Alcatel Lucent SAS v Amazon Digital UK Ltd & Ors

Factual and Procedural Background

This appeal concerns a decision by Judge Zacaroli on 10 September 2024 refusing in part the Defendant/Part 20 Claimants' ("Amazon") applications to amend their Defence and Counterclaim and their Part 20 Particulars of Counterclaim. The refused amendments sought declarations and orders related to an interim licence of the Nokia Video Portfolio pending determination of RAND (reasonable and non-discriminatory) terms by the Patents Court. Amazon appealed, relying on the subsequent Court of Appeal decision in Panasonic Holdings Corp v Xiaomi Technology UK Ltd, which recognized a willing licensor's obligation to enter into an interim licence of SEPs pending final FRAND terms determination.

The dispute involves RAND obligations under Swiss law for patents essential to ITU-T H.264/AVC and H.265/HEVC standards, as well as non-essential patents ("NEPs"). Nokia, comprising Nokia Corp and Nokia Tech, holds a portfolio of SEPs and NEPs relevant to these standards, collectively called the Nokia Video Portfolio. Amazon, a digital content provider and device supplier, seeks a comprehensive licence covering this portfolio to avoid business disruption from patent injunctions.

Negotiations between the parties have been protracted without resolution, with Nokia making offers consistent with RAND obligations but refusing to license NEPs. Nokia commenced a worldwide litigation campaign alleging infringement of SEPs and NEPs, including injunctions in multiple jurisdictions, causing Amazon significant business harm.

The UK proceedings were initiated by Alcatel (a Nokia Group member) seeking injunctions for NEP infringement. Amazon defended, challenging patent validity and infringement, and counterclaimed to enforce Nokia's RAND obligations seeking declaratory relief and specific performance. Amazon also issued Part 20 claims against Nokia Corp and Nokia Tech to enforce RAND obligations and seek declarations on patent essentiality.

The judge resolved various applications including strike out, jurisdiction, expedition of the RAND trial, and amendment applications. While some of Amazon's claims survived strike out and jurisdiction challenges, the judge refused permission to amend to raise the interim licence claim, reasoning that there was no sufficiently arguable case that Nokia was obliged to enter into an interim licence and that the complexities of determining such a licence would duplicate the final RAND trial.

Legal Issues Presented

1. Whether the judge erred in refusing permission to amend to plead claims for a declaration and order requiring Nokia to enter into an interim licence of the Nokia Video Portfolio pending determination of RAND terms.
2. Whether Amazon’s claim to an interim licence has a real prospect of success under Swiss law and English law, particularly in light of the Court of Appeal’s decision in Panasonic Holdings Corp v Xiaomi Technology UK Ltd.
3. Whether the appeal is procedurally inapposite due to Amazon’s revised offer of interim licence terms.
4. Whether the judge was correct to consider case management grounds in refusing permission to amend to plead the interim licence claim.

Arguments of the Parties

Appellant's Arguments (Amazon)

• The judge’s decision was wrong in light of the Panasonic v Xiaomi decision, which recognized the enforceability of interim licences pending determination of FRAND terms.
• Swiss law permits specific enforcement of RAND obligations including the granting of an interim licence, supported by Article 112 of the Swiss Civil Code regarding contracts benefiting third parties.
• Amazon offered to enter into an interim licence on terms reflecting Nokia’s 30 May 2024 offer, limited to Codec SEPs and with payment adjustable pending final determination.
• Amazon undertook to take a licence on final RAND terms determined by the Patents Court, providing assurance of payment and compliance.
• Nokia’s ongoing worldwide litigation and injunctions are inconsistent with their RAND obligations and suggest an attempt to leverage injunctions to secure more favourable terms.
• The interim licence claim is not duplicative of the final RAND trial, as it involves a limited determination to "hold the ring" pending final terms.
• The appeal is not procedurally inapposite despite revisions to the interim licence terms, as the amendments were permitted "as amended from time to time" and do not materially alter the claim’s basis.

Respondent's Arguments (Nokia)

• The appeal is procedurally inapposite because Amazon’s revised offer moves the goalposts, and the proper procedure would be a fresh application rather than appeal.
• The Panasonic v Xiaomi decision is distinguishable due to factual differences: Nokia did not initiate proceedings seeking determination of RAND terms, did not undertake to enter into a licence on court-determined terms, and seeks to enforce NEPs unlike Panasonic.
• Nokia contend they have acted consistently with their RAND obligations and in good faith, supported by foreign court decisions and expert evidence.
• A declaration for an interim licence would serve no useful purpose and would be contrary to comity given ongoing negotiations and parallel proceedings.
• The judge was correct to consider case management issues and the complexity of determining interim licence terms, which would duplicate the final trial.
• There are issues of coherence in Amazon’s position regarding the scope and terms of the interim licence versus the final licence claim.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court analyzed the appeal by applying the summary judgment test for amendment applications, concluding Amazon’s claim to an interim licence has a real prospect of success. It found that the judge’s refusal was based on an incorrect premise that the interim licence claim would duplicate the final RAND trial. The Court explained that the interim licence determination is a narrower inquiry focused on whether an interim licence should be granted and on what terms, distinct from the full trial of all RAND issues.

The Court accepted Amazon’s submission that the interim licence serves the useful purpose of "holding the ring" pending final determination, preventing business disruption from injunctions. It noted the practical undertakings by Amazon to pay royalties and comply with final terms provide assurance to Nokia.

The Court considered the factual differences Nokia relied upon to distinguish Panasonic v Xiaomi and found those differences are not material to the legal principles, concluding the precedent is legally indistinguishable and applicable.

The Court rejected Nokia’s procedural objections, holding that Amazon’s revised offer of interim licence terms does not render the appeal inapposite, as the amendments allowed the claim to be "as amended from time to time." The Court also rejected arguments that the claim was incoherent or inconsistent.

Regarding case management, the Court emphasized that the judge’s concerns about duplicative trials were misplaced and that interim licence applications have been efficiently managed in similar cases. The Court stressed the importance of expedition, warning that delay in determining the interim licence would render the application nugatory given the scheduled final trial.

The Court acknowledged foreign decisions cited by Nokia but held they do not negate Amazon’s arguable case regarding good faith and RAND obligations. It noted these decisions do not amount to issue estoppel and are only persuasive, not binding.

Holding and Implications

The Court allowed the appeal, granting Amazon permission to amend both their Particulars of Counterclaim and their Defence and Counterclaim to include claims for an interim licence of the Nokia Video Portfolio on RAND terms, subject to the revised scope reflecting Nokia’s 30 May 2024 offer.

The appeal was allowed.

The direct effect is that Amazon may pursue their claim for an interim licence, potentially preventing disruption to their business caused by Nokia’s worldwide litigation and injunctions pending the full RAND trial scheduled for October 2025. The Court’s decision does not establish new legal precedent but clarifies that interim licences are a viable remedy consistent with existing principles, particularly as articulated in Panasonic v Xiaomi. The decision underscores the importance of balancing enforcement rights with obligations to negotiate licences in good faith under RAND/FRAND frameworks.