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IPCom vs HTC: Worldwide Damages not Available Based on UK Patent Infringement

The UK High Court has recently ruled in the case of IPCOM GmbH & Co Kg v HTC Europe Co Ltd & Ors [2020] EWHC 2941 (Pat) that damages following the infringement of a UK standard essential patent may be based only on patent infringements that occur within the UK.

IPCom were the proprietors of patent EP(UK) 1,841,268 that expired on 14 February 2020. The patent covered an aspect of the operation of 3G mobile telephones. The patent was declared essential to the relevant telecommunications standards and subject to a FRAND (Fair, Reasonable And Non-Discriminatory) undertaking from IPCom.

In another previous case between the parties, the UK Court of Appeal decided that the patent was valid and infringed by some of HTC's mobile telephones. Accordingly, HTC were instructed to pay damages to IPCom due to their infringing acts. IP Com argued for an approach to determining the damages payment that took worldwide sales of all handsets into account, and so set the damages in the region of hundreds of millions of US dollars. HTC contended that an alternative approach to determining damages, based only on infringing UK sales, should be taken that set the damages at less than about 1 million US dollars.

The present judgment is the result of the subsequent Court proceedings that were held to determine whether part of IPCom's claim to how damages should be determined should be struck out, and IPCom's calculation of the damages payment accordingly reduced.

HTC argued that the only damages that IPCom were entitled to claim were those resulting from the infringement of the UK patent. The damages should therefore be calculated based only on HTC's sales of 3G mobile telephones in the UK. No damages should be payable for HTC's sales of mobile telephones sold outside of the UK and mobile telephones that were sold in the UK but were not infringing 3G mobile telephones.

IPCom argued that the damages should be based on the overall loss caused by HTC's infringing act. In particular, IPCom argued that due to HTC failing to take a FRAND Licence, IPCom had suffered a loss in the form of revenues under a notional licence for IPCom's entire patent portfolio that would have been agreed prior to HTC's infringing acts. The notional licence would have been worldwide in scope, covered all of HTC's 2G/3G/4G mobile telephones and entered into at the publication date of the patent application (in 2007). The damages should be therefore calculated based on the worldwide sales of all of HTC's mobile telephones since 2007.

IPCom's argument for the notional license being global in nature was consistent with the recent UK Supreme Court decision in Unwired Patent v Huawei (see here) regarding FRAND terms. Justice Birss acknowledged that it is common in many global patent licences for royalties to be paid resulting from sales in countries in which there was no patent protection. However, Justice Birss went on to state that this practice exists where products have been made in a patented country and there is therefore a causal link to the country in which a patent is held. The circumstances in the present situation were different as non-UK sales of HTC's mobile telephones were not dependent on any infringement of IPCom's rights in the UK (the products were not made in the UK). Thus, it was held that damages should not be calculated based on non-UK sales.

Justice Birss did not strike out IPCom's claim that the damages should be based on all 2G/3G/4G mobile telephones (instead of just the infringing 3G mobile telephones). This is also consistent with the recent decision in Unwired Patent v Huawei in which damages were assessed on a UK portfolio basis rather than on the basis of only the individual patents that were valid and infringed. This aspect of the damages assessment will be decided further in a future trial.

Accordingly, the UK High Court's judgment was that IPCom's claim for damages should be struck out insofar as it is based on anything other than a claim for royalties attributable to sales of, or other dealings in, 2G, 3G or 4G telephones in the UK. The judgment provides further clarity as to how infringement of standard essential patents will be assessed in the UK.

This judgment shows that while the UK is prepared impose licence arrangements that may seem extra-territorial (due to the particular facts of worldwide licensing practice in the telecoms sector), this appetite is not unlimited, especially where unfairness may result.