy and
14 the court says, "You are entitled to a FRAND remedy," it is my
15 right to a remedy, and the court says, "No, you cannot have an
16 injunction, but I am going to grant you a licence. The law
17 says it is either ETSI or it is Article 102, and on that basis
18 you can have a global licence." The court might say only per
19 patent. If it says per patent, it will still have to fix the
20 royalty, but the court will say that it is lawful to grant a
21 licence without having validity determined in advance.
22 Your Lordship may have seen that this is one of the questions
23 that the German courts have referred to the European Court,
24 whether or not you have to have a validity challenge first of
25 all, in the Dusseldorf proceedings, and the German courts have
[Page 63]
1 always taken the view that you do not.
2 MR. JUSTICE BIRSS: Yes. Well, that is their bifurcated view of
3 patents.
4 MR. GREEN: Yes, for FRAND. Never mind bifurcating validity.
5 MR. JUSTICE BIRSS: It is all driven by the fact that they hear
6 infringement separately.
7 MR. GREEN: But in principle, there is never a suggestion that you
8 actually have to find the merits before you go to FRAND. The
9 point is, the defendants would not have the lawful right to
10 control that exercise. They would not be able to say, "We say
11 we are entitled to a FRAND licence. We ask the court to rule
12 that a per patent UK licence is the only FRAND alternative.
13 If the court finds against us, we will not accept it."
14 MR. JUSTICE BIRSS: I agree. I see that.
15 MR. GREEN: I come back to the point your Lordship quite rightly
16 made to me: where does it crystallise into a definitive
17 ruling? It is at that stage; and even if you strip out the
18 bit about the surplusage, it does arise, on these pleadings,
19 on the defendant's case. It is unavoidable. It is completely
20 unavoidable. It is not their right to pick and choose.
21 MR. JUSTICE BIRSS: Okay.
22 MR. GREEN: Can I just rattle through ----
23 MR. JUSTICE BIRSS: I think I stopped you before your sixth point,
24 if that matters. I cannot remember what your sixth point was,
25 I am afraid.
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1 MR. GREEN: It really changes to the ----
2 MR. JUSTICE BIRSS: (Unclear) in human affairs. Everyone is doing
3 it, so we should do it.
4 MR. GREEN: Certainly, there was a growing recognition that you
5 just simply do not go down the old validity infringement
6 route. I have shown you Motorola. Samsung v. Apple, in the
7 Dutch District Court, there is a fairly detailed article on
8 this at C3, 20. I was not going to take you at length through
9 it. It is a detailed exposition of all the FRAND issues that
10 occurred in the Apple v. Samsung litigation.
11 MR. JUSTICE BIRSS: Right.
12 MR. GREEN: In particular, it focused upon what is meant by a
13 "willing licensee". But we simply put it in the bundle to
14 demonstrate that courts are now grappling with FRAND quite
15 independently of validity. There is the position of the
16 European Commission. The relevant quotes are set out in C1,
17 tab 4, Mr. Laakkonen's witness statement.
18 MR. JUSTICE BIRSS: Yes.
19 MR. GREEN: Paragraphs 16 to 18.
20 MR. JUSTICE BIRSS: No doubt, it is subtler than this but, as I
21 understand it, the position is that if you are a willing
22 licensee, you are not going to get an injunction against you,
23 and if you are not, you will.
24 MR. GREEN: That is, effectively, the position.
25 MR. JUSTICE BIRSS: That is what it boils down to.
[Page 65]
1 MR. GREEN: Yes. Someone who claims to be a willing licensee but
2 then prevaricates, engages in unreasonable delay, goes for
3 years without accepting a licence, they may -- there is not
4 enough law on it to be definitive -- they may not be a willing
5 licensee. But the European Commission's position is that
6 there ought to be independent bodies, whether by arbitration
7 or through court proceedings, under which there is a mechanism
8 whereby parties can agree or have agreed for them FRAND term
9 licences. Of course, the Commission's position is,
10 emphatically, that you may stop being a willing licensee if
11 you want to litigate every single solitary patent. You simply
12 take the choice. You throw strength, as it were, into the
13 negotiation, as you see in Motorola, you take a view on
14 strength, and it is factored in in a different way, but it is
15 a jolly good analysis of overall strength, which would include
16 an assumption that a very high percentage of the patents may
17 be invalidly granted. That goes into the comparables. He
18 also refers to fact that the Federal Trade Commission have
19 adopted a similar position, again encouraging parties to
20 negotiate, and part of the FTC's consent order in Motorola and
21 Google involves submitting disputes to arbitration. We rely
22 upon the fact -- and we have set out the press release -- that
23 ZTE has entered into a global licence with Microsoft. It is
24 obviously not litigation, but it demonstrates that what
25 Mr. Burdon has said, which is that they are after worldwide
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1 global negotiations with Corp, is correct. That is C4, tab 9.
2 We have shown you ZTE's own position in the US, where they
3 strongly argue, by reference to authority, that this is now
4 normal. I have shown you Philips v. Alba, where Kitchin J
5 allowed the FRAND pleadings to go ahead and, effectively,
6 stayed the patent litigation. I do not think I took
7 your Lordship to that part of the judgment. It is C4, tab 19,
8 page 8, lines 13 to 15: "As far as the FRAND issues are
9 concerned, I hope I have made it clear that the pleadings are
10 to progress." Lines 18 to 23: "As far as the patent issues
11 are concerned, and as I indicated yesterday, it seems to me to
12 be premature, for all the reasons that I have given, to
13 require the defendants to engage upon prior art searches in
14 relation to the 16 patents currently in issue. I will give
15 directions to that effect."
16 It is relevant that he was not saying that simply
17 because there were 16 patents and someone had given a vast
18 estimate of days. He said, "Well, I am not going to do 16
19 patents. I will break it down, probably, into fours."
20 MR. JUSTICE BIRSS: Right.
21 MR. GREEN: Mr. Alexander would like me to draw your attention to
22 page 6, line 18: "Amino and, I understand, Alba too, are
23 prepared to have the FRAND issues tried on the basis that all
24 the patents in suit are valid and infringed." Obviously, that
25 might have been relevant to the court's determination. But as
[Page 67]
1 to that, they still wanted the technical trials afterwards.
2 So, it was merely an assumption for FRAND. Indeed,
3 Microsoft v. Motorola makes it plain that you do not have to
4 make that that assumption, because strength is an integral
5 part of the assessment. But they did want to have technical
6 issues tried afterwards. So, it was not a binding assessment;
7 it was simply an assumption which might or might not have held
8 true.
9 MR. JUSTICE BIRSS: It would not be the best they could have got.
10 I mean, I did something like this in the Patents County Court
11 about three or four months ago. It was a little copyright
12 case about some photographs, a photograph. The claimant said
13 that the nightclub in question had infringed the copyright.
14 The nightclub in question said the claim was worth 100. The
15 real question was whether, if the claimant was right, how much
16 it was worth, and I said, "Let's do quantum first," on the
17 assumption that was the case, and that is what we did.
18 MR. GREEN: I think this point is, it may be right, it may be
19 wrong. Motorola says you do not have to make that sort of
20 assumption.
21 Then, finally, Nokia v. IPCom, C3, tab 8. As
22 your Lordship knows, this was a case where validity was tried
23 first and then it went to a FRAND determination, which has now
24 been stayed.
25 MR. JUSTICE BIRSS: Oh, has it? Okay. There was a trial. It was
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[Page 68] [Page 70]

1 going to come on about now, was it not? 1 suit or a FRAND determination is most useful in that regard,
2 MR. GREEN: Yes. I think something happened in Munich which threw 2 to which our answer is manifestly the latter.
3 everybody into confusion. Mann J, I think. 3 MR. JUSTICE BIRSS: Right.
4 MR. JUSTICE BIRSS: Oh, excellent. I thought I might have had to 4 MR. GREEN: They also say, and indeed I think we have cited in our
5 do that. So, that is good. 5 skeleton, ZTE's position in other litigation where, having
6 MR. GREEN: You might yet! 6 lost in Mannheim, they very dramatically walked over to the
7 MR. JUSTICE BIRSS: Oh, no doubt. I am not the captain of my own 7 court and handed a 100 note to the other side. Are we going
8 fate any more. 8 to go down a very long and expensive trial for them to simply
9 MR. GREEN: It is suggested that by the time that comes on, you 9 say, "Well, it is only 100"? They probably are. Well,
10 will be in the Court of Appeal. 10 inevitably they are.
11 MR. JUSTICE BIRSS: I really, really doubt that, for a number of 11 MR. JUSTICE BIRSS: Mr. Green, I know you are not saying your
12 reasons. 12 patents are only worth 50.
13 MR. GREEN: Your Lordship knows the history. IPCom initially 13 MR. GREEN: No, but that is what they will say. After all they
14 sought a trial of validity and infringement. It then changed 14 make a 2 million operating loss so they cannot afford very
15 its mind and sought a FRAND determination. This was in 15 much, if they can afford to pay us anything. Are we going to
16 May 2009, with the validity and infringement trial set 16 go down that process when again ZTE involved in the
17 down ---- 17 litigation, a FRAND determination, is infinitely more likely
18 MR. JUSTICE BIRSS: This is the one where Floyd J says, "Well, the 18 to lead to a settlement?
19 patent case is going to be in six months. So maybe if you had 19 MR. JUSTICE BIRSS: Yes.
20 done this earlier, it might have been a good idea, but it is 20 MR. GREEN: What do these add up to? They add up to an indication
21 too late." 21 that the courts are inclined in appropriate circumstances to
22 MR. GREEN: That is the context to it. I think your Lordship will 22 order FRAND determinations to facilitate settlement. They are
23 see from -- I think it is, essentially, paragraphs 17 and 18, 23 also inclined to determine FRAND matters when it is part and
24 in particular. If Mr. Alexander wants me to cite anything, 24 parcel of the litigation which, in the light of the discussion
25 I am very happy to do so. "Mr. Meade, who appears on behalf 25 I had with your Lordship earlier, it is. I come back to the

[Page 69] [Page 71]

1 of Nokia today, raises a number of points as to why I should
2 not go down this road. First, he says it is wrong to approach
3 questions which go to quantum before the question of liability
4 is established. That is right as a general working rule, but
5 the court should exercise its case management powers in such a
6 way, amongst other things, as to promote settlement. There
7 are many examples of the way in which the court does that, for
8 example, on occasions making targeted orders for disclosure
9 which go to quantum even if quantum is to be decided after
10 liability. The purpose of doing so is to assist in the
11 process of causing the parties to settle their dispute."
12 As a point of principle, we strongly endorse that. We
13 fully understand why the judge, given the stage of
14 proceedings, did not go down the line; but he was certainly
15 attracted to it, because he thought it would facilitate
16 settlement, which is precisely the defendant's point, that
17 they want a settlement of a global licence with Corp. They
18 say, "We would like to have a bit of a view of the UK patents
19 to help us." But we say, "Actually, if that is what you want,
20 FRAND is far better and far more comprehensive in giving you a
21 view of overall strength than looking at a slither of UK
22 patents." If that is really their concern, which they say it
23 is..... (Pause) Standing back on it, if what Mr. Burdon says
24 is right, they want to get a view to help with the broader
25 settlement, you have to ask yourself whether the patent in
1 point that the defendants cannot wriggle out of that on their
2 own case even if our case is completely ignored.
3 But, in this case peculiarly, ZTE Corporation's position
4 is that this would simply be on a way to a determination of a
5 global licence. In other words, the settlement would be
6 between putative D2 and Vringo Infrastructure. There is
7 nothing now that suggest the courts do not do FRAND first. It
8 is an ordinary matter of case management. There is no
9 presumption that you should do one before the other. It is a
10 matter of the court's discretion.
11 I simply come back to the point about we are seeking a
12 declaration of our rights as between D1 and D2, whether that
13 arises through our particulars of claim or through their
14 defence. That is an independent lis. It arises quite
15 independently of the patents in suit. It is simply not
16 connected to those patents in suit. We would be entitled to
17 bring it as a freestanding claim without any reference to
18 patents in suit but it does arise on the defendants' defence
19 and counterclaim.
20 That is where those cases take one to. Can I now deal
21 briefly with joinder and amendment?
22 MR. JUSTICE BIRSS: Right. I think joinder follows from your
23 case, does it not?
24 MR. GREEN: Yes. It really automatically follows. Your Lordship
25 knows the jurisdiction under CPR 19. There are two bases.

