EPLAW PATENT BLOG

UK – IPCOM v HTC

Posted: January 30th, 2013

IPCom GmbH & Co KG v HTC Europe Co Ltd and Nokia OYJ (Nokia Corp) v IPCom GmbH & Co KG [2013] EWHC 52 (Pat)

This was an application concerned with whether particular individuals on IPCom’s side should be permitted to inspect confidential licensing documents disclosed in the actions by HTC and Nokia pursuant to orders of the court.

Background
The proceedings in which this application was made are concerned with the determination by the court of the appropriate FRAND (fair, reasonable and non-discriminatory) terms for a licence under IPCom’s standard essential patent EP (UK) 1 841 268, including a royalty to be paid by Nokia and HTC to IPCom. Pursuant to orders made by Roth J, Nokia and HTC had served statements of case setting out the method by which they contended that a FRAND royalty rate should be calculated, which included schedules of comparable licences on which they relied. Roth J had ordered that any such licences should be disclosed to IPCom.

The parties were unable to agree on the individuals entitled to see the disclosure material, although an interim arrangement was arrived at under which the parties’ UK solicitors, counsel and (upon provision of signed undertakings) independent licensing and economics experts, were permitted to inspect the material. On 30 July 2012 IPCom issued an application, seeking an order that the court impose a confidentiality regime in which inspection should be by legal advisers and counsel, named experts (subject to confidentiality undertakings in the agreed form), and up to two named individuals from IPCom (again, subject to confidentiality undertakings in the agreed form).



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On 20 September 2012 IPCom’s application came before Arnold J who considered that the interim arrangement was sufficient to enable IPCom to plead its case. IPCom accordingly served its FRAND statement of case, placing reliance on “comparator licences” generally. Arnold J then ordered that consideration of the outstanding issues be divided into two hearings: a disclosure hearing and an inspection hearing.  At the disclosure hearing on 22 November 2012 Floyd J ordered Nokia and HTC each to produce a list of all licences entered into since January 2007.  The order then allowed IPCom to make a selection of up to 7 HTC and 10 Nokia licences from the lists. Floyd J noted that he did not regard the disclosure of these licences likely to be of great assistance to the court because they did not relate to the patent in suit, and many of them included special features which would be extremely difficult to assess the importance of but, nevertheless, thought it appropriate to order such disclosure in order to dispel any suspicion that IPCom may have that there was helpful material there.

The inspection hearing
At the inspection hearing on 16 January 2013, IPCom asked that either Mr Frohwitter or Mr Schoeller (IPCom’s internal management team) plus Dr Sedlmaier (an external lawyer instructed in the case) be allowed to inspect the documents.  IPCom said it would be prepared to have Mr Kahlenberg (an external commercial adviser to IPCom) admitted instead of one of the members of the internal management team.

IPCom’s solicitors explained that IPCom is a very small company consisting of only two people (Mr Frohwitter and Mr Schoeller), that it was imperative that individuals identified by each of the parties should be able to review all the materials in the proceedings on the basis that the confidential materials may have a bearing on a party’s case, and that the IPCom’s solicitors would be placed in difficulty in complying with their duty to their client under the Solicitors’ Code of Conduct if their client could not give them fully informed instructions on all the information in the case. Nokia and HTC were content for only lawyers and experts to inspect the documents.

Principles applicable
Floyd J reviewed the relevant principles applicable, in particular that “A party has a right to know the case against him and evidence on which it is based” with the exception that “where the whole object of the proceedings is to protect a commercial interest, full disclosure may not be possible if it would render the proceedings futile” (Al Rawi v Security Service [2011] UKSC 34;  [2012] 1 AC 531 at [12]).

Floyd J noted that it was common in intellectual property cases in the UK to deal with such issues relating to disclosure by tailoring a confidentiality club to meet the circumstances of the case and the stage which it has reached, and in certain circumstances “a court might well be justified in directing disclosure of allegedly secret material only to expert or professional agents of the party seeking discovery on terms they should not, without further order, pass on any information so obtained to the party himself or anyone else, but should merely advise him in the light of the information so obtained” (Warner-Lambert Co v Glaxo Laboratories Ltd [1975] RPC 354).  The degree to which the party might be able to understand the document was a factor in setting the scope of inspection, as was the stage which an action has reached.

