January 26, 2023
Thales DIS France SA has a large global portfolio of patents, some of which are standard essential patents (SEPs), relating to eSIM technology. Thales is willing to grant, and has granted, licences to its various competitors.
Kigen (UK) Ltd is also active in eSIM and iSIM technology and software for “internet of things” manufacturers.
In March 2021, Thales wrote to Kigen asserting that it owned several SEPs relating to GSM specifications and identified certain activities of Kigen that were making, using or selling software said to be compliant with those specifications. Four patents were identified at that stage as being mapped to the relevant specifications, including two UK patents (the Patents). Thales invited Kigen to respond in relation to taking a licence. Correspondence, discussions and some negotiations took place, but no resolution was reached.
In January 2022, Thales offered Kigen a licence on confidential terms, said to be on terms substantially similar to licences with three major competitors. In April 2022, Kigen made a confidential counteroffer.
In May 2022, Kigen issued proceedings against Thales for declarations that the Patents were invalid on the grounds of a lack of novelty and inventive design, and orders for revocation. Alternatively, it sought declarations that the Patents were not essential to the relevant standards and (not “or”) a declaration that it was entitled to licences of Thales’s essential intellectual property rights (Essential IPR), including the Patents, on FRAND terms, and a determination of those terms.
Thales applied to the court for a determination that the court had no jurisdiction or should not exercise its jurisdiction or should grant a stay in relation to part of Kigen’s claim. Thales said that since Kigen’s claim was one of invalidity, there was no issue that required a FRAND determination and further that there was no allegation of infringement if the Patents were found to be valid. It also said that there was no jurisdiction to grant declaratory relief in respect of Essential IPR, as there was no jurisdiction asserted in relation to Thales’s patents other than the Patents in suit.
By way of amendment, Thales added that unless and until Kigen gave an unqualified commitment and undertaking to enter into any licence determined by the court to be FRAND, these proceedings should be stayed pursuant to CPR Part 3.
Kigen then altered its position, saying in correspondence and in court that it was “prepared to take a FRAND licence from Thales on any patent found to be valid and essential by the English courts in these proceedings (after the conclusion of all potential appeals), such licence to be on whatever terms are then determined by the Court”. Kigen said that it was not offering an undertaking to take a licence of all Essential IPR regardless, because the position might arise in which essentiality was not established at trial, in which case Kigen might decide to take the risk of not taking a licence. However, it said, if the court took a different course, i.e. if the patents were held to be valid and essential, then it was prudent to have the FRAND proceedings on foot.
Mr Justice Fancourt said that Kigen’s new position was clearly different to its pleaded position, in which Kigen was relying on a freestanding right to claim a licence as a claim, not as a defence. Kigen was now effectively running the claim to a licence as a defence to an anticipated infringement counterclaim by Thales. Even in relation to patents that might be held at trial to be valid and essential, Kigen was not prepared to undertake that it would take a licence. It said that it was entitled to consider the position at the time when infringement was established and when it was put to its election.
Thales, on the other hand, was very concerned that considerable expense could be incurred in litigating the Patents issues and the FRAND terms in circumstances in which Kigen had no obligation to take a licence once the terms were determined. Kigen’s recent position had changed so that it could (and probably would) take a licence, but only once it had established that there was infringement. In this way, Kigen was forcing Thales to litigate, at risk of costs and forgone licence fees. In Thales’s view, this was an abuse of process.
In Fancourt J’s view, the question was not one of jurisdiction because, contrary to what Thales argued, there was an issue before the court that gave it jurisdiction to determine FRAND terms and that issue was determination of what terms would be FRAND. Kigen’s pleaded case raised a proper basis to bring the disagreement on FRAND terms before the court.
The question was, Fancourt J said, whether there was: (i) any abuse of the jurisdiction by Kigen proceeding with a FRAND claim without giving an undertaking to take a licence; and (ii) whether if there was no abuse, the court ought nevertheless to stay the FRAND claim until an undertaking was given.
Fancourt J referred to the Court of Appeal decision in Optis v Apple, Trial F,  EWCA Civ 1411 report) in which it held that that where infringement has been determined and an implementer is put to its election, the implementer is not permitted to decline to give an undertaking and resist an injunction pending determination of the FRAND terms because the terms are required to be fair, reasonable and non-discriminatory, and the well-advised implementer is well able to work out roughly what the terms will be.
Here, however, there was no finding of infringement and Kigen did not have to elect. Nevertheless, the argument that Kigen could be expected to have a reasonably good idea what the FRAND terms would be, subject to the question of validity of the Patents, was the same, even if partial invalidity might affect the value of the licence. It was therefore not persuasive for Kigen to submit that it should not be required to decide whether it wanted a licence until it knew what the terms were. That was particularly so as Kigen had originally issued a claim for a declaration that it was entitled to a licence of all Thales’s Essential IPR on FRAND terms.
Whether Kigen should be required to give an undertaking only once it knew which of the Patents were valid and essential, as Kigen was now asserting, was different.
Fancourt J accepted that there was a real issue as to the commercial impact of a finding that one or both of the Patents was invalid or non-essential. He also accepted that Kigen’s position was now equivalent to that of an unwilling licensee defendant, rather than a claimant who was asking for a licence of all Essential IPR. If Kigen intended to maintain that position, Fancourt J held that it should amend its claim to make clear that it was seeking a licence only to the extent that it was required to do so following a determination on validity and essentiality.
Fancourt J also stayed the claim for FRAND declarations until that amendment was made, or (in order to remove doubt as to Kigen’s willingness to take a licence) it gave an undertaking that it would enter into a licence for all Thales’s relevant Essential IPR. The stay would be lifted automatically if Kigen did either of those two things, he said.
Fancourt J also said that for Kigen to continue with its claim as pleaded without making any amendments or giving the undertaking, in the light of what had been said in recent correspondence and in court, would be an abuse of process. That was particularly so given the risk that the costs of the proceedings might exceed the value of the licence.
Fancourt J also clarified that he was not deciding that in any freestanding claim for a FRAND licence a claimant must offer such an undertaking. There will be many cases where there is no reason to doubt a claimant’s status as a willing licensee and to require an undertaking regardless of what may eventuate, unknown to the parties, would be onerous, he said. It was clearly not an abuse for Kigen to raise and seek determination on the Patent issues that it had pleaded and these must be determined if they were not agreed. (Kigen (UK) Ltd v Thales DIS France SA  EWHC 2846 (Pat) (8 November 2022) — to read the judgment in full, click here).