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1 Does it resolve the issues in dispute between the parties and
2 would joining D2 be desirable? Does an issue exist between
3 the new party, that is Corporation, and an existing party
4 connected to the matter in dispute? Is it desirable so the
5 court can resolve the issues?
6 Both tests, we would submit, are plainly satisfied.
7 ZTE Corporation is clearly relevant to the central issue of
8 facilitating negotiation of a global licence. It is directly
9 relevant to ZTE's defence because we say the answer, if there
10 is any infringement, is a licence to Corp, not to (UK) and
11 therefore it is relevant on defendants' own pleading, even
12 setting aside our amended particulars of claim. And thirdly,
13 because ZTE accepts that the real issue in dispute between the
14 parties is a licence between Vringo Infrastructure and Corp
15 and, fourthly, because to determine any issue as to relief
16 will require disclosure from Corp.
17 MR. JUSTICE BIRSS: Yes.
18 MR. GREEN: So far as amendment is concerned, the principles are
19 not seriously in dispute. Amendment will invariably be
20 granted at an early stage if it clarifies the real issue in
21 dispute. For your Lordship's note, White Book, page 511, the
22 well-known dicta from Peter Gibson LJ: courts should
23 effectively be slow to disallow an amendment at an early stage
24 which does focus and crystallise the issues.
25 The issues here are important issues. Your Lordship
[Page 73]
1 will have seen the pleading. Can I very briefly just take you
2 to it. Draft amended particulars of claim, bundle B, tab 2.
3 This raises the FRAND issue. Just very briefly, paragraphs 5,
4 6 and 7 identify the ownership of the relevant patents,
5 identifies essentiality, and identifies the willingness to
6 offer a FRAND licence. At 9 and 10 it identifies D2 and the
7 relationship between D1 and D2. That is paragraphs 9 and 10.
8 It then goes on to plead the failure of the defendants
9 to take a licence since 2003. It pleads infringement of all
10 of the claimant's essential patents in the United Kingdom and
11 elsewhere: paragraph 16. It identifies proceedings in a
12 number of different jurisdictions. It identifies that D2 has
13 initiated invalidity proceedings in China.
14 It identifies in 19, 20, through to 25, the offers and
15 various cross-offers.
16 In 26 through to 30 it identifies the disputes which
17 arise as to the FRAND terms and the need for the declarations
18 which are then set out on page 7, which is a declaration that
19 the Confidential Term Sheet is FRAND compliant and that having
20 made the FRAND offer, the claimant is not obliged to offer
21 terms to licenses and defendants which is D1 and D2 on other
22 terms.
23 In the alternative, a declaration that the Confidential
24 Term Sheet complies with the claimant's obligations to make a
25 licence available to the defendants to the patents in suit, so
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1 that is obviously domestic UK proceedings only and, in the
2 alternative, a declaration as to what would constitute an
3 offer to licence the defendants on the SEPs.
4 Then a declaration that the defendants have no
5 entitlement to individual licences.
6 In issue, even on the particulars of claim directed only
7 at the patents in suit, is the issue, is the term offer
8 compliant with FRAND and is it satisfactory assuming
9 ex hypothesi that one or more of the patents is valid?
10 The amended defence and counterclaim, just really to
11 bring your Lordship back to the point which we were discussing
12 earlier about this really being inevitable even on their own
13 pleadings, at tab 4, they start off in paragraph 11 with the
14 traditional kick that we are a non-practising entity. They
15 then plead the patents that have been declared essential.
16 That must be the patents in suit. To the extent that they are
17 declared essential and they are valid and infringed, they are
18 entitled to a licence under each of them on FRAND terms.
19 The claimants and/or predecessor in title have made an
20 irrevocable commitment to grant licences on FRAND terms which
21 means therefore that our global offer is squarely in these
22 proceedings, even on the patents in suit.
23 The claimant's parent company has agreed that it and its
24 group companies, including the claimant, are bound by the
25 commitment in the PPA.
[Page 75]
1 Further or alternatively, having declared the patents
2 were essential, it is a breach of competition law to refuse a
3 licence. They then cite by way of example Nokia v IPCom. A
4 complaint to the Commission. The Commission say -- and one
5 does not need to get into the correctness or otherwise of this
6 statement -- that their position is that the Commission
7 require FRAND licences under Article 102.
8 They say copies of declarations and undertakings are
9 likely to be in the claimant's possession. "That declaration
10 and those undertakings" -- this is (d) on page 7 --
11 "recognised the obligation of a party in the position such as
12 that of the Claimant to grant licences on FRAND terms ..."
13 Then they say in relation to the Samsung proceedings
14 commenced by the Commission by way of statement of objection,
15 the Commission take the view you cannot have an injunction.
16 Then they say at (f) that the claimant is under a
17 similar obligation to licence each of the patents in this case
18 and, accordingly, licences under each of the patents asserted
19 must be made available on the FRAND terms.
20 MR. JUSTICE BIRSS: Right.
21 MR. GREEN: And then: "... the defendant will undertake to take
22 such a licence under each of the relevant Patents with the
23 FRAND terms of any such licences to be settled by the court if
24 not agreed", by either the court or a similar procedure.
25 Then they say, in any event, order damages in lieu.
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1 And then the claimant is not entitled to an injunction.
2 Again that just simply establishes why and how a
3 determination of FRAND on my client's basis and the other
4 side's basis will have to be determined by the court. That is
5 because they say they will undertake a licence under each of
6 the relevant patents. If they are wrong in that, the court
7 will say, "No, that is wrong. Your paragraph 14 of the
8 amended defence is not right. You are bound to take a licence
9 but it is on the claimant's terms, namely it is global." It
10 does not matter that they have said under each of the relevant
11 patents. The court will have to determine whether that is
12 right.
13 I come back to my point that even if you ignore
14 everything in my particulars of claim, which is really just
15 the mirror image of this, we would re-raise that by way of
16 reply to the defence and counterclaim and we simply mirror
17 image it in response and re-raise that issue.
18 MR. JUSTICE BIRSS: Okay.
19 MR. GREEN: Therefore, we suggest that the appropriate course is
20 to permit the amendment, whether it is right or wrong. It is
21 not disputed that permission should be granted for the defence
22 and counterclaim. It is not disputed that we have a right to
23 plead to this in which we will simply recycle the same points
24 and join in issue these issues by way of further pleading.
25 My Lord, I do not think there is anything further I want
[Page 77]
1 to say about amendment at this stage. (Pause) A point has
2 been put to me which I think, my Lord, is worthy of
3 consideration which is the court has jurisdiction ----
4 MR. JUSTICE BIRSS: I am sure your junior is very happy to hear
5 that, Mr. Green!
6 MR. GREEN: Worthy of enormously deep and sincere consideration.
7 Is that better? Good. One could take this in stages. Your
8 Lordship has identified the issue per patent or global. That
9 in its own right is an important issue which could be
10 determined in advance. One could do the preliminary issues in
11 two stages. If one is trying to work out whether or not this
12 is going to facilitate a settlement, there is probably no
13 better issue to be tried which might just result in heads
14 being banged together and the parties sitting down and
15 settling something, which after all is what they say they
16 want. If that did not lead to a settlement, then one might
17 have to go on and do the maths.
18 Coming back to where I started, the parties have both
19 said they want a global licence with Corp. The question is
20 whether UK proceedings facilitate that. We say most unlikely.
21 Germany will probably get there first of all. Increasing
22 willingness of courts to grapple with FRAND. FRAND is,
23 whichever way one looks at it, live and mandatory on the
24 pleadings, even if one simply takes the defendants' defence
25 and ignores the particulars of claim. The court can split
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1 preliminary issues into stages, sort of theoretical issues or
2 point of principle, followed by, as it were, the detailed
3 evidence. Given that the courts accept that determinations
4 can be made in advance to facilitate settlements -- this is
5 not just the settlement of ordinary litigation, this is
6 settlement in the context of an entire worldwide
7 infrastructure of standards setting organisations which
8 operate upon the basis that people will negotiate strength as
9 part of a deal. Not to litigate makes even greater sense.
10 Unless I can assist further, those are my submissions.
11 MR. JUSTICE BIRSS: Thank you, Mr. Green. I know there are a lot
12 of sort of CMC questions to sort out. This probably is the
13 big question so let us deal with it first.
14 MR. GREEN: Yes.
15 MR. JUSTICE BIRSS: Thank you. Yes, Mr. Alexander?
16 MR. ALEXANDER: My Lord, can I address you under broadly speaking
17 the following heads: First a few points about the background,
18 the portfolio, the correspondence that Mr. Green took you to,
19 the terms and the parties' respective positions.
20 MR. JUSTICE BIRSS: Right.
21 MR. ALEXANDER: So the sort of "where we are" position. Secondly,
22 may I address you on the issue of what is actually being
23 contemplated by the proposal that is advanced; thirdly, on
24 caselaw; fourthly, including the position on the Harvard case,
25 the US cases and some of the foreign cases; I do not have to
[Page 79]
1 go into that in great deal because your Lordship has read
2 that; fifthly, briefly on what might be called jurisdictional
3 issues which I hope to take very briefly; and, finally, on
4 points relating to the amendment.
5 As your Lordship knows, our position is that the
6 proposal that is advanced or suggested is wrong in principle,
7 impractical, and even if one takes it on its own terms would
8 actually, if anything, recommend that this court should order
9 that there should be a trial of the technical issues on this
10 sample of patents to do the very exercise of testing the
11 strength of the portfolio that both parties accept would be
12 required for this particular FRAND determination.
13 This is not one of those cases where the parties, in
14 particular the defendant, says, "Well, I accept that you have
15 valid rights that are highly likely to be infringed, I accept
16 that your portfolio is a sound one and that the only thing
17 that we are discussing is rates and comparables". That is in
18 a sense what might be called the Copyright Tribunal model
19 because that is a model where it is very rare for there to be
20 a dispute about the existence or infringement of the
21 underlying rights that are subject to the proposed terms of
22 licence -- the terms on the licence themselves. We say there
23 is simply no basis for it.
24 Perhaps I can explain briefly by reference to the first
25 point on the portfolio and the way that the matter has
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1 developed. This is a portfolio of Nokia patents. It is
2 obviously not Nokia's whole portfolio of the patents that they
3 have declared to be standard essential. Without putting it
4 unduly pejoratively, this is a bunch of patents that Nokia has
5 seen fit to dispose of to Vringo in exchange for some money
6 and a chance for a bit more cash out of a licensing programme.
7 On one view one might say these are in a sense Nokia's
8 cast-offs. This is not one of these situations where one can
9 say ex ante this is a portfolio where one is likely to find
10 even crown jewels, even prince jewels, it is a portfolio that
11 is unlikely to have a huge amount of merit.
12 It is therefore, in our submission, particularly
13 important in a case of this kind that there is a degree of
14 rigorous testing on any view, even my learned friend's view,
15 because I cannot imagine that his clients would be wanting to
16 take money from invalid patents -- well, actually, I can
17 imagine they would be wanting to take money, but I cannot
18 imagine they would be saying they are entitled to do that.
19 The way matters have developed between the parties and
20 your Lordship has seen some of the correspondence in relation
21 to it and I do not want to spend a lot of time going back
22 through the history, but because of some of the points that my
23 learned friend made and the impression that he was seeking to
24 give that we were being unhelpful or had given particular
25 positions, I do need to just show your Lordship a few of the
[Page 81]
1 documents.
2 The way this matter started was that Vringo basically
3 bought this bunch of patents in August, I think, last year.
4 At the end of September they write ZTE Corporation a letter.
5 My learned friend says no response was received to that
6 letter. The letter was sent on 25th September. By the first
7 week of October they had sued us. So they did not give us a
8 lot of time to respond.
9 It is noteworthy that the letter that they first send
10 does not actually propose any terms at all. Nor does it
11 actually say that you need a licence under these patents.
12 What it does is it says at page 2 of C2, tab 1: "We invite
13 ZTE to consider again whether any license to the patents is
14 required." Something that one would envisage.
15 MR. JUSTICE BIRSS: Presumably the problem with the US is if you
16 assert that you do then you get the risk of a declaratory
17 judgment against you.
18 MR. ALEXANDER: My Lord, yes, there may be all kinds of sort of
19 posturing positioning reasons and so forth why a letter was
20 written in those terms, but, in any event, what did not happen
21 was that any offer was put forward or any proposals were put
22 forward, not even a proposal which they say now is so
23 important, for a worldwide licence. Indeed no such proposal
24 would have been put forward but for our asking for it.
25 What happened next is the proceedings were issued and we
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1 served our responses and so forth. Then, in January this
2 year, we wrote to them, and your Lordship sees that at page 5,
3 requesting certain information. It is C2, tab 1, page 5.
4 MR. JUSTICE BIRSS: Yes.
5 MR. ALEXANDER: We ask them on page 7 basically what they are
6 asking for in the proceedings. They come back on 1st February
7 with an unhelpful response and do not put forward any terms of
8 any kind at that stage. So we press them again in relation to
9 that in March, and your Lordship sees that at page 11 of the
10 bundle, and say, "Can you actually tell us what you are going
11 to do? Can you actually provide us with some information
12 about what is now asserted to be the absolutely essential and
13 core part of the case which has to be heard first?"
14 After considerable pressing on that we get a letter of
15 28th March which contains what they say is their offer and
16 their only offer, their only preparedness to licence these
17 patents on a take it or leave it basis -- on the basis of a
18 worldwide proposal under the entire portfolio and it is worth,
19 without going to any of the confidential material or talking
20 about any of the confidential material openly, just indicating
21 to your Lordship what the nature was of that request.
22 Your Lordship finds that at tab 15 of C2. Perhaps I can
23 just, rather than trying to go into camera, which would be
24 very undesirable, try and do this by just inviting your
25 Lordship's attention to certain of the provisions of this
[Page 83]
1 agreement and why really this debate has arisen. First of
2 all, let us cut to the chase and look at page 4. It is
3 clause 1(d) and your Lordship can essentially read the first
4 five lines of that.
5 MR. JUSTICE BIRSS: Yes.
6 MR. ALEXANDER: You see what is contemplated there both in
7 relation to the phones and in relation to the other matters.
8 Your Lordship will appreciate that these patents are said to
9 be applicable in different ways.
10 Then take a look at how that is said to apply in the
11 definitions in clauses 1(e) an 1(f).
12 MR. JUSTICE BIRSS: I do not have 1(e), do I?
13 MR. ALEXANDER: I am sorry, on page 1.
14 MR. JUSTICE BIRSS: What you said was 1(d) was 2(d). I have it.
15 MR. ALEXANDER: My Lord, you are quite right. I am sorry, I
16 thought it was a continuation of 1 because I did not see the
17 2 on the bottom. Absolutely. Perhaps I can just invite your
18 Lordship to read (e), (f) and (g).
19 MR. JUSTICE BIRSS: (Pause for reading) Okay.
20 MR. ALEXANDER: Perhaps I can just make this point which is to
21 indicate what the consequence of that would be and of what the
22 proposed terms would be independent, if I can put it like
23 that. That is where matters stood in March.
24 MR. JUSTICE BIRSS: I am sorry, Mr. Alexander, beautifully
25 submitted no doubt but completely beyond me.
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1 MR. ALEXANDER: I am sorry. Perhaps I should be a little ----
2 MR. JUSTICE BIRSS: I think it might be simpler if we just did it
3 in camera.
4 MR. ALEXANDER: Perhaps we can do it in camera. It will not take
5 me more than a minute to make my submissions on that.
6 MR. JUSTICE BIRSS: I am afraid, Mr. Green, your clients will have
7 to say who has to leave. We will only sit in private for a
8 couple of minutes. Is everyone in this room now on one or
9 other side in this case? It looks like it. Okay.
10 (See separate transcript for proceedings in private)
11 MR. JUSTICE BIRSS: Yes, Mr. Alexander?
12 MR. ALEXANDER: We then respond to that. When I say "we", ZTE and
13 (UK) respond to that, as your Lordship has seen. That is at
14 page 19 and 20. ZTE Corp also responds at 22-24. Although my
15 learned friend is right to say that what this letter indicates
16 is that there is not in this sense an absolute rejection of
17 the idea of a global licence for the whole portfolio, what
18 this is not saying is that this is the basis upon which we are
19 going to negotiate and will only negotiate.
20 If it is suggested by my learned friend that the real
21 lis between the parties is only as to the terms of a global
22 portfolio and the lis between Vringo Infrastructure and ZTE
23 Corporation is only in relation to that, with respect, we do
24 not agree. In fact, we make that perfectly clear in the
25 letter because in paragraph 3 the letter interrogates a number
[Page 85]
1 of points to try to work out where on earth Vringo is coming
2 from and in paragraph 3 says: "Please state whether Vringo
3 would also consider specifying a royalty which would apply on
4 a 'per patent' basis."
5 Paragraph 4: "Please state whether Vringo would consider
6 an appropriate apportionment of revenue for the purpose of
7 calculating the royalty."
8 There are questions about the comparables and whether
9 there are any other licences granted on the
10 standards-essential portfolio and so forth.
11 MR. JUSTICE BIRSS: You said something about revenue. I see,
12 "would consider an appropriate apportionment of revenue", yes.
13 MR. ALEXANDER: In 2 it said: "Please confirm that the royalty
14 will only be payable if the patent is actually used". And
15 various, in our respectful submission, perfectly reasonable
16 interrogations of that proposal.
17 That is answered on 3rd May at page 32 onwards.
18 Essentially let us just take 3 as an example on page 33: "...
19 the offer is of a portfolio licence and not one on a per
20 patent basis. Discussing offers that have not been made does
21 not appear to serve any useful purpose", and essentially they
22 decline to engage in any debate other than in respect of a
23 portfolio licence and indeed the proposed amendment suggests
24 that they are simply not amenable to any debate on any basis
25 other than a portfolio licence because they have said that and
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1 that is essentially it and at least to that extent the issue
2 is take it or leave it. It is portfolio or nothing. That is
3 their approach.
4 MR. JUSTICE BIRSS: Would it not be helpful if you knew whether
5 that was right?
6 MR. ALEXANDER: It probably would be helpful generally.
7 MR. JUSTICE BIRSS: If they are right about that, then you would
8 probably settle pretty quick, would you not?
9 MR. ALEXANDER: It would be helpful for someone to know if it was
10 right. Whether or not one would view things differently who
11 knows, I cannot say, but at the moment they have not indicated
12 any desire to depart from that as an approach. It might be
13 that they say, "In that case, what we will do is we will
14 negotiate on a per patent basis, but in that case you have to
15 pay for this patent, patent X, what you would have paid for
16 the whole portfolio". One could see that if that was said,
17 then it would not be taking the negotiations very much
18 further. My Lord may or may not be right to say that knowing
19 that kind of information would be of assistance. It all
20 depends, as with all of these cases, on the bottom line as to
21 what the actual terms are with respect to what is proposed.
22 But, at least in principle, knowing a bit more about it would
23 be helpful. That is why we asked them.
24 We also wanted to know in a sense what their position
25 was in relation to this claim. Then can I come on to the next
[Page 87]
1 point which is what would be required if this approach was
2 adopted by the court in this case.
3 My learned friend tries to say that this would all be a
4 very straightforward exercise in determining other
5 Copyright Tribunal what the right rate should be for this
6 portfolio. As I indicated previously, with Copyright Tribunal
7 cases, generally there is no dispute as to the subsistence and
8 validity of the underlying rights.
9 One point that is not in dispute between the parties is
10 that the strength of the portfolio is a key factor in the
11 royalty rates. This is particularly important in this case
12 because this is not a portfolio for which there exists any
13 comparable. This is not a portfolio that has been licensed as
14 a group of patents. It is not that one can say here, "Ah,
15 so-and-so has agreed to pay X and therefore this evaluation
16 should be done on the basis of what so-and-so agreed". This
17 is in a sense a virgin or untested portfolio. In those
18 circumstances it might be said that it is particularly
19 important for a test of validity of parts of it to take place.
20 My learned friend says, and on this at least I agree
21 with him, that were this matter to go forward as a FRAND
22 determination we would be able to make and they would be able
23 to make such points as the parties respectively wished as to
24 the strength of the portfolio. Of course one of the points,
25 indeed one of the first points that we would be making, as
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[Page 88] [Page 90]