Floyd J further commented that the role which a document will play in the case is a factor which must be weighed in the balancing exercise in setting the terms of the confidentiality regime at any given point in the case (Roussel Uclaf v Imperial Chemical Industries plc [1990] RPC 45).

The material at issue
Floyd J then went on to review the confidential material in issue, being Nokia licences with third parties, HTC licences with third parties, and Nokia internal licensing guidance. Amongst these materials were licence agreements to which Ericsson and Research in Motion were parties, both of whom appeared on the application to resist extended inspection of the licences to which they were a party.

Floyd J noted that whilst all the material was confidential, mere confidentiality would not justify restricting the access of a party to a document because the court has ample machinery to enable it to maintain confidentiality within the scope of the proceedings. However the commercial value of knowing the terms on which HTC and Nokia (and Ericsson and Research in Motion) have been prepared to licence technology was of undoubted commercial value to IPCom, and if the confidential materials were available to IPCom’s internal management they would not be able to “unlearn” them.  Consequently, in any negotiations with parties to the licensing agreements disclosed, those individuals would have knowledge of potential value which could direct the way in which those negotiations were conducted.

Floyd J rejected IPCom’s submission that merely having the information in one’s head, and acting in the negotiations on the basis of it, was not a use of the information. Knowing the information and allowing it to direct one’s stance in negotiations was a plain use of the information.

The individuals objected to
Mr Frohwitter and Mr Schoeller run IPCom.  IPCom’s main commercial endeavour is the licensing of a portfolio of patents which includes the patent in suit, and so these two individuals were therefore engaged full time in litigating, and negotiating terms for the licensing of, these patents. Dr Sedlmaier is an external lawyer who has been coordinating IPCom’s legal strategy since 2007.

Mr Kahlenberg was said by IPCom to be an external commercial adviser.  However he appeared to be closely associated with a company called Schoeller Holding GmbH which is one of the owners of IPCom.  It was clear that both Dr Sedlmaier and Mr Kahlenberg were close to IPCom in the sense that they formed an important part of IPCom’s licensing team.

Floyd J’s decision
Floyd J came to the conclusion that it would not be right to allow inspection at this stage by Mr Frohwitter, Mr Schoeller or Mr Kahlenberg, but that it was right for Dr Sedlmaier to be allowed inspection.

The case was still at the interim stage (and there was no guarantee it would go to trial) and so it was not clear what part (if any) the documents would play in the case. Indeed, the documents had not yet been inspected by IPCom’s solicitors so it was entirely possible that they would reject them as not comparable or only of remote or background relevance.  Furthermore, the order could affect the interests of third parties.

There was a real risk that the confidential information, once given to Messrs Frohwitter and Schoeller and which could not be “unlearned” by them, would prove of value in licensing IPCom’s portfolio.  Messrs Frohwitter and Schoeller would not in practical reality be able to avoid its use.  Mr Kahlenberg was in a very similar position to Messrs Frohwitter and Schoeller.  The material at issue was confidential and, whilst its potential for use to the detriment of HTC and Nokia was not at the high end of the scale represented by secret process cases, the court should not facilitate the granting of a competitive advantage to IPCom, and accordingly inflict a competitive disadvantage on HTC, Nokia and the interested parties, unless justice required it to take such a course.

Dr Sedlmaier, on the other hand, was an external lawyer bound by a professional code of conduct.  Whilst extremely close to IPCom, if he was included, the prejudice to IPCom was significantly mitigated.

Accordingly Floyd J acceded to IPCom’s application only to the extent it sought confirmation that the documents could go to Dr Sedlmaier, subject to an undertaking in the ag
reed form.  There was a minor dispute about whether Dr Sedlmaier should give an express confidentiality undertaking, IPCom’s objection being that other external lawyers were not being required to do so. However, Floyd J felt that the concerns expressed by HTC and Nokia about Dr Sedlmaier’s closeness to IPCom and his involvement in negotiations outside the context of the action made it desirable that he should give an undertaking, although Floyd J was keen to point out that the requirement for an undertaking did not impugn in any way the integrity of the individual concerned, but may help him to guard against inadvertent disclosure or use.

Read the decision (in English) here.

Head note: Scott Parker

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