English Court of Appeal allows Amazon to amend its pleadings to claim interim licence from Nokia

The Court of Appeal in Alcatel Lucent SAS v Amazon Digital UK Limited & Ors has held that Amazon's claim for an interim reasonable and non-discriminatory (RAND) licence from Nokia for the standard essential patents (SEPs) in the Nokia Video Portfolio had reasonable prospects of success and should be allowed to proceed to a trial. This overturned the decision of the High Court.

This decision may be disappointing for SEP owners that were expecting the recent decision declaring terms for an interim licence in Panasonic v Xiaomi to be confined to those facts. However, the judgment is limited to a decision that Amazon's claim to an interim RAND licence has a reasonable prospect of success, rather than determining entitlement to that relief.

The decision is a timely reminder both that media-coding patent disputes are likely to be the next frontier, and that there is a "Swiss army knife" of procedural tools that can be utilised in these disputes. As always, early planning and strategizing during the RAND licence negotiation process is key.

Patent infringement actions

Alcatel had sued Amazon for infringement of three patents, which are implementation or non-essential patents (NEPs) rather than SEPs. In response, Amazon counterclaimed against both Alcatel and Nokia for a RAND licence to the Nokia Video Portfolio (covering SEPs and NEPs). Amazon alleged that such a RAND licence should include both the SEPs and an option (which Amazon said it would exercise) to license the NEPs that were commonly licensed as part of the Nokia Video Portfolio. This included the NEPs that had been asserted in the UK. Amazon has undertaken to accept the English court's determination of RAND terms.

In July 2024, the High Court determined several applications brought by the parties.

• Strike out: Alcatel applied to strike out the parts of Amazon's defence and counterclaim that referred to the Nokia Video Portfolio and to Nokia's RAND obligations. This application succeeded only insofar as Amazon claimed a RAND licence from Alcatel rather than Nokia, as the former was not the party subject to the RAND obligation. However, the application failed in relation to Nokia, with the court holding that Amazon's claim to a RAND licence from Nokia, and Amazon's claim that this would be a defence to any injunction, had a real prospect of success.
• Jurisdiction: Nokia applied to set aside permission for the counterclaim against it to be served outside the jurisdiction on the basis the court did not have, or should not exercise, jurisdiction over the claim to a RAND licence. The court dismissed that application, finding that there was a serious issue to be tried, several gateways applied, and England and Wales was the appropriate forum to hear the claim.
• Expedition: Amazon applied to expedite the RAND trial given the plethora of parallel litigation against it in other jurisdictions. The court agreed and listed a RAND trial for October 2025.
• Amendment: Amazon applied for permission to make various amendments to its pleadings. Some objections from Nokia were rejected, but the court refused Amazon permission to make amendments raising a claim to an interim RAND licence.

Standardisation body

The relevant standardisation body in the case is the International Telecommunication Union (ITU) not the European Telecommunications Standards Institute (ETSI). The obligation to grant RAND licences was therefore subject to a different regime and different (Swiss) law.

However, it was not disputed that there was a substantial degree of similarity between the content of the RAND obligation under Swiss law and the FRAND obligation under French law, though Amazon contended that the Swiss law went further and enabled it to seek specific performance of Nokia's RAND obligation from the courts.

Pre-appeal development and parallel actions

One additional development was that between the High Court decision and the appeal, Amazon revised its offer of an interim licence to "mirror" the RAND licence offered by Nokia to Amazon in May 2024. This included two major differences to Amazon's previous interim licence offer. First, the interim licence would relate only to SEPs (not NEPs), and, second, Amazon offered to pay whatever consideration the court deemed appropriate for the interim licence.

There were parallel actions in Brazil, Germany, India, the USA and the UPC. Nokia had already been held to have complied with its FRAND obligations in Germany, where it had already secured an injunction. A preliminary injunction had also been granted in Brazil.

Grounds of appeal

Amazon argued that the High Court was wrong to hold that Amazon's claim to an interim licence had no real prospect of success (the relevant test for an amendment application), and that, insofar as Amazon had also been refused permission on case management grounds, the High Court was also wrong.