1 indeed any defendant in proceedings of this kind makes in this
2 country and is well established, is to it say, actually, the
3 patents that you yourself have selected are invalid and that
4 itself is an indication of the strength of this portfolio.
5 Perhaps I can cut to the chase here in this way. Let it
6 be supposed that in this elaborate statement of case that my
7 learned friend is contemplating the parties will serve on this
8 FRAND issue I were to plead under my particulars of
9 valuelessness, if I may put it like that, the following facts:
10 (a) that six patents have been asserted in this portfolio in
11 this country and other countries out of the whole collection.
12 No other patents have been asserted. Competent advisers to
13 the defendant would have selected those that they believed to
14 be the most potent of the portfolio and those patents are
15 invalid or not infringed for the reasons set out in the
16 defence and counterclaim and particulars of infringement in
17 this action. That would be a perfectly proper way of me
18 attacking any sort of FRAND determination or answering any
19 FRAND determination that my learned friend would wish to come
20 forward with. I would say, "Here is my way, my preferred way,
21 indeed in a sense, it is your preferred way as well on one
22 view, of testing this portfolio."
23 To an engineer it is not that surprising that
24 occasionally when one does structural testing, if I can put it
25 like this, or, let us think about this as my learned friend
1 the exercise of saying that the parties should be able to open
2 the hood and see what is in the engine of these patents is
3 because it is that that actually contributes to a greater
4 likelihood of settling the disputes. Although there are these
5 threats that are put up by parties to say, "Well, you know, if
6 you do not give in, there is more of the red army coming over
7 the hill on these ones. If you manage to mow the first lot
8 down, do not worry we have more coming."
9 The reality is that both for the purposes of settlement
10 and for the purposes of what might be called court settlement
11 of terms knowing what the real strength of the patents are
12 that are said to be the crown jewels is really important.
13 That is why in the Nokia v IPCom litigation it was done in
14 that way. IPCom obviously put forward patents that they
15 thought were jolly good to begin with. They put forward a
16 whole range of others. Ultimately, as your Lordship will
17 know, they suffered a fate at least in the English courts with
18 the result that there is one sort of left, if I can put it
19 like that.
20 I do not think even my learned friend would be saying
21 and certainly those perhaps in cahoots is too strong with
22 Vringo would be saying that the price for a portfolio which
23 contains one patent which at least I think in Nokia's case in
24 IPCom can easily be got round and is neither here nor there
25 could possibly be the same as the price of a portfolio where

[Page 89] [Page 91]

1 selling me a job lot of how many patents are there, let us say 1 there was a significant number of patents that were valid and
2 500 used cars effectively and 500 used cars in an industry 2 infringed.
3 where, if I may pursue this analogy, one of the leading lights 3 Even on his view we are going to need to go down this
4 in the Used Car Dealers Association have said you have to be 4 exercise. That is in a sense the heart of my reason for
5 careful with these kinds of cars, they are doggy, they are 5 saying that it is in a sense premature to be considering this
6 very likely to be clocked. If I were to say, "Well, all 6 matter.
7 right, you put forward your six best cars and I will see 7 MR. JUSTICE BIRSS: Okay. Is that a convenient moment,
8 whether actually they are clocked and whether actually the 8 Mr. Alexander?
9 engine even turns on when you turn the key slightly". That 9 MR. ALEXANDER: It is.
10 might be thought to have some relevance if the vehicle 10 MR. JUSTICE BIRSS: Obviously we will reconvene at two o'clock.
11 inspector was going around trying to determine a value for 11 I will have a think about things generally but also how we are
12 that job lot of cars. Indeed the vehicle inspector might say, 12 going to manage the hearing.
13 "Wait a moment, that is a brilliant way of testing the value 13 MR. ALEXANDER: My Lord, yes. I do not actually have a huge
14 of that portfolio, much better than this hand wavy way of 14 amount more to say. I will try and keep it to half an hour or
15 saying, 'Oh, well, somewhere in that parking lot over there 15 so. If I can invite my Lord to just perhaps refresh his
16 you are bound to find something because something always turns 16 memory of the points in our written submissions.
17 up in that pile over there'." 17 MR. JUSTICE BIRSS: That is a good idea. Where is Floyd J's
18 MR. JUSTICE BIRSS: All right. 18 judgment in ----
19 MR. ALEXANDER: The consequence even of my learned friend's 19 MR. ALEXANDER: You will find that in bundle C3, tab 8. Is it the
20 approach is that it would for practical purposes be either 20 one on the IPCom case?
21 inevitable or almost inevitable that the validity and 21 MR. JUSTICE BIRSS: Yes.
22 infringement of the patents that are currently in issue would 22 MR. ALEXANDER: Yes, in fact probably it is useful just if your
23 remain in issue on the FRAND determination and there is a good 23 Lordship is thinking of reading anything over lunch to read
24 reason for it. This is not just forensic game play. 24 that and in particular read paragraph 27.
25 The reason that historically the courts have engaged in 25 MR. JUSTICE BIRSS: Okay.

