No, this post has nothing to do with the famous 007 spy.
It rather deals with the restriction of the accessibility of evidence filed during patent litigation to protect trade secrets. With such an exciting topic, who needs car chases, double agents and half-naked bodies?
A while ago, I reported on the first instance judgment in the Core Wireless Licensing v. LG litigation. As a reminder, this is an SEP (standard essential patents) infringement action brought by Core Wireless (Core) against the Korean giant LG, which was handled super fast by the Paris Tribunal de grande instance, upon the claimant’s request for accelerated proceedings. Not that it worked out for them though, as there was no finding of infringement by the court for any of the five asserted patents.
As swift as the first instance case was, I have not heard about any appeal proceedings since the judgment of April 17, 2015 – until very recently, that is. Now, owing to LG’s lawyers and via the AIPPI French group (thank you), here are tidings of Core’s appeal.
It turns out that the appeal case has been moving at a much slower pace, with already three orders on procedural motions issued by the appeal judge in charge of case management. The third order, dated October 9, 2018, is of particular interest.
First of all, the order of the judge mentions that “what is at stake in the litigation is now the determination of a FRAND royalty rate applicable to the patents in suit“.
This is somewhat surprising, since the first instance judgment dismissed all infringement claims brought by Core. I can only assume that a partial agreement between the parties must have been reached, that LG must have agreed to take a license from Core and that the only remaining contentious issue must be the royalty rate.
Now, a major difficulty in a FRAND royalty rate-setting lawsuit such as this one is how evidence relevant to the royalty rate determination should be handled.
For instance, similar license agreements granted by the right holder, or even third party license agreements may be of relevance to the determination, but these are also highly sensitive documents.
The first point addressed in the October 9 order is a dispute regarding one exhibit filed by LG, namely a license agreement between Nokia and Qualcomm.
Core’s patent portfolio was originally owned by Nokia. Nokia licensed the patents to the chip manufacturer Qualcomm. The LG devices comprise Qualcomm chipsets. As a result, LG contends that they benefit from pass-through rights under the Nokia / Qualcomm agreement (by exhaustion of the Nokia patent rights). A recurring debate in many SEP lawsuits.
LG had made repeated official requests for being granted access to the Nokia / Qualcomm agreement, to no avail. But on October 31, 2017, LG finally filed a redacted version of this agreement in front of the Paris Cour d’appel, which they apparently originally obtained from parallel proceedings in the U.S.
Core protested and stated that this filing was illegal. They argued in particular that, under article 21 of the agreement, Nokia’s consent is a prerequisite for filing the agreement in the French proceedings, and that Nokia did not consent. Core thus requested that the exhibit should be dismissed.
An interesting problem, but also one that the appeal judge did not solve. Indeed, the judge noted that it is not within her prerogatives to dismiss an exhibit. This is a matter for the three-judge court to decide. So, Core’s request was rejected – for the time being at least. It will be decided in the judgment on the merits.
As a second point addressed in the order, various requests for additional evidence were filed by both LG and Core.
LG requested that Core be ordered to file a number of contracts: 1) a purchase and sale agreement between Intellectual Property Asset Trust and Core dated 2011, 2) a royalty participant agreement between Intellectual Property Asset Trust, Core, Nokia and Microsoft dated 2011, and 3) all further agreements between Core and any third party regarding the patents at stake, and in particular an agreement of 2015 between Core and Microsoft.
The judge deemed that these agreements were indeed relevant to the determination of the FRAND royalty rate. Besides, Core did not frontally object to the submissions of these documents but requested that confidential information be protected (more on that below).
On the other hand, Core requested that LG be ordered to file license agreements between LG and Nokia, Interdigital, Ericsson and Blu Products.
LG objected, and the judge held that the LG agreements are in fact not relevant to the lawsuit because they do not relate to the patents in suit. Also, the judge did not like that this request by Core was submitted only a few days before the scheduled hearing on the parties’ motions.
As a summary, Core was ordered to file a number of agreements in relation with the patent portfolio at stake, but LG was not ordered to filed its own license agreements regarding other patents.
But the most interesting part of the order is probably that the judge made use of a brand new provision, introduced by law No. 2018-670 of July 30, 2018 into the French statute.
This is the transposition of the so-called “trade secret directive” (aka Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure).
Among others, this law created a new article L. 153-1 in the Code de commerce, which reads as follows (my own translation):
When, in civil or commercial proceedings relating to a motion for taking of evidence before a trial on the merits or during litigation on the merits, the communication or supply of an exhibit is relied upon or requested, and a party or a third party contends, or it has been held, that it may breach a trade secret, the judge can, on his/her own motion or upon the request of a party or a third party, if the protection of this secret cannot be otherwise safeguarded and without prejudice of the rights of the defendants:
1. Read the exhibit alone and, if deemed necessary, order an expertise and ask for the opinion, for each party, of a person authorized to assist or represent them, in order to decide whether the protection measures provided in the present article should be applied;
2. Decide to limit the communication and supply of this exhibit to some elements only, order the communication or supply in the form of a summary, or restrict access, for each party, to at most one person and another person authorized to assist or represent them;
3. Decide that the debates will take place and the decision will be handed out in private;
4. Adapt the reasons of the decision and modalities of publication thereof to the necessities of protecting trade secrets.
The judge thus decided that the documents at stake should be first communicated for LG’s attorneys’ eyes only. The attorneys of both parties should then tell the judge which parts of the documents may or may not infringe a trade secret, in their view. The judge will then, if necessary, issue another order to implement some of the measures under 2, 3 and 4 above.
I think it is very positive that the range of options to preserve trade secrets during litigation has been broadened by the transposition of the trade secret directive. This will hopefully make it easier for judges to order relevant evidence to be communicated – knowing that guarantees can be put in place in order to prevent the misuse of such evidence, if it is highly confidential and sensitive. This is essential in the French system which does not provide for a broad discovery / disclosure procedure.
Turning back to this Core v. LG case, I personally hope that the judge will not issue an order under paragraph 3 of article L. 153-1, and will make moderate use of paragraph 4. This is because the judiciary determination of the FRAND royalty rate in a case such as this one will be of major interest to all stakeholders in the industry, as it could provide some eagerly awaited general guidance.
Cour d’appel de Paris, pôle 5 chambre 1, October 9, 2018, Core Wireless Licensing SARL v. LG Electronics France SAS & LG Electronics Inc., RG No. 15/17037.