Motorola Mobility, LLC v Telefonaktiebolaget LM Ericsson (publ)

The court may order a preliminary issue where it will finally determine an important issue, materially reduce the scope, cost or duration of the proceedings, or provide valuable clarity for trial. The assessment is a case-management exercise requiring consideration of the likely factual and expert evidence, the risk of increased cost or delay, the possibility of irrelevance or pleading amendments, and whether the order may fetter a just result. The court should remain cautious about assuming that a preliminary trial will produce the best outcome. A discrete construction issue may properly be tried preliminarily where it can substantially narrow the dispute and adds little to the proceedings.

The claimant and defendant were parties to a global patent cross-licence agreement. The claimant sought declarations concerning the scope of the licence as applied to 354 cellular phone products. It applied for a preliminary trial of the construction of clause 2.4A, which referred to products in Motorola’s field as at the effective date and commercially reasonable updates or extensions of licensed products.

The claimant also sought preliminary determination of an implied term concerning proceedings based on patent infringement where rights had allegedly been exhausted under the licence. The court considered whether these construction issues should be resolved before the wider factual and technical issues.

1. Preliminary issue ordered. The court ordered a preliminary trial of the construction of clause 2.4A and of the proposed implied term.
2. The decision was a case-management exercise. The court applied the checklist derived from Steele v Steele and summarised in Wentworth Sons Sub-Debt SARL v Lomas, including whether the issue would dispose of an aspect of the case, reduce costs or time, depend on agreed or limited facts, risk fettering a just result, increase costs or delay, prove irrelevant, or prompt amendments to the pleadings.
3. The construction of clause 2.4A would finally resolve a core issue. Depending on the outcome, it could avoid a product-by-product investigation of the 354 products, or clarify that such an investigation was required. Even if Ericsson’s construction prevailed, early resolution would define the scope of the trial.
4. On the pleadings, the issue involved little factual investigation and no expert evidence for the first three alternative constructions. The fourth construction might require expert evidence and could involve questions of application rather than construction. If the preliminary issue became disproportionate, its scope could be reconsidered or the trial abandoned. The court also applied the caution in Binstead v Zytronic against assuming the best outcome from a preliminary trial.
5. The anticipated United States proceedings did not justify refusing the order. Ericsson had not sought a stay, and the English court would in any event need to determine the construction under the parties’ English-law agreement. The implied-term issue was discrete, required little additional work, and could remove a substantial aspect of the case.