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1 MR. ALEXANDER: I am not sure you were taken to that, but it is
2 quite useful to have that in mind.
3 MR. JUSTICE BIRSS: Very good. Two o'clock.
4 (Adjourned for a short time)
5 MR. ALEXANDER: My Lord, I was just on what would be required in
6 the sense of the utility aspects, if I can put it like that,
7 technical aspects. Perhaps to try and speed matters up I
8 could remind your Lordship of where the evidence is on this
9 issue, particularly in Mr. Burdon's witness statement. It is
10 C1 at paragraph 49 onwards where he indicates the kind of
11 matters that would be likely to be required in relation to the
12 technical aspects and in relation to what might broadly be
13 called the licensing/economic aspects.
14 First, in relation to what may be called the "strength",
15 I do not think there is any dispute that "strength" is a
16 compendious word used by my learned friend to encompass
17 validity, infringement, overall economic importance and so
18 forth. Each of those would require investigation, both for
19 specific patents and potentially more generally. Your
20 Lordship has seen from the matters I was addressing your
21 Lordship on in private that although that may be a substantial
22 exercise to undertake, the nature of the claims that are
23 advanced in this case does not suggest that it would, or at
24 least on the basis of the claims that the claimant is making,
25 be a disproportionate exercise bearing in mind the nature and
[Page 93]
1 size of the claims that are being made. One can think, in
2 rough terms, about the net present value of what is sought
3 under those terms. We are talking about very substantial sums
4 and it would be proportionate to deal with them in a detailed
5 way. You cannot just wave your hands and say, "It looks as
6 though there might be a claim in there that might survive".
7 You need to look at it on a more detailed basis. Indeed, for
8 the court, the is trying to make an evaluation in relation to
9 strength. It is very unlikely that it will want to do it in
10 what may be called "a hand-waving way".
11 When it comes to economic issues, there will be issues
12 of comparables. As I say, it is difficult in this case
13 because there is not another comparable portfolio directly;
14 stacking and hold-up and so forth. That is in contrast to the
15 position in the Microsoft case, which my learned friend likes
16 so much, where it appears from the judgment that
17 notwithstanding the fact that that judgment itself ran to
18 probably 150 pages, much of the underlying evidence was not in
19 dispute. It may be that that is the reason why it was
20 possible to do that case in a relatively short compass. It
21 was, in a sense, a breach of contract case, a breach of the
22 contract to offer FRAND terms. It is very unlikely as matters
23 stand, and your Lordship can see the stances that the
24 respective parties take here and the stances that have been
25 taken here with respect to patent portfolios, that that would
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1 be possible. Your Lordship will be aware from your knowledge
2 of the Nokia v. IPCom litigation which, in a sense, is the
3 best analogue, that there was a great deal of detailed
4 analysis. When one comes to what was proposed to be done for
5 the FRAND trial, it was much less than what my learned friends
6 are contemplating would need to be done in this trial because,
7 for that trial, all that was contemplated was a FRAND
8 determination for a single patent in a single jurisdiction.
9 That, as I said, has now been effectively adjourned and I will
10 hand up the judgment just for completeness. It was a few
11 weeks ago that it was adjourned. So none of the technical
12 material would be of relevance. I do not know, and doubtless
13 Mr. Green is perhaps better placed to assist your Lordship on
14 what points are in issue in that case but it has involved both
15 patent expertise, competition expertise, licensing expertise
16 from lawyers, at least as far as one can see from those
17 instructed in that case, and that is leaving out many of the
18 points that would arise in this case. That in itself is 13 to
19 15 days. So we respectfully suggest that the optimistic
20 estimates that you can just do a quick and dirty evaluation in
21 five days of the FRAND issues for a worldwide portfolio of
22 this kind is not realistic.
23 Your Lordship is also very familiar with the copyright
24 Tribunal cases where no issues of subsistence arise. Your
25 Lordship may recall that there was one some years ago on
[Page 95]
1 internet use of musical works where your Lordship's
2 predecessor heard evidence over many days. The total costs of
3 that were, I think, 12 million, and that was, in a sense,
4 just settling licensing terms. Of course, there were
5 complexities in that case which might not occur in this case.
6 I am not saying that the analogy is a perfect one but your
7 Lordship is experienced enough in this field to know that when
8 someone says this is just a short copyright Tribunal case,
9 that is often an optimistic assessment.
10 Then we come to competition issues. There are serious
11 competition issues here in relation to the arguments. It is
12 not simply one of these cases where someone is waving their
13 hands about competition issues and they are not big points.
14 It is in relation to the kind of licence that is appropriate
15 under competition law, whether it is appropriate to offer
16 simply a compendious licence or whether it is appropriate to
17 do things on a more divided basis.
18 There may be, in a sense, two layers of analysis here if
19 I can develop that very briefly. Let us divorce this entirely
20 from this case. In fact, forget about this industry. For two
21 parties who have portfolios in the pharmaceutical field simply
22 to say, "We are going to engage in mutual non-assert,
23 worldwide, in relation to our respective portfolios", that may
24 not raise any competition concerns at all, even though there
25 is, in a sense, a worldwide licence. It is done without
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1 regard to whether the rights are used and so on. It is a
2 simply, "Let us stop this war moratorium". Equally, there may
3 be circumstances in the industry with which we are concerned
4 where a worldwide moratorium, effectively, may be appropriate.
5 I do not think one can say ex ante the detailed evaluation
6 that simply because of the particular structure that has been
7 adopted, it is ipso facto illegal under competition law. It
8 may be that that is an argument but I would say that it is
9 premature to say that it is definitely the case. If that is
10 the case, one would need to look in somewhat greater detail
11 at what the relevant terms were that one was assessing by
12 reference to the competition law.
13 Let me give your Lordship a concrete example. If you
14 think about my pharmaceutical example, there is no money
15 changing hands effectively but just people saying, "We will
16 drop hands". Let us suppose we have a slightly different
17 example and some person says, "All right, if you give me
18 100,000, or whatever it is, I will not assert any of my
19 patents against you anywhere".
20 MR. JUSTICE BIRSS: Yes. What I thought, and it is the same
21 thing, is that it occurred to me that if, in this case, Vringo
22 -- I should make it clear that this is a fantasy example --
23 said to you that they would give you a worldwide global
24 portfolio licence for a dollar, you would not say it was not
25 FRAND. You would take it.
[Page 97]
1 MR. ALEXANDER: Obviously one would take it, but more important on
2 the competition aspect is, not only would we take it but it is
3 very doubtful that the competition authorities would be very
4 interested in it in those circumstances. That is because
5 there is an agreement between the parties. Everyone can see
6 that everyone is happy, if I can put it like that, about the
7 terms. If, on the other hand, what is being done is that the
8 court, or the District Inspector of Terms, is being invited to
9 settle them, then the court has to pay, in a sense, more
10 attention, if I can put it like that, to whether or not those
11 terms conform with the relevant competition standards. It has
12 to pay attention to it for a number of different reasons:
13 first of all, because it is the court seeking to do something
14 that complies with the law, if it is settling terms; secondly,
15 and this relates to a further point that I am coming on to,
16 because if it settles terms in relation to one case of a
17 portfolio with respect to one licensee, and those terms are
18 settled on a basis that they do not depend on the identity of
19 the licensee, then those terms would also potentially be
20 applicable to other licensees, other potential licensees, who
21 may also be in a similar position. The declaration is made in
22 a sense -- what one is doing in copyright tribunal terms -- in
23 relation to the licensing scheme in respect of that portfolio.
24 In those circumstances, legality of the scheme, both in
25 structure and in amount, is more important than if the parties
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1 simply do a deal in a restaurant. So those points are of
2 particular importance in circumstances where someone is coming
3 along and saying, "I want you, as an independent licensing
4 Tribunal, to engage in this exercise". Now, I am not in a
5 position to say today what the points are that will
6 necessarily arise in this case. Indeed, it is impossible to
7 say that entirely in the abstract. Your Lordship has an
8 indication of where we are going from the evidence that has
9 been submitted from our competition specialists and the issues
10 that have arisen, and specifically arisen and been
11 specifically referred already to the Court of Justice. That
12 is why I say this is a serious set of issues that will need to
13 be looked at.
14 That brings me to my final point in relation to this
15 which is the position of other parties. Although my learned
16 friend says we can just do this among friends, just between
17 you two, in my respectful submission at least part of his
18 declaration seeks a declaration as to what FRAND licensing
19 terms are. Unless, and I do not think he has suggested, there
20 is any basis for saying that the terms would be different
21 fundamentally with respect to other potential licensees,
22 essentially what the court is being invited to do is to decide
23 on the portfolio terms for everyone in the world. That gives
24 rise to a number of practical issues. One of the biggest
25 issues is, if that is the invitation then it might be that the
[Page 99]
1 appropriate course is to extend invitations to those who are
2 potentially affected by the licensing scheme as is done in the
3 ----
4 MR. JUSTICE BIRSS: Yes, I know, you advertise it and ----
5 MR. ALEXANDER: You advertise it and then people can make
6 comments. If they are not interested they do not have to
7 come. There may be industry bodies who want to make
8 representations. It could be, for all we know, that Nokia,
9 who is a beneficiary, says,"Wait a moment, I do not agree with
10 the approach" or they could say "I do agree with the
11 approach". This is not so artificial because Nokia's approach
12 in relation to at least the IPCom litigation was not to say,
13 at least so far as one can see from the way in which they have
14 been knocking the patents off, "We say that it does not matter
15 how many valid patents you have to the licensing rate". Their
16 approach is, "Actually, it really does matter", and that is a
17 matter of principle which it would be undesirable for the
18 court to determine without the participation of those who were
19 interested, not even necessarily in this specific portfolio
20 but in portfolio licensing generally.
21 So what is contemplated is a very lengthy, complicated,
22 potentially multi-party dispute that involves, at least as
23 part of it, the very issue that needs to be decided before one
24 even gets to that, namely, whether or not there are any rights
25 that trigger a FRAND obligation in the first place.
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[Page 100]
1 I have mentioned the Motorola case where the issues were
2 different. Can I just briefly address your Lordship on the
3 other cases that are referred to, the Harvard case first of
4 all which is in bundle C4, tab 19. It is important that your
5 Lordship has the context and facts of that case in mind.
6 There was not a separate judgment. This was a running
7 judgment, if I can put it like that, of Kitchin J. There is
8 another Nokia v. IPCom judgment which is in the authorities
9 bundle, and there is a judgment in the Harvard case of Lewison
10 J which refers to this judgment as being the least worse
11 option of the options to take.
12 First of all, just a few words of context which come
13 from the Lewison judgment but it is not in dispute. That was
14 about the MPEG pool for digital music which was a pool of all
15 of those engaged in the development of the MPEG standards.
16 It is one of those things where you think, "Wait a minute,
17 these are the guys who actually invented this stuff. This is
18 not just the odd, stray declaration, still less the residual
19 lump of patents sold by one of them". It is a pool which, one
20 might say prima facie, is more likely to have something
21 genuinely in it one way or another.
22 The issues in this case are that the claimant sued for
23 infringement on 16 patents originally, and they said they had
24 another 16 coming on behind and so forth. The issues in that
25 case, as your Lordship sees from that judgment, were really
[Page 101]
1 three-fold. It was whether or not the defendant was already
2 licensed as a result of the claimant having licensed the
3 defendant's suppliers. Then there was the issue as to the
4 price of the licence which, in broad terms, was the FRAND
5 issue. Then there was the patent issue. Effectively, what
6 the court did was that the court did not say, "You have got to
7 have FRAND first". What it said was, "Actually, the issue
8 that you ought to have first is whether you are licensed at
9 all and, if you are, then the FRAND issue would go away". So,
10 effectively, what Kitchin J did was to order trials in that
11 order, dealing with licensing first and then the FRAND
12 determination, and only if that became necessary, the patent
13 matters. But it is important, and this is a passage that I
14 asked my learned friend to draw to your attention, that in
15 that case the parties were prepared to approach the FRAND
16 determination on the basis that all of the patents in suit
17 were valid and infringed. You see that on 183. That is a
18 fundamental difference from the position here. Indeed, the
19 position here is the opposite position where we approach it at
20 least on the basis that the patents are very unlikely to be
21 valid and infringed. In any event, the relevance of that is
22 accepted by both sides.
23 Similarly, when we come to the position in the United
24 States, the ZTE InterDigital case, where there was effectively
25 an acceptance that ZTE would be bound by the determination.
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1 Your Lordship should take a look at that and what is said
2 there in detail, not only in the part that was drawn to your
3 attention there but also in the earlier statements because it
4 becomes quite clear from that that what ZTE was essentially
5 doing there was to say .... What InterDigital was saying was,
6 "Look, I am going to the IPC. I am going to get an injunction
7 despite the fact that I have given a FRAND undertaking with
8 respect to these patents". I do not know the full intentions
9 ins and outs of the approach to US law on injunctions and when
10 they may be sought or resisted and so forth, but you could see
11 perfectly well the rationale for saying, "All right, if we
12 accept that there is something in that portfolio and we accept
13 that we will be bound by it and you also accept that you will
14 be bound by it, the rational thing to do is for a FRAND
15 determination to take place first because that is the real
16 issue between the parties".
17 So we respectfully submit that that provides no support
18 for the position that is advanced here. In fact, one can tell
19 that by looking to see what even Vringo's position is in this
20 case. If your Lordship goes back to the evidence bundle, so
21 that is bundle C1 at tab 10, paragraph 12, Vringo's
22 preparedness to be bound by the UK court's final determination
23 is actually a contingent preparedness to be bound. It is only
24 prepared to be bound on the basis that ZTE Corp undertakes to
25 enter into a global licence with Vringo on terms determined by
[Page 103]
1 this court. So let us suppose that ZTE Corp says, "Actually,
2 we dispute, even as a matter of competition law, the
3 appropriateness of a global licence in this case for the
4 reasons set out" or "We dispute the appropriateness of a
5 global licence before the determination of the validity of at
6 least some of the patents". On this basis, even Vringo would
7 turn round and say, having been through this very expensive
8 exercise before your Lordship, "I never said I would be bound
9 by what your Lordship held. I only said I would be bound by
10 it if they agreed to be bound by it and, since they did not, I
11 am not bound. Your Lordship has settled a royalty which is
12 only 3/6. We do not like that, even though you have said that
13 is FRAND for this portfolio, but you must be kidding. We are
14 going elsewhere. We are now going off to the French court to
15 have another court decide on a different royalty rate, a
16 global royalty rate for this patent, or a US court" or
17 wherever it is, "because we do not like it".
18 So on no view is this proposal going to be one that even
19 binds the person seeking the determination. In those
20 circumstances, it might be said, where is the jurisdiction
21 and, if there is jurisdiction, the discretion for invoking the
22 court's power to grant declaratory relief which may be wholly
23 hypothetical and contingent?
24 I move on to jurisdiction briefly. It is not part of my
25 case to say that there are no circumstances in which this
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[Page 104]
1 court can determine FRAND; nor do I say that there are no
2 circumstances in which a court can consider whether or not a
3 global licence would or would not be FRAND. But I do say
4 this, that in circumstances where the real issue between the
5 parties is whether there are any valid rights to licence in
6 the first place, which is the real issue between the parties
7 here, that until that issue has been determined, so far from
8 it being ripe to determine FRAND issues, it is wholly
9 premature. I also say this, that if a claimant comes along
10 and says, "I am not even necessarily going to be bound by the
11 determination of this court because it depends on other
12 circumstances outside my control", in those circumstances,
13 although one can put it as a matter of jurisdiction, it is
14 probably better put as a matter of discretion as to whether or
15 not the court should entertain such a declaratory claim.
16 There is, of course, a final point. I am not here and I
17 am not briefed for ZTE Corp, but your Lordship will need to
18 consider this aspect. My learned friend has not really
19 addressed your Lordship on the basis upon which it would be
20 appropriate to grant leave to serve ZTE Corp out of the
21 jurisdiction in relation to this claim. It is, of course,
22 necessary, if that is to be done and they are to be joined
23 into these proceedings, for the court to be satisfied that
24 there is a serious issue to be tried, that there is a good,
25 arguable case with respect to satisfaction of one or more of
[Page 105]
1 the gateways under CPR Rule 6 and that, in all the
2 circumstances of the case, the discretionary jurisdiction of
3 the court should be invoked to require, essentially, a party
4 that is not at the foreign court to engage in litigation here
5 in relation to a speculative declaration. In our submission,
6 no basis has been made out for satisfaction of any of those
7 heads. In those circumstances, it would be quite wrong for
8 ZTE Corp to be brought into these proceedings. But if I am
9 wrong about that and your Lordship thinks that, in a sense,
10 they are a necessary or proper party at this stage, and your
11 Lordship may say that if we are dealing with patent matters
12 they are certainly not a necessary or proper party to those --
13 no one suggests that they are or would be on any view -- if
14 that is the case, then we would say that that inevitably
15 brings into play all of those others who are potentially
16 affected by a declaration of this kind, because all other
17 potential licensees would then potentially be necessary or
18 proper parties. They would all potentially be servable by
19 Vringo in these proceedings on the basis that a patent claim
20 had been made not against them or any of their subsidiaries
21 but on the basis that a declaration was being sought in
22 relation to the worldwide licensing terms of this portfolio.
23 Equally, it would be very difficult to resist the
24 beneficiaries, or partial beneficiaries of this patent who are
25 the owners of the patent in question and developers of the
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1 patent, also being necessary and proper parties to such a
2 claim for a declaration, particularly if it was said that
3 there was an element of comparables or anything that was said
4 in this case which affected their interests to any extent.
5 So my point is this, that, first of all, they do not
6 satisfy the relevant requirements of the rules but, if they
7 do, your Lordship is embarking upon a potentially difficult
8 and party-wise, if no other, hard to manage dispute as to
9 which ultimately there may be no substantial benefit.
10 So can I just conclude with this. We have put forward
11 directions for the trial of the patent matters in a reasonable
12 timeframe. There have been discussions between the parties in
13 relation to them, and I think it is anticipated that if your
14 Lordship rejects my learned friend's application, those can be
15 relatively easily resolved. Those trials are, in my
16 respectful submission, bound to assist the parties in their
17 negotiations because if they show, as it were, contrary to
18 past experience and expectation, that there is something here,
19 in those circumstances whether it be ZTE (UK) or ZTE Corp,
20 they may say "All right, let us talk". If they show in
21 accordance with the ordinary practice that there are no rights
