TQ Delta, LLC v Zyxel Communications UK Ltd & Anor

The court’s broad and flexible jurisdiction to grant declaratory relief is governed by discretion. The court must first ask whether the declaration would serve a useful purpose, then whether it would serve justice to both parties, and finally whether special reasons favour or oppose relief.

An implementer of a standard essential patent may irrevocably abandon reliance on the patent owner’s RAND undertaking. That choice is effective regardless of whether the licence otherwise available would be worldwide or group-wide. Once the implementer accepts ordinary infringement relief and no longer seeks a licence, declarations fixing RAND terms or determining willingness ordinarily serve no useful domestic purpose. Speculative assistance in possible foreign proceedings is insufficient, particularly where the relevant parties, foreign law and preclusive effect are uncertain.

TQ Delta alleged that two patents essential to telecommunications standards had been infringed by two ZyXEL companies. After one patent was held valid, essential and infringed, ZyXEL abandoned reliance on TQ Delta’s RAND undertaking, accepted an injunction and offered irrevocably to waive enforcement of its rights to a UK licence.

Birss J, in [2019] EWHC 1089 (Pat), refused to strike out TQ Delta’s claims for declarations concerning RAND licence terms and whether ZyXEL were willing licensees. He considered it arguable that a real commercial dispute remained despite the waiver and allowed the scheduled RAND trial to proceed.

The central issue on appeal was whether the declarations retained any useful purpose after ZyXEL’s waiver, including through their possible effect in future foreign litigation.

1. Appeal allowed. The claims for declaratory relief had no real prospect of success. Once ZyXEL irrevocably abandoned reliance on the RAND undertaking, accepted infringement relief and offered to pay the damages claimed, a determination of the scope or terms of a licence which it would not take served no useful purpose.

2. The jurisdiction to grant declarations is broad and flexible, but its exercise is discretionary. Following Messier-Dowty and Financial Services Authority v Rourke, the court must scrutinise whether the declaration would serve a useful purpose, whether it would serve justice to both parties, and whether special reasons favour or oppose relief. Those requirements were not satisfied here.

3. An implementer may be unable selectively to demand part of a unitary worldwide, portfolio or group-wide RAND licence. That does not prevent it from abandoning all reliance on any licence as a defence to relief for infringement of UK patents. The effectiveness of that abandonment does not depend upon the geographical or corporate scope of the RAND obligation.

4. Unwired Planet v Huawei [2018] EWCA Civ 2344 did not give an SEP owner an independent right to obtain declarations fixing RAND terms where the implementer had no interest in taking a licence. Its discussion of the patent owner’s legitimate interest in determining licence terms concerned the proportionality of presenting an infringer with an election between accepting a FRAND licence and suffering ordinary infringement relief. ZyXEL had already exercised that election.

5. A declaration that ZyXEL were unwilling licensees was not justified by its possible utility in future foreign proceedings. No such proceedings existed between these parties. The approach of foreign courts, the possible operation of res judicata and the meaning of “willing licensee” were uncertain. Other group companies whose interests would be affected were also absent. It would be inappropriate to impose the English court’s view upon an unknown foreign jurisdiction.

6. The proposed ten-day trial, with substantial further costs, would not allocate an appropriate share of the court’s resources once its domestic utility had disappeared. Neither sunk costs, possible customer issues, competition-law concerns nor speculative consequences of a future foreign licence justified continuing it. The Court of Appeal therefore struck out the declaratory claims.

1. Court of Appeal (Civil Division): In [2019] EWCA Civ 1277, the court allowed ZyXEL’s appeal. It held that the claims for declaratory relief had no real prospect of success following ZyXEL’s irrevocable waiver.
2. High Court, Patents Court: In [2019] EWHC 1089 (Pat), Birss J refused ZyXEL’s strike-out application, permitted most of TQ Delta’s amendments and allowed the scheduled RAND trial to proceed.