ADAPTIVE SPECTRUM AND SIGNAL ALIGNMENT INC v BRITISH TELECOMMUNICATIONS PLC

In construing a detailed commercial agreement, the court identifies the objective meaning of the language in its documentary, factual and commercial context. Textual analysis ordinarily carries substantial weight, but the contract must be read as a whole and its commercial consequences considered. Commercial common sense cannot be applied retrospectively merely because the bargain later appears disadvantageous.

A clause excluding patent-licence protection for services provided on behalf of a third party using that party’s materials was directed at patent laundering. It did not exclude a network operator’s ordinary provision of a bundled telecommunications service to a communications provider merely because the end user used customer-premises equipment supplied by that provider.

ASSIA and BT entered into a patent licence and settlement agreement after patent infringement disputes concerning BT’s digital subscriber line technology. The licence authorised BT to use ASSIA’s patents within BT’s field of use, including systems controlling BT’s networks. Clause 10.1 excluded products or services provided on behalf of a third party using materials provided by or on behalf of that third party.

ASSIA sought declarations that the exclusion prevented BT from providing VULA broadband services to third-party communications providers where the provider supplied customer-premises equipment. BT disputed that construction and sought declarations supporting the continuing operation of its licence and covenant not to sue. The central issue was the proper construction and application of clause 10.1.

1. Claim dismissed. The Licence and Settlement Agreement were to be construed together as documents forming a single transaction, while retaining their distinct legal effects.
2. The relevant service supplied by BT was the VULA data connection, comprising the relevant fibre and copper connections, DSLAM and ethernet connection. BT did not supply a separate DLM service or the end user’s internet-access service. VULA was supplied to the communications provider, which required it to perform its own contractual obligations to the end user.
3. The phrase “on behalf of” in clause 10.1 did not necessarily require a legal agency relationship. In this contractual context it could extend to conduct engaging the responsibility of the third party. That conclusion did not assist ASSIA because BT supplied VULA to the communications provider, not to the end user.
4. The reference to materials provided by or on behalf of a third party had to have a real connection with the activity said to infringe. Treating a customer-premises modem as the relevant material would make liability depend on the happenstance of the end user’s equipment choice, although the source of the modem had no material relevance to BT’s VULA service or DLM operation.
5. The heading and structure of clause 10 indicated that it clarified the exclusion of patent-laundering transactions, such as manufacturing for an unlicensed third party or buying and reselling products to confer the benefit of a licence. It was not a clear carve-out from BT’s express field of use or its ordinary business of operating the NGA network.
6. The parties’ knowledge of VULA, third-party communications providers and the transition to one-box equipment supported BT’s construction. The commercial objective of the settlement was patent peace and certainty. ASSIA’s construction would have placed BT in immediate breach while continuing an activity expressly within its licensed field of use.
7. The later expansion of VULA and the resulting commercial disadvantage to ASSIA could not justify retrospectively rewriting the agreement. Declarations sought by BT were to be addressed after consequential submissions.