22 to license in relation to the first three, that is for any
23 rational licensee and any rational licensor, it is bound to
24 affect the approach to licensing negotiations, whether it be
25 for licences for these patents individually in the UK or for a
[Page 107]
1 global licence. There is, in my respectful submission, no
2 basis at all for doing what is urged upon you which is
3 effectively to stay my proceedings for revocation of these
4 patents and interpose into that genuine and useful exercise,
5 which has proved useful time and again in these courts in
6 bringing parties to sensible negotiations, a claim that has a
7 minimal prospect of that result. It is, of course, something
8 that your Lordship will recall which is that Vringo is not
9 suggesting that patent proceedings should stop altogether.
10 They are still happily wanting to go on with matters in
11 Germany and France and, as I understand it, have just opened
12 another little front in Australia. So they are not saying "We
13 will stay all those pending a FRAND determination". They just
14 want to keep going as far as they can with those which
15 suggests that this may be more part of a kind of international
16 game than a genuine attempt to determine whether there is
17 anything really here that they are entitled to make a claim on
18 at all.
19 We respectfully submit that this court should not be
20 engaged in the business of encouraging or supporting people
21 who actually have no rights by the procedural to'ing and
22 fro'ings to place in difficulties those of whom they are
23 requesting enormous sums. This court should be doing what it
24 has always done which is to say that if there is a real issue
25 as to the underlying merits of the rights that are advanced,
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1 that is the issue that should be determined and should be
2 determined in short order.
3 The only other thing I would say, and I promised I would
4 finish in half an hour ----
5 MR. JUSTICE BIRSS: I did not say I would hold you to it.
6 MR. ALEXANDER: There is just one point and perhaps I can sweep it
7 up. It is a matter that my learned friend raised in C2, tab
8 4. I do not think it arises for decision today but I just
9 want to make sure your Lordship has it in mind. I think it
10 was suggested that if someone puts forward a licence and they
11 say, "I am prepared to license from you but I actually do want
12 to open your bonnet and turn the ignition on first of all",
13 that somehow they should be regarded as an unwilling licensee
14 and, therefore, that they should be subject to an injunction
15 for the temerity of suggesting that they might examine the
16 nature of the vehicle before being asked to spend huge sums of
17 money on it and its ilk.
18 Page 2 of tab 4, the third paragraph, is the Commission
19 press release in the statement of objections in the Motorola
20 case. "In addition, in the Commission's preliminary view, the
21 fact that the potential licensee challenges the validity,
22 essentiality or infringement of the SEP does not make it
23 unwilling where it otherwise agrees to be bound by the
24 determination of FRAND terms by a third party. In the case at
25 hand, Motorola required clauses that prohibited such
[Page 109]
1 challenges by Apple, even after Apple had agreed to be bound
2 by a third party determination of the FRAND terms. The
3 Commission's preliminary view is that it is in the public
4 interest that licensees should be able to challenge the
5 validity, essentiality or infringement of SEPs."
6 Although it might be said that it is not a final
7 determination, and it is not, again, we submit that we have a
8 perfectly respectable argument that says, "There is nothing
9 wrong with saying we are happy to take a licence in principle
10 but we do need to check the infringement and validity of what
11 you assert before we do so".
12 MR. JUSTICE BIRSS: Thank you very much. Mr. Green?
13 MR. GREEN: My Lord, in my reply I will deal with the issue this
14 way. I made fairly detailed submissions to you in relation to
15 the invitation we made to the court to conduct a full scale,
16 preliminary issue on FRAND. In our reply I am going to focus
17 upon a section of that or a sub-part of that which is the
18 issue whether the court might, in the alternative, decide the
19 more limited question of whether or not a licence which was
20 per patent or global was in fact lawful. This is, in fact, a
21 live issue on the pleadings which your Lordship sees. It is
22 live on the defendants' amended defence, paragraphs 13F and
23 14, where they say they are entitled to a per patent licence
24 and "that must", are the words they use in para 13F, be made
25 available to them. We dispute that and say it need not be
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1 made available to them, and they are wrong. They are not
2 entitled to a per patent licence on the facts of this case
3 when one is dealing with a global licensee, the fourth largest
4 supplier in the world, where we have a substantial portfolio,
5 including patents which have survived Munich -- a point which
6 has not been referred to by my learned friend. It is
7 perfectly proper for us only to offer a global licence. We
8 believe that determination of that issue, even if your
9 Lordship considers that at this stage a determination of the
10 broader FRAND substance would be inappropriate, would be of
11 great utility and would determine a wide range of issues on
12 the pleadings and would be highly beneficial as creating, as
13 Kitchin J put it, a platform for settlement.
14 The logic tree I think would be as follows. If the
15 court decided that the proper response was per patent, never
16 mind the terms, then it would be plain that our offer was not
17 FRAND, and it would determine that, in principle, a part of
18 ZTE's defence was valid and a part of our claim or our
19 response to their defence was invalid. Then, I think,
20 logically, if the court was left with the notion that there
21 were only six patents in suit and they were entitled to a
22 licence on FRAND terms, I can see and we see the force of your
23 Lordship's point that you would need to determine validity
24 prior to FRAND because if the validity was zero the FRAND
25 would be zero. That would be a consequence if the finding was
[Page 111]
1 that it was per patent. It would also enable the parties to
2 know where they were, and it would avoid a full-blown FRAND
3 assessment of the portfolio.
4 If, on the other hand, the issue is determined that a
5 patentee in the position of Vringo can offer a global licence,
6 then it would indicate, it would determine definitively, that
7 paragraphs 13F and 14 of the defence were bad. It would
8 determine that issue between the parties. There is little
9 doubt that since this is a key issue between the parties it
10 would facilitate settlement. It would be highly relevant to
11 determine the legal point as to what was and was not a willing
12 licensee which is an absolutely pivotal issue upon which there
13 is little case law. No doubt over the years courts will
14 grapple with it bit by bit, but if a willing licensor can
15 offer a global licence and a licensee says no, that would be
16 highly relevant as a general issue across the world, and it
17 would guide and, indeed, possibly determine the remedies in a
18 case such as the present. It is therefore a very big issue.
19 How would it be tried? Well, first of all, what might
20 be the likely answer to that? Our submission is that it is
21 inherently probable that a court would find that a global
22 licence on facts such as this was not an abuse of a dominant
23 position. That is because standard setting organisations are
24 premised upon everybody taking a licence of the patents which
25 form the basis of the standard. The defendant is global. The
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1 portfolio is large. Indeed, the defendant has already
2 indicated that it is prepared, in principle, to contemplate a
3 global licence. It is, we would submit, highly improbable
4 that in these circumstances a court would find a per patent
5 licence to be the only appropriate offer. However, if we were
6 wrong on that, as I have said, there would be great utility,
7 and it would resolve important issues on the pleadings.
8 In order to get to that, Vringo would, of course ,invite
9 the court to assume that there was dominance so the court
10 would not have to grapple with dominance. That is a working
11 assumption which the German courts are very happy to make,
12 that if you have a standard-essential patent you are dominant
13 vis--vis that patent. But the logic of the underlying
14 intuition is that if you have a patent which is blocking
15 because it is against us, you have the ability to exclude
16 third parties from a market. That is an indication of
17 dominance. So the court would simply assume dominance and
18 would go on to decide the point of law on the facts that would
19 be very limited in a case such as this. They would probably
20 be almost incapable of dispute; the size of the defendant, its
21 global reach, its turnover. There could be no question but
22 that it affected trade between member states, and the
23 background and context of the Standard Setting Organisations
24 would be relevant. There is quite a body of law on how they
25 came about, and the European Commission's approach to the
[Page 113]
1 analysis of standards. It would not be a difficult issue. It
2 would be a few days predominantly of legal argument, albeit
3 the directions could be set for it. It would, of course, mean
4 that the court did not have to decide the full terms of the
5 licence, and it would overcome the observation that your
6 Lordship made earlier, particularly in a domestic action,
7 about the circularity between validity and royalty rates.
8 So our suggestion, therefore, is that if your Lordship
9 concludes that is a halfway house or one step with a view to
10 enabling the court to see better how to proceed in the future,
11 that would be a quick method of resolving matters. We rely
12 upon, and we probably all rely upon Kitchin J in Philips. It
13 is absolutely true that, in that case, Amino and Alba were
14 prepared to try the FRAND issue on the basis that the patents
15 in suit were valid and infringed. That is C3, tab 19. The
16 point about that, and I do not think there is any dispute
17 about it, is that that was not acceptance for all time because
18 the judge then goes on to say, "I will adjourn for the time
19 being the invalidity matters". More importantly, the judge
20 did accept, as I drew to your Lordship's attention before
21 lunch, that if the court decides the FRAND issue, and we would
22 say here a part of a FRAND issue, then I would rely on both of
23 the points made by the judge on page 6 and ----
24 MR. JUSTICE BIRSS: Where is this?
25 MR. GREEN: I beg your pardon. It is C4. Your Lordship has
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1 already seen the bit at the bottom of page 5 where the judge
2 says he sees merit in deciding FRAND before conventional
3 patent issues. He then makes the point that we make: it is
4 money. "If the court decides the FRAND issues, it may well be
5 determinative of a large part of the case" -- so, we say here
6 at least a part -- and it might profit a platform for
7 constructive settlement, to which we say "yea". So, both of
8 those factors apply, at least to the more limited preliminary
9 issue which the court may consider. "The court is likely to
10 have to decide the FRAND issues in any event, unless of course
11 the patent infringement claim fails in respect of each and
12 every patent in suit and, indeed, possibly other patents which
13 are not yet before the court." So, the court was not taking
14 the view that it was sensible to determine validity before
15 FRAND for having a look or "waving of hands" reasons, as my
16 learned friend would put it. "The costs and time involved in
17 trying the patent issues is likely to be rather greater than
18 that those involved in trying the FRAND issues...." Only then
19 does he come to Alba and Amino will treat them, ex hypothesi,
20 for the purpose of FRAND, as valid and infringed. Actually,
21 that point works in my favour, because even on the broader
22 preliminary issue, we would not be saying that the other side
23 could not argue about strength. We have seen in Motorola v.
24 Microsoft you can examine strength, and we would be saying
25 that there is no impediment; and it seemed to me the parties
[Page 115]
1 there were viewing it as an impediment. They made the
2 concession. We say that on a wider FRAND inquiry, that would
3 not be an impediment. That is all I want to say about that.
4 On the question of strength generally, your Lordship may
5 have seen from the papers that we do have patents which have
6 already passed through the Technical Board of Appeal, the
7 EP119 patent, subject to opposition by Qualcom. It survived;
8 there was a hearing; it has been upheld. No evidence has been
9 put forward as to strength. My learned friend of course makes
10 a lot of assertions. We do note from their Statement of Costs
11 that their patent attorney spent 50 hours examining the
12 patents, but they have come up with no evidence. They have
13 made an assertion that two out of the six patents are not
14 worked and are not essential, but they say nothing about the
15 other four, which includes EP 119. It really is not a point
16 which your Lordship is able to take account of. There is
17 simply no evidence as to the strength of portfolio. My
18 learned friend says it is logical that my clients put forward
19 their top six. We purchased the portfolio. It has taken a
20 long time in order to investigate the portfolio. In
21 Australia, for example, entirely different patents are going
22 to be -- one patent, a patent which is being sued on, which is
23 entirely different. This is not, as my friend puts it,
24 hand-waving. This is, we say, a perfectly valid and valuable
25 portfolio. But your Lordship is not in a position to take a
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1 view at this stage.
2 Can I deal with a number of somewhat stray points.
3 First of all -- and I do not think it probably matters at this
4 stage -- it was suggested that our term offer covers
5 non-standard essential patents. Your Lordship needs only to
6 make the following reference: C2, tab 15, page 4. It is
7 quite plain that the term offer only covers SEPs, and nothing
8 else. So, there is nothing which is not a standard essential
9 patent in the term offer.
10 MR. JUSTICE BIRSS: Does the standard essential patent in the
11 offer mean patents you say are standard essential or patents
12 which are standard essential?
13 MR. GREEN: Which have been found to be; not just which we say
14 are, but which are standard essential.
15 MR. JUSTICE BIRSS: Right.
16 MR. GREEN: It may not be relevant, but just so your Lordship just
17 sees precisely what the offer is, it is tab 15 of C2, and it
18 is page 4, just above (d), the last sentence: "Royalties
19 shall only be due on Subscriber Units or Infrastructure
20 Revenues where one or more of the ZTE activities licensed
21 under the Definitive Licence Agreement with regard to such
22 Subscriber Units or Infrastructure Revenues occurred in a
23 jurisdiction where Vringo owns or controls Essential Patents."
24 MR. JUSTICE BIRSS: I see. Just out of interest, since you read
25 that out, Mr. Green, that is not confidential, I take it? I
[Page 117]
1 mean, I do not know. You tell me.
2 MR. ALEXANDER: Not any more!
3 MR. GREEN: It is a good job I did not continue to read, but that
4 bit we will treat as not confidential. As I said, the
5 question about confidentiality, essentially, my clients are
6 very happy for the offer to be made public, but for reasons I
7 have explained. So, yes, I did trespass, but ----
8 MR. JUSTICE BIRSS: It is your confidentiality.
9 MR. GREEN: It is, indeed.
10 MR. JUSTICE BIRSS: I see. You see this sort of thing in
11 worldwide licences. So, for the sake of argument, if it
12 turned out that in Australia all your portfolio was invalid
13 except for one patent, but the one patent was an essential
14 patent, then Australia would be covered. That is what I mean.
15 I can see why that might make sense in a global negotiation.
16 MR. GREEN: Yes. The other point, my learned friend provided some
17 critique and commentary of this, in particular, to the
18 definition of infrastructure equipment, and various other
19 things. We have made it clear in the correspondence that our
20 clients are prepared to negotiate. That goes without saying.
21 So, just pulling together a few strands, we submit there
22 are essentially two issues for your Lordship, a broader issue
23 and a narrower issue. I am not going to repeat what I have
24 said about the broader issue, but I have made submissions
25 about the narrower issue, which we believe will provide real
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1 utility. It is an enormously important issue. It would
2 almost certainly completely reconfigurate negotiations, which
3 both parties say they want. But if it is per patent, then we
4 would probably have to accept the inevitable, that you would
5 have to go to trial first on validity; but if it is global,
6 then this court does not have jurisdiction over the vast
7 majority of the patents in the portfolio, and the analysis is
8 utterly and totally different, and my client would be able to
9 almost certainly bring this matter to a head.
10 But that brings me to the position of ZTE Corporation.
11 The real issue -- indeed, even if your Lordship goes down the
12 route of a PP, per patent, as against the global -- is with
13 Corporation. It is the real issue on the defendant's own
14 pleaded case, where they say they do not want a global
15 licence, because they say that would of course involve
16 Corporation. They only want a domestic licence. But in their
17 evidence, Mr. Burdon, at paragraph 12, says that they want a
18 global licence with Corporation. That is the real issue.
19 MR. JUSTICE BIRSS: You say that answers Mr. Alexander's point
20 about all these other people who might be joined into the
21 case. You say that Corp are in a different position because
22 of the letter that they wrote and the evidence of Mr. Burdon.
23 MR. GREEN: We would not of course be saying that if the potential
24 licensee was a localised company which operated in the UK only
25 or in just a part of Asia or Europe, it would necessarily be
[Page 119]
1 appropriate to grant them a worldwide global licence; but for
2 a global (unclear), it is. They are different. We therefore
3 suggest that Corporation is an integral part of this.
4 The final point, there was a brief mention about a stay.
5 We invited Corp to negotiate. We suggested that if there was
6 negotiations we would not start new litigation. We suggested
7 that if there were negotiations, they would not start
8 invalidity proceedings. That offer was not taken up.
9 Regrettably, we are where we are, but both parties wish to
10 settle. A stay does not really come into it, and I do not
11 think it is not suggested that any order your Lordship makes
12 is conditional upon something happening elsewhere in the
13 world.
14 MR. JUSTICE BIRSS: What happens to the foreign proceedings? Do
15 they continue -- German, Australia, and all that?
16 MR. GREEN: The position which my client has adopted, he would be
17 very happy to have a standstill. It requires two to tango.
18 If the other side were prepared to say, well, let us allow a
19 preliminary issue to go ahead, sort this out, have a crack at
20 negotiations, try and get it resolved, we would be delighted,
21 and we would then do what was necessary in a foreign court.
22 There is this difficulty, that if the court was to say it is a
23 condition of a preliminary issue, it would effectively be
24 potentially interfering with the discretion of another court.
25 MR. JUSTICE BIRSS: Yes, surely. No. I had not thought that far,
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1 anyway. 1 determination -- a determination.
2 MR. GREEN: No, quite. I did not think your Lordship had. But we 2 MR. JUSTICE BIRSS: Right. I see. Sorry, I do not want to be
3 have no objection to any form of consensual agreed standstill 3 dense. The way you are putting that, the emphasis of the
4 pending a resolution of this issue. We would obviously all 4 language is, you are saying that you are not now, on
5 have to go back to foreign courts and deal with it, but that 5 instructions, maintaining the last sentence; is that what you
6 is certainly not an issue or an objection so far as we are 6 mean, or you are? I am not trying to be difficult, Mr. Green.
7 concerned. 7 I just want to make sure I have understood it. I do not mind.
8 MR. JUSTICE BIRSS: Okay. 8 MR. GREEN: Let me just make sure there is no confusion.
9 MR. GREEN: Mr. Hinchcliffe said I should just deal with service 9 MR. JUSTICE BIRSS: Absolutely. (Pause) I should say, Mr. Green,
10 out. CPR6 effectively says -- and I think, in a sense, I have 10 I am not trying to push you anywhere.
11 made the point -- that the court will permit service out of 11 MR. GREEN: My instructions are that we would be prepared to grant
12 the jurisdiction against somebody where there is between the 12 a licence on the terms set by the court.
13 claimant and the defendant a real issue which is reasonable 13 MR. JUSTICE BIRSS: Right.
14 for the court to try. It is pretty much the same criterion as 14 MR. GREEN: So, not contingent.
15 whether or not one would bring in D2. If you bring in Corp, 15 MR. JUSTICE BIRSS: Okay. Right. Thank you very much. That was
16 it would be because we needed to bring them in and we would 16 it. Yes, Mr. Alexander.
17 therefore serve out. 17 MR. ALEXANDER: My Lord, just very briefly in relation to the
18 MR. JUSTICE BIRSS: I see. So, you say it all stand or falls 18 alternative, as it were, unmade application for a different
19 together. 19 preliminary issue. First of all, we do take some issue with
20 MR. GREEN: It does. In practical terms, when one looks at the 20 that being advanced for the first time in reply in
21 two tests under CPR19 and 6, they pretty much really amount to 21 submissions. If my learned friend wants to advance an
22 the same thing. 22 application that there should be a trial of a specific
23 MR. JUSTICE BIRSS: Okay. 23 preliminary issue, a preliminary sub-issue of the issues that
24 MR. GREEN: Thank you very much. 24 have arisen, then that is something that ought to be done
25 MR. JUSTICE BIRSS: Thank you, Mr. Green. I did have one question 25 properly, so that it can be considered. Let me deal with the

