Motorola Mobility LLC v Telefonaktiebolaget LM Ericsson (publ)

A contractual patent licence covering commercially reasonable updates or extensions is construed by reference to actual products in existence at the relevant date, rather than broad product categories. The later product must be an update or extension of one or more identified origin products and fall within the contractual field. It need not result from a single step or derive from only one predecessor. Industry concepts such as platform, franchise and 5G compatibility may be relevant factors, but they are not automatic exclusions.

Commercial common sense cannot replace clear contractual language. A term will not be implied into a detailed commercial agreement unless necessary for business efficacy or so obvious as to go without saying.

Motorola Mobility sought declarations concerning 354 cellular products under a global patent cross-licence with Ericsson dated 4 January 2011. Ericsson accepted that 55 products already existing at that date were licensed. The preliminary issues trial concerned the construction of clause 2.4A, particularly the expressions “FIELD” and “commercially reasonable updates or extensions” (“CRUE”), and whether the licence contained an implied term preventing Ericsson from bringing infringement proceedings concerning products within the licence.

The court also considered the relevance of earlier agreements, contractual recitals, commercial common sense, product development, and the possible licensing of 5G patents. The trial did not finally determine whether particular 5G products were licensed.

1. Construction. Clause 2.4A was to be read as a whole. It limited the licence to actual products existing at the date of the 2011 Licence which were properly described as commercially reasonable updates or extensions of one or more origin products and which were within Motorola Mobility’s FIELD. Any mobile phone was not automatically a CRUE. The court rejected the Field Construction, the Phone is a Phone Construction and the Development Process Construction.
2. Meaning and application of CRUE. A CRUE may develop from more than one existing product and need not result from a single step. The assessment is from the perspective of the product-producing company and may take account of commercial and technical considerations. Different platforms, franchises or 5G functionality are not freestanding requirements or exclusions. Their underlying features may nevertheless be relevant to whether a product is an update or extension. Whether particular 5G products were licensed remained for a later trial.
3. Commercial context and recitals. The earlier agreements formed part of the factual matrix, but commercial desirability, patent peace, the theoretical duration of the licence, or the possibility of renegotiation could not displace the contractual language. The recital summarising the spin-out licence did not control the more detailed operative wording of clause 2.4A.
4. Implied term. Applying the principles summarised in Marks & Spencer and Yoo Design Services, no term preventing Ericsson from bringing infringement proceedings was necessary or obvious. A licence provides a defence to infringement within its scope. The various possible implied obligations, including a stay, indemnity or restriction on foreign proceedings, also demonstrated that no single obvious term could be identified.
5. The correct construction was the Origin Product Construction, subject to the stated qualifications. Motorola Mobility’s implied-term claim failed. The parties were to address the form of order and further case management, including sensible sampling of products.