Amazon's primary appeal argument was based on the Court of Appeal's recent decision in Panasonic v Xiaomi. In that judgment, the majority decision written by Lord Justice Arnold (Lord Justice Phillips dissented) was that Xiaomi was entitled to a declaration that a willing licensor in the position of Panasonic would enter into an interim licence with Xiaomi.

The court also found Panasonic in breach of its obligation to act in good faith under clause 6.1 of the ETSI Intellectual Property Rights policy, and that a declaration of interim licence terms would serve a useful purpose because Panasonic may reconsider its position. The purpose of the declaration was not solely to influence foreign proceedings, and it should not be refused on grounds of comity. Indeed, the court considered that if the declaration assisted the parties in reaching a settlement (which is in fact what consequently happened, then it would promote comity.

Was the appeal 'procedurally inapposite'?

A significant focus of Nokia's arguments on the appeal was that it was procedurally inappropriate as, by changing the nature of the proposed interim licence, Amazon had "moved the goalposts". Instead, Amazon should make a fresh application for permission to amend in the High Court, or at the least ought to have sought permission from the Court of Appeal to raise a new argument.

The court did not agree, holding that Amazon had not changed its case on appeal in a way that was material. The legal arguments were the same as those in the High Court, as it had concluded Amazon had no real prospects of success on its claim for an interim licence per se, irrespective of its terms. Amazon therefore also did not need permission to raise a new argument on appeal since there was no new argument being raised.

A real prospect of success?

The court presumed that Amazon's allegations as to Swiss law were correct for the purpose of considering the appeal, and referred to Panasonic v Xiaomi for a summary of the relevant principles of English law. The court noted that the High Court had dismissed Alcatel/Nokia's strike-out application and jurisdiction challenge, and Alcatel/Nokia had not appealed those dismissals.

Amazon drew parallels with the fact pattern in the Panasonic v Xiaomi litigation, and added that in its view the remedy of specific performance was available under Swiss law, suggesting declaratory relief could be of even more use in this case. Nokia argued that the facts in Panasonic v Xiaomi were obviously different. For example, Nokia had not sought the RAND determination from the English courts, it had not undertaken to accept the court's determination as it was pursuing relief elsewhere, and the case involved NEPs not SEPs. There were also issues around whether it was only those engaged in decoding (not encoding) that needed a licence under the SEPs in the relevant standard(s).

The court did not agree, holding that Amazon had a real prospect of showing any factual differences were immaterial and that accordingly there was a useful purpose to an interim licence declaration. Further, this would not cause duplication with the full RAND trial. There would be a full RAND trial, which would involve a full investigation of the issues relating to RAND (presuming no aspects were hived off for determination at a preliminary issue trial).

An earlier hearing to determine the interim licence terms should be quick as it would only involve consideration of (i) whether Amazon was entitled to the declaration and (ii) any limited dispute on the terms.

On (i), the High Court will have the benefit of this judgment, the Panasonic v Xiaomi judgment, and likely the judgment on the interim licence appeal in Lenovo v Ericsson (due to be heard on 18 February). On (ii), there should be limited argument given that the scope of the interim licence offered now matched Nokia's last RAND offer, so the only outstanding issue was likely to be the amount (which would be adjusted according to the final determination anyway).

Osborne Clarke comment

This judgment is a clear restatement of the Court of Appeal's view that interim licensing declarations may serve a useful purpose in SEP cases involving multiple parallel proceedings. There is also an undercurrent of encouragement from the Court of Appeal that these requests ought to be capable of quick determination given that there would be a reconciliation or true-up process in due course.

Also of note was the repetition of a common comment that any SEP holder and any licensee will be willing if the royalty rate is sufficiently high or low respectively and that, therefore, one has to decide what rate is (F)RAND before one can separate the willing from the unwilling. Overall, the decision is a reminder that the English courts' consideration of willingness is secondary, and behaviour is only really a factor when the courts consider a party to not be acting in good faith.

The judgment will be of particular interest to companies in the media coding space given the focus on media encoding/decoding patents, the ITU standards for H.264 and H.265 and Amazon's Prime video service. Media companies offering streaming or other video services in the UK would be well advised to consider their exposure to the larger portfolios of SEPs licensed in this space. Early strategy planning during or even prior to the licence negotiation phase is critical to ensuring readiness for litigation – and seizing an advantage through the tactical use of the English courts.