[Page 121] [Page 123]

1 for you. Sorry, Mr. Alexander. Just hang on.
2 Mr. Green, Mr. Alexander referred to paragraph 12 of
3 Mr. Laakkonen's second witness statement, which is in C1,
4 tab 10, on page 5. He characterised this -- this is coming,
5 obviously, from Mr. Laakkonen -- he characterised this as
6 proof positive that your client's position is contingent, that
7 your client's position on the binding nature of the
8 determination you are seeking is contingent. I think he is
9 right about that, but I just want to make sure whether ----
10 MR. GREEN: Both parties would be bound by a determination of the
11 issues arising on the defendant's defence. We cannot wriggle
12 out of it, nor can the defendant. If, in fact, the issue
13 before the court is that there are, let us say ex hypothesi,
14 two valid and infringed patents, the question now is remedy,
15 the court is going to ensure that my client does not, again
16 ex hypothesi, having a dominant position, abuse it. You will
17 set the terms, and we will be bound.
18 MR. JUSTICE BIRSS: I understand that. I am not sure that is
19 quite what was being said.
20 MR. GREEN: In relation to a broader privy issue.
21 MR. JUSTICE BIRSS: Yes. What Mr. Alexander was saying is that if
22 you look at this, what this is saying is that Mr. Laakkonen
23 says, in the middle of the paragraph.... (Pause whilst
24 counsel confers) Go on. That is fine.
25 MR. GREEN: My client is prepared to be bound by a court
1 merits of it, as far as it is possible to do so, briefly. It
2 is really a very bad idea, for this reason. What is being
3 contemplated is that a determination is made entirely in the
4 abstract of whether the mere fact that a proposal is a global
5 proposal means that it is or is not susceptible to competition
6 and criticism. No competition determination of which I am
7 aware takes place in that way or could take place in that way;
8 nor would it make the slightest sense for that to be the case.
9 Let us suppose that someone was to offer a royalty-free global
10 licence in respect of a portfolio. No one would suggest that
11 that could possibly give rise to any competition
12 considerations simply on the basis that it was offering free
13 royalty for everything. If, on the other hand, they offered,
14 and only offered, a royalty-bearing global licence that said,
15 "You must pay, regardless of whether these patents are used,"
16 and the rate that was sought to be charged in relation to
17 those that were not used or patents that were invalid was a
18 rate that would be wholly inappropriate were the rights in
19 question not to subsist, then the fact that it was a global
20 "take it or leave it" (in that sense) deal would raise
21 competition considerations. No one suggests that in any
22 bundling case that if, as a manufacturer, you say, "If you buy
23 my computer, I will throw in a hard drive or extra hard drive
24 for free," it creates competition considerations. If someone
25 says, "I will only sell you my computer on condition that you

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MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
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1 buy all of my hard drives from me at the following prices,"
2 that, potentially, does raise tying and bundling
3 considerations of exactly the kind in the evidence. So, it is
4 not possible to make an abstract determination; nor is it even
5 sensible to do so, even within the terms framed by my learned
6 friend, because, plainly, if one is raising an issue of this
7 kind, that is an issue that would be paradigmatically of the
8 kind at least referred to in the Huawei case. It is not
9 exactly the same as that referred to in the Huawei case, as
10 that relates to different questions in relation to claims for
11 an injunction, but it at least relates to those; and
12 your Lordship can see those in C2, tab 8. The idea that this
13 court, or indeed any higher court, would wish to consider this
14 issue entirely in the abstract is, in my respectful
15 submission, really nonsensical. The idea that that, of
16 itself, would contribute to settlement is also unrealistic,
17 because let it be supposed that the answer is: "Well, in
18 principle, a global offer is fine." Why would that advance
19 the issue of settlement if the real issue was, "Well,
20 actually, we are not so concerned with the fact that the offer
21 is global. All we are concerned about is the fact that what
22 you are proposing to do is charge us X in relation to it." It
23 would not help. Suppose then that the alternative is that it
24 was held that a global offer was illegal in principle, in
25 these circumstances. Well, that would then simply lead to a
[Page 125]
1 question as to what the right approach was or what the right
2 rates were for the individual patents. So, of all of the
3 issues that fall to be determined in this overall dispute,
4 that comes very low down the list of issues that are likely to
5 bring about any deal between the parties, whether globally or
6 more individually.
7 Finally, I think it is said that you do not need to pay
8 any attention, really, to the practice direction and the
9 gateways because, as long as there is a serious issue to be
10 tried, that is enough. That is not correct, and I do want to
11 just remind your Lordship of the requirements of CPR, at
12 Rule 6. I am not going to dwell on those in detail, because
13 they are very, very well known. But my learned friend
14 blithely saying, "Oh well, it is just the same as bringing in
15 someone in this country to proceedings," that is not and has
16 never been the law, and for very good reasons; and if
17 your Lordship wants us to address your Lordship on this in a
18 supplementary note with reference to the (unclear) principles,
19 the recent case of the Supreme Court in VTB, which requires
20 consideration of all kinds of issue of forum conveniens, and
21 so forth, and the approach to the exercise of discretion in
22 circumstances where there is leave to serve out, we can
23 certainly do this. But my learned friend's handwaving on this
24 occasion will not really do.
25 There was one final point, which is that he keeps saying
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1 that everyone agrees that there should be a global licence.
2 That is not the position. It is not the position in the
3 correspondence; it is not the position in the evidence,
4 either. It is certainly doubtless the case that it would be
5 convenient for there to be something that sorted out all of
6 the issues worldwide, and I do not think that if terms were
7 offered that were reasonable terms ----
8 MR. JUSTICE BIRSS: You are straying off what you are allowed to,
9 Mr. Alexander. But go on anyway. Finish this one. You are
10 straying a bit, I think.
11 MR. ALEXANDER: Yes. Perhaps I can just invite your Lordship to
12 reread paragraph 12 of Mr. Burdon's evidence on that, which
13 sets out the real position. Sorry, I was just trying to
14 explain why it was relevant.
15 MR. JUSTICE BIRSS: It is always so difficult to resist the
16 opportunity to say something after the other person.
17 MR. ALEXANDER: My Lord, yes.
18 MR. JUSTICE BIRSS: Yes, Mr. Green.
19 MR. GREEN: I should get the final word in this.
20 MR. JUSTICE BIRSS: Absolutely. You can have the final word.
21 MR. GREEN: In relation to the suggestion that we have made, this
22 was raised at the end of my submissions. Your Lordship
23 actually quizzed Mr. Alexander on it, and he said that it
24 might actually be helpful. It was not raised for the first
25 time in reply. It is not in the abstract. In fact, it is an
[Page 127]
1 integral issue which flows from their defence, where they say
2 they must have made available to them a per patent licence of
3 the patents in suit, and nothing else. It is key. It is the
4 critical issue, and it is almost certainly going to facilitate
5 a settlement. Mr. Burdon does say in paragraph 12 that he
6 wants a global licence. This is an issue which is absolutely
7 fundamental to that. The alternative, which is really where
8 ZTE are ultimately driving the court, is to conduct a trial of
9 six patents in suit over the next two years, with appeals,
10 then a competition defence, and a reference, and at the same
11 time the German courts are likely to beat us to the post
12 anyway. So, neither may be terribly satisfactory, but that is
13 by far and away the least satisfactory outcome. This issue is
14 squarely on the pleadings. Whichever way it goes, it will
15 take a great chunk out of one side or the other's pleadings,
16 and it is very much at the heart of it. We all accept that
17 this is really a money matter, a licensing matter. This is
18 fundamental.
19 My Lord, service out. I have not said that the test of
20 amendment is the same as service out. I have said on the
21 facts of this case; and I can go through, if it really needs
22 to be done, the practice direction. It is a clear issue
23 between us; it is a serious issue; it is reasonable. It is
24 central to the litigation. It will facilitate efficiency of
25 court proceedings to have the second defendant here. Those
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1 are reasons which apply to both amendment and service out, but
2 I accept the test is different.
3 MR. JUSTICE BIRSS: Right. Okay. Thank you.
4 Now, I am not giving you a judgment now. I will give my
5 judgment at two o'clock tomorrow. I hope that is not
6 massively inconvenient. I am prepared to negotiate a bit, if
7 you want to ask me now. I cannot give you a judgment in the
8 morning, but if you would rather it was three o'clock tomorrow
9 afternoon, I can do that. I am even prepared to countenance
10 doing it the day after, if you really I would rather did that.
11 MR. GREEN: We believe that two o'clock is fair, reasonable and
12 non-discriminatory.
13 MR. JUSTICE BIRSS: Excellent.
14 MR. ALEXANDER: On this matter, we entirely agree.
15 MR. JUSTICE BIRSS: Excellent. So, I will give you my judgment on
16 this question, which is the critical question, and then I
17 guess, depending on what happens, we will have to sort out
18 what is going to happen. So, I am not at all dogmatic about
19 who turns up and represents the parties. If it is convenient
20 to have both you fine silks, that is great. If not, well,
21 fine, whatever. That is obviously a matter for your clients
22 and you. Thank you both very much for your arguments. I will
23 see you tomorrow.
24 (Adjourned till 2.00 p.m. tomorrow)
25

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A 33:23 86:21 109:1 120:3 20:20,24 59:23 applies 25:18 army 90:6
ability 112:15 add 1:8 32:18 agreeing 19:7 americans 39:25 apply 57:13 83:10 art 66:13
able 63:10 87:22 70:20,20 agreement 10:8 amino 52:13 85:3 114:8 article 31:21 47:1
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abroad 60:12 7:11 17:17 116:21 80:11 91:14 85:6,12 33:17
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absolute 46:25 125:17 108:23 126:1 analogue 94:3 83:8 artificial 36:12
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abstract 98:7 adjourned 92:4 114:19 answer 44:21 101:19 102:9 29:19 86:23
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126:25 adjudicated 28:24 alexander 0:23 57:24 70:2 72:9 125:1,21 asking 8:14 15:16
abuse 55:15 59:5 adjudication 1:3 66:21 68:24 111:20 124:17 appropriate 11:3 44:19 45:22
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abusive 21:9 admit 29:1 81:18 82:5 83:6 answering 88:18 31:5 32:21 59:16 81:24
accept 23:12 28:2 adopt 28:15 83:13,15,20,24 answers 44:25 40:18 70:21 82:6
37:19 44:14 adopted 12:16 84:1,4,11,12 118:19 76:19 85:6,12 aspect 20:23 97:2
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128:2 92:23 102:18 126:17,23 anyway 48:10 4:9 26:23 27:19,23
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22:18 advancing 51:11 alexanders 118:19 127:12 april 2:8 10:17 82:12 88:10,12
acceptance 6:6 advertise 99:4,5 alleged 9:13 19:1 apparent 9:8 17:3 20:12 asserting 19:17
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27:7 101:25 advisory 47:24 119:18 49:17 68:10 arbitration 65:6 assertion 26:18
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accepted 41:23 affect 106:24 126:8 appeals 41:9 43:3 arguable 104:25 assertions 25:16
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accepting 65:3 afraid 8:13 43:13 54:2 63:12 appear 1:1,3 37:19 66:3 assess 18:13
accepts 51:10 63:25 84:6 73:23 74:2 17:25 19:11 114:23 assessed 2:20 32:7
72:13 afternoon 128:9 109:18 122:18 85:21 argued 56:25 assessing 96:11
account 36:18,25 agenda 42:23 124:23 127:7 appeared 0:21,23 argues 3:6 27:3 assessment 34:9,9
37:10 38:13 ago 67:11 94:11 alternatively 75:1 appears 1:18 arguing 2:14 37:22 39:9 61:2
44:2,5,10 45:1,5 94:25 altogether 107:9 13:19 68:25 21:24 28:5 67:5,6 95:9
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60:25 115:16 19:15,22 21:11 85:24 apple 2:25 27:7,7 29:15,17 40:1 assignment 4:18
accounts 4:7 60:9 25:17 33:1,21 amend 1:7,12 20:5 27:11,16 28:19 51:25 55:15 4:23
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acquired 3:23 40:12,13,14,14 amended 21:2 64:6,10 109:1,1 113:2 117:11 25:7 69:10
4:16 6:10 40:20 44:8 49:5 23:2,14 72:12 apples 27:9 arguments 22:8 78:10 94:13
act 23:3,6 50:4 53:19 73:2 74:10 76:8 applicability 27:5 33:19 95:11 106:16
action 43:18,19 55:25 59:16 109:22 applicable 83:9 128:22 assistance 86:19
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activities 116:20 25:19 61:2 65:8 85:23 127:20 applications 1:6 arising 5:8 32:17 58:16 112:9,17
actual 7:1,11 74:23 75:24 128:1 3:16,21 55:16 121:11 assumes 34:23
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112:11 bases 71:25 binding 6:5 51:20 blocking 112:14 bunch 80:4 81:3 40:19 41:1,23
atlantic 51:7 basically 22:4 51:24 52:8 55:1 board 115:6 bundle 3:24 5:12 43:3 45:5 46:9
attach 20:19 29:17 81:2 82:5 55:20 56:9 60:4 bodies 65:6 99:7 6:16,18 23:15 46:10,13 47:14
attacking 88:18 basis 9:13 10:7,19 61:20 67:6 body 112:24 24:1,14 53:8 48:9,15,18,21
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attention 15:23 51:24 59:6 birss 0:7 3:8,10,19 bonnet 108:12 100:4,9 102:20 56:5 57:14
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automatically 123:12 55:25 56:3,12 102:14,22,23,24 busy 21:21 95:8,20 96:9,10
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banging 45:8 big 78:13 95:13 86:22 111:14,14 92:12 20:23 21:19 90:21 105:12

MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
TEL: (020) 7067 2900 E-MAIL: info@martenwalshcherer.com FAX: (020) 7831 6864
VRINGO v ZTE 05 JUNE 2013 PROCEEDINGS
[Page 131]

118:2,9 120:6 59:22 60:2,23 121:6,7 128:21 53:2 69:20 connected 71:16
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44:9 50:24 80:15 84:6 common 1:19 components 55:11 122:8 78:6 100:5,12
52:22 57:18 115:18 117:5,20 22:21 38:17 comprehensive conkers 3:13 112:23

MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
TEL: (020) 7067 2900 E-MAIL: info@martenwalshcherer.com FAX: (020) 7831 6864
VRINGO v ZTE 05 JUNE 2013 PROCEEDINGS
[Page 132]

contingency 25:20 119:5 120:15 114:10 115:9 22:10,19 25:8 73:7,12,21 97:21 98:18,18
26:2 28:1 29:9 corporation 0:13 118:15,23 28:4 29:12,20 120:15 100:18 105:5,16
31:1,7,8 61:17 1:8,20,24 2:13 court 0:1,2,18 29:24 30:19 damage 19:1 105:21 106:2
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104:17,20 105:8 104:16,21 107:7 courts 2:5,23 7:19 d2 17:6 49:2 71:6 71:12 73:18,23 77:24 101:3
106:19 118:21 112:8 113:3 14:19 21:13 71:12 72:2 73:6 74:2,4 75:9 109:22 118:13

MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
TEL: (020) 7067 2900 E-MAIL: info@martenwalshcherer.com FAX: (020) 7831 6864
VRINGO v ZTE 05 JUNE 2013 PROCEEDINGS
[Page 133]

121:11 57:20 60:20 118:21 119:2 72:19,21 79:20 dwell 125:12 107:20
defined 6:2 66:25 67:23 122:18 124:10 87:7,9 92:15 endorse 69:12
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55:18 56:18 115:21,23 118:8 69:11 72:1,4,13 duty 21:9 28:15 65:19 equivalent 36:3

MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
TEL: (020) 7067 2900 E-MAIL: info@martenwalshcherer.com FAX: (020) 7831 6864
VRINGO v ZTE 05 JUNE 2013 PROCEEDINGS
[Page 134]

equivocated 27:16 102:20 115:8,12 expertise 94:15,15 73:8 findings 30:3 forced 11:22 60:5
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93:18 95:2 98:8 40:16 failure 27:9,12 60:18,20 110:25 110:22 38:18 39:8

MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
TEL: (020) 7067 2900 E-MAIL: info@martenwalshcherer.com FAX: (020) 7831 6864
VRINGO v ZTE 05 JUNE 2013 PROCEEDINGS
[Page 135]

41:12,16,18 92:16 93:15 107:11 66:5 69:2,3,9,14 96:10 114:17 108:4

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88:25 90:20 42:13 77:21 58:15 63:8 64:5 greater 78:9 90:3 61:21 91:14 20:15 43:21

MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
TEL: (020) 7067 2900 E-MAIL: info@martenwalshcherer.com FAX: (020) 7831 6864
VRINGO v ZTE 05 JUNE 2013 PROCEEDINGS
[Page 136]

67:7 103:9 91:17 123:2 33:8 60:7 infrastructure 0:9 122:11 invite 3:5 5:23
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idea 68:20 84:17 included 6:15 86:19 instructions 122:5 invitations 99:1 119:19,23 120:4

MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
TEL: (020) 7067 2900 E-MAIL: info@martenwalshcherer.com FAX: (020) 7831 6864
VRINGO v ZTE 05 JUNE 2013 PROCEEDINGS
[Page 137]

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judges 3:1 81:15 82:4 83:5 knowing 62:6 88:25 89:19 43:17 46:8,24 licensees 97:20,20
judgment 2:8 8:3 83:12,14,19,24 86:18,22 90:11 90:20 92:16 47:2,5 48:13 98:21 105:17

MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
TEL: (020) 7067 2900 E-MAIL: info@martenwalshcherer.com FAX: (020) 7831 6864
VRINGO v ZTE 05 JUNE 2013 PROCEEDINGS
[Page 138]

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107:12 111:8,13 92:8,20,21 56:5 69:5 71:8 member 112:22 127:17 116:5 127:21

MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
TEL: (020) 7067 2900 E-MAIL: info@martenwalshcherer.com FAX: (020) 7831 6864
VRINGO v ZTE 05 JUNE 2013 PROCEEDINGS
[Page 139]

negate 26:8 74:14 occasionally 36:5 owns 3:15 116:23 70:23 78:9
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nonpractising 125:24 opening 16:13 ownership 73:4 65:20 66:7 67:5 87:19

MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
TEL: (020) 7067 2900 E-MAIL: info@martenwalshcherer.com FAX: (020) 7831 6864
VRINGO v ZTE 05 JUNE 2013 PROCEEDINGS
[Page 140]

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11:14,17,19 51:21,22,24 picked 8:14 37:23 63:9,15,23,24 117:12 118:7 pp 118:12
12:2,10,24 70:15 86:15 piece 19:9 54:7 67:18 69:12,16 123:10 ppa 74:25
13:18 14:2,5,17 87:15 97:9,12 pieces 56:2 71:1,11 74:11 portfolios 93:25 practicable 33:15
14:20 15:7 16:2 123:15 125:7 pile 89:17 76:13 77:1 78:2 95:21,23 34:3 36:16
16:4 17:13,23 payable 13:24,25 pirate 9:16 79:25 83:20 portion 42:18 practical 39:21
18:2,5,7,15,17 85:14 pivotal 111:12 87:1,9 97:15 position 5:6 6:21 50:7 51:9 55:24
19:1,14,17 paying 27:10 place 11:3 31:6 98:14 104:16 9:18,19 14:11 58:25 89:20
20:15 24:4,9 29:18 87:19 99:25 106:5 108:6 14:14 15:3,10 98:24 120:20

MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
TEL: (020) 7067 2900 E-MAIL: info@martenwalshcherer.com FAX: (020) 7831 6864
VRINGO v ZTE 05 JUNE 2013 PROCEEDINGS
[Page 141]

practicalities 46:6 prima 100:20 119:14 125:15 45:6 117:16 105:25 109:19 30:10 58:14
practice 106:21 prince 80:10 127:25 provides 17:20 112:21 115:4 79:17 87:11
125:8 127:22 principal 32:16 process 27:4 33:17 102:17 117:5 120:25 113:7 125:2
precisely 51:2 58:5 55:15 57:7 providing 1:25 121:14 123:19 rational 102:14
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precursor 15:17 36:15 43:19 produced 32:11 provisions 82:25 questions 8:14 rationale 102:11
predecessor 74:19 58:13 60:16 32:14 public 4:22 7:18 11:9 15:15,16 rattle 63:22
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previous 7:3 74:1,22 75:13 provide 1:13,22 55:10 56:3,5 56:10,13,14 49:14 89:24,25
previously 87:6 77:20 81:25 13:17 18:10,22 57:9 58:12,12 62:5 87:5 99:15 91:4 93:19
price 90:22,25 82:6 84:10 88:1 53:22 54:3,4 58:13 67:13,14 103:15,16 123:2
101:4 104:23 105:8,19 82:11 117:25 67:15 69:3 123:16,18 reasonable 11:2
prices 124:1 107:3,9 119:8 provided 6:3 7:22 77:19 78:13 rates 16:10 22:16 28:8,16 85:15

MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
TEL: (020) 7067 2900 E-MAIL: info@martenwalshcherer.com FAX: (020) 7831 6864
VRINGO v ZTE 05 JUNE 2013 PROCEEDINGS
[Page 142]

106:11 120:13 rejects 106:14 28:25 29:16,23 30:13,20 31:18 44:4,21,23,24 44:4,20,21,22
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reasonably 32:15 relates 97:15 57:24 58:17 72:1,5 112:7 48:19 49:24 54:25 55:19
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28:10 25:13 48:20 residual 35:23 85:11,12 route 51:23 64:6 66:16 70:11
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123:15 rely 21:7 65:21 resist 105:23 116:20,22 routine 37:3 89:15 90:1,20
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regulation 60:13 89:23 resolution 15:12 rich 19:5 royalty 13:23,25 102:5,11 107:12
reiterate 18:22 remainder 15:20 22:6,13 29:7 right 4:17 8:6 16:10 17:21 109:9 114:22,24
reject 58:19 remaining 15:14 31:4,6 50:21 19:25 25:2 18:5,6,24 24:7 117:20 118:23
rejected 10:20 remains 8:21 120:4 27:18 32:24 24:12 34:22 121:21,22 122:4
rejection 84:16 rembrandt 27:15 resolve 12:3 25:12 35:9 39:5 43:24 35:14 43:24,24 125:14,25

MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
TEL: (020) 7067 2900 E-MAIL: info@martenwalshcherer.com FAX: (020) 7831 6864
VRINGO v ZTE 05 JUNE 2013 PROCEEDINGS
[Page 143]

says 1:15 7:8 6:21 17:19 20:8 20:12 22:25 106:17,20 skills 32:20 127:14
13:17 29:15 22:9,11 42:13 24:2,7 27:1,17 shown 7:15 10:1 slightest 123:8 sso 21:4 22:17
30:18 34:22 62:22 73:1 80:5 27:22,25 29:19 64:6 66:2,4 slightly 8:16 38:4 stacking 33:22
45:3 46:16 51:2 80:20 84:13 29:22 30:10 shows 33:12 34:2 38:9 89:9 96:16 37:9 40:13
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seek 13:17 26:4 servable 105:18 73:19,24 57:19 58:17 speeches 40:4 state 0:10 4:4
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seeks 36:16 98:18 127:19,20 128:1 shortly 7:14 13:14 skeleton 34:14 split 77:25 4:23 13:11,13
seen 4:3,16 6:16 set 3:3 16:10 show 51:10 80:25 70:5 squarely 74:21 14:9 64:17 75:6

MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
TEL: (020) 7067 2900 E-MAIL: info@martenwalshcherer.com FAX: (020) 7831 6864
VRINGO v ZTE 05 JUNE 2013 PROCEEDINGS
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53:11 107:9 108:15 suspect 38:13 60:15 82:19 test 36:7,16 87:19 96:20 119:25

MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
TEL: (020) 7067 2900 E-MAIL: info@martenwalshcherer.com FAX: (020) 7831 6864
VRINGO v ZTE 05 JUNE 2013 PROCEEDINGS
[Page 145]

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40:2 41:11,21 120:21 121:14 38:23 122:7 42:11 43:11 vast 66:17 118:6 42:19 44:17

MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
TEL: (020) 7067 2900 E-MAIL: info@martenwalshcherer.com FAX: (020) 7831 6864
VRINGO v ZTE 05 JUNE 2013 PROCEEDINGS
[Page 146]

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MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
TEL: (020) 7067 2900 E-MAIL: info@martenwalshcherer.com FAX: (020) 7831 6864
VRINGO v ZTE 05 JUNE 2013 PROCEEDINGS
[Page 147]

124:12
84 4:9

9
9 42:4 66:1 73:6,7
919 42:14,15

MARTEN WALSH CHERER LTD 1ST FLOOR, 6-9 QUALITY COURT, CHANCERY LANE LONDON, WC2A 1HP
TEL: (020) 7067 2900 E-MAIL: info@martenwalshcherer.com FAX: (020) 